Just a moment...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 News - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Category: ?
Categorized by AI
---- All Categories ----
  • ---- All Categories ----
  • Income Tax
  • GST
  • Customs, DGFT & SEZ
  • FEMA & RBI
  • Corp. Laws, SEBI & IBC
  • PMLA, Black Money & ED
  • Budget
  • News and Press Release
  • PTI News
Month:
---- All Months ----
  • ---- All Months ----
  • January
  • February
  • March
  • April
  • May
  • June
  • July
  • August
  • September
  • October
  • November
  • December
Year:
---- All Years ----
  • ---- All Years ----
  • 2026
  • 2025
  • 2024
  • 2023
  • 2022
  • 2021
  • 2020
  • 2019
  • 2018
  • 2017
  • 2016
  • 2015
  • 2014
  • 2013
  • 2012
  • 2011
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
    Senior citizen threatened with terror funding case probe, duped of Rs 7.2 crore
    Rupee declines 10 paise to 95.55 against US dollar in early trade
    UK’s PG Paper welcomes SEBI review of fraud allegations against Indian firm
    'Neta-Company Loot Tribunal': Cong on NCLT haircut approval for Subhash Chandra
    S&P affirms India's 'BBB' sovereign rating; cites dynamic economy, policy stability
    Sugar prices ease marginally to Rs 64.33 per kg on Thursday
    ED freezes assets worth Rs 33 crore after raids against Gurugram realty group
    CARD91 Launches SpendFlow, a Commercial Card Platform Built for Enterprise Requirements
    Will talk to Japan on increasing basmati rice exports from India: Goyal
    Will consider Air India's biz strategy, other factors before deciding on additional fund requests: Singapore Airlines
    Commerce and Industry Minister Shri Piyush Goyal Concludes Japan Visit; Calls for Greater Japanese Investment and Stronger Industrial Partnerships wit...
    PM Jan Dhan Yojana Completes 12 Years of Transforming India’s Financial Inclusion Landscape
    Rassense Becomes First Indian CFS Company to Cross 5,000+ Employees; On Track to Cross INR 600 Crore in Revenue
    SVC Bank's Nationwide Cyber Safety Drive Reaches Over 19,061 Citizens Across 213 Housing Societies
    'Not haircut but mundan': Cong on NCLT clearing Subhash Chandra's Rs 6.5 crore payout
    Keralam: Escaped Assam prisoner reaches police station for Aadhaar card, flees again
    Women's Savings Account: Features that make opening one worth it
    Best Pension Plans and Annuity Plans in India 2026: A Full Comparison
    Rupee rises 4 paise to 95.40 against US dollar in early trade
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

News
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
August 28, 2026
Show AI Summary
Cyber fraud impersonating enforcement officials coerced a senior citizen into bank and cryptocurrency transfers through terror-funding threats.
Cyber fraudsters allegedly impersonated public officials and threatened a senior citizen with implication in money laundering, terror funding and cybercrime. Using WhatsApp video calls and purported official notices, they allegedly induced the victim to transfer funds to multiple bank accounts and a cryptocurrency wallet on the pretext of proving innocence. The victim reportedly liquidated fixed deposits and mutual fund investments before identifying the deception and reporting it through the cybercrime helpline. A cyber police case was registered for further investigation.
August 28, 2026
Show AI Summary
Rupee depreciation against US dollar reflects foreign investor outflows and crude supply disruptions, moderated by weaker dollar and oil prices.
Foreign institutional investor outflows and disruptions in global crude oil supplies placed downward pressure on the rupee against the US dollar. A weaker dollar index and lower Brent crude prices moderated the decline. Market commentary anticipated a narrow trading range, with expected Reserve Bank of India protection at the upper end and oil importer, month-end, and importer demand supporting the lower end. Participants also monitored the US Federal Reserve Chair's Jackson Hole speech.
August 27, 2026
Show AI Summary
Emergency flood response measures coordinate rescues, suspend cross-border transport, and address risks to public safety.
Severe flash floods in Nepal and along the Nepal-Tibet border prompted cross-border rescue coordination for missing and stranded persons, warnings of continued downstream flood risk, and international relief support. Preventive public-safety measures included temporary suspension of an Indo-Nepal bus service. Separate developments included disruption of public services during an employee strike, investigation of an aircraft crash, market measures affecting sugar and onion prices, and proposed trade engagement for greater market access for basmati rice and processed food exports.
August 27, 2026
Show AI Summary
Regulatory review of fraud allegations requires timely consideration of representations while merits and standing remain undecided.
SEBI must consider and decide, within two weeks, representations alleging fraud by an Indian logistics company and its subsidiary. The allegations concern systematic over-invoicing of freight charges and forged documentation, with a parallel criminal investigation based on an FIR registered by the Delhi Police Economic Offences Wing. No determination has been made on the merits of the allegations or the complainant's standing to approach SEBI. The allegations and criminal proceedings were disclosed in IPO offer documents.
August 27, 2026
Show AI Summary
Personal insolvency repayment plans test creditor voting thresholds, valuation safeguards, and limits on commercial review under insolvency law.
Personal insolvency resolution under the Insolvency and Bankruptcy Code involved approval of a repayment plan providing for payment of Rs 6.25 crore to creditors and Rs 25 lakh towards process costs against admitted creditor claims of about Rs 22,006.57 crore. Objections by dissenting creditors were rejected because they held less than 20 per cent of voting share, while the plan received 80.81 per cent support. Valuation indicated that the personal estate was worth less than the amount offered, and the tribunal declined to replace creditor commercial wisdom or assess settlement adequacy.
August 27, 2026
Show AI Summary
Sovereign credit rating stability reflects policy continuity, infrastructure investment, external strength, and fiscal consolidation pressures.
India's sovereign credit rating retained a BBB stable outlook, supported by strong growth, an external balance sheet, stable institutions, policy predictability, and infrastructure investment. Public investment and consumer demand are expected to sustain growth and assist fiscal consolidation. Constraints include weak fiscal performance, elevated government debt and interest burdens, and low per-capita income. Long-term rating support depends on financing infrastructure investment without materially widening the current-account deficit and on reducing the fiscal deficit through stable fiscal and monetary policies.
August 27, 2026
Show AI Summary
Sugar import liberalisation and stockholding limits seek to moderate retail prices amid constrained domestic supply and restricted exports.
Sugar price-control measures combine duty-free raw sugar imports, stockholding limits for dealers and bulk consumers, and an export prohibition to address elevated retail prices and curb hoarding. Domestic supply remains constrained by reduced sugarcane output, prior exports and diversion of sugar to ethanol. Net production is estimated below projected domestic demand, while closing stocks are expected to remain limited. Import access, inventory restrictions and export controls therefore operate as market-stabilisation mechanisms.
August 27, 2026
Show AI Summary
Money-laundering investigation into alleged homebuyer fraud led to searches and freezing of assets linked to realty promoters.
Money-laundering proceedings were initiated under the Prevention of Money Laundering Act on the basis of police FIRs alleging fraudulent inducement and non-delivery of residential plots. Searches at premises linked to real estate promoters resulted in the seizure or freezing of luxury vehicles, jewellery, bank accounts and securities. The investigation alleges that substantial upfront payments for residential plots were received, but a significant portion of promised plots remained undelivered, and certain plots were allegedly sold to third parties without consent.
August 27, 2026
Show AI Summary
Commercial card governance enables configurable credit, approvals, virtual cards and controlled supplier payments across enterprise payment workflows.
SpendFlow combines commercial card program configuration, credit management, virtual cards, spend controls, approvals, supplier payments, billing and accounting in one architecture. It supports centrally governed rules with approved corporate-level variations, enterprise hierarchy management, and virtual cards linked to entities, employees, accounts or credit facilities. Multi-tier approvals and virtual-card supplier payments support controlled business payment functions, while core banking and ERP connectivity links card activity with banking and enterprise financial workflows.
August 27, 2026
Show AI Summary
Basmati rice market access may be pursued through trade agreement review, subject to import limits and safety standards.
Market access for Indian basmati rice may be pursued through review of the Comprehensive Economic Partnership Agreement, as rice remains a sensitive sector subject to import quantity limits and duties beyond permitted quantities. Processed food exports offer further opportunities where exporters comply with Japanese quality and safety standards. Bilateral cooperation also covers investment, supply chains, technology partnerships and capital flows supporting infrastructure, manufacturing and semiconductor ecosystems.
August 27, 2026
Show AI Summary
Capital allocation discipline governs consideration of further Air India funding alongside business strategy, cash flow and investment requirements.
Further capital investment in Air India will be evaluated by Singapore Airlines' board through a disciplined capital-allocation process. Assessment will consider the group's capital requirements, Air India's business strategy, operating cash flow, investment needs for aircraft and products, and multi-hub investments intended to support long-term growth and returns. As a significant minority shareholder, Singapore Airlines supports Air India's transformation programme with Tata Sons, but no commitment to provide additional capital is indicated.
August 27, 2026
Show AI Summary
Semiconductor investment cooperation anchors expanded India-Japan industrial partnerships across technology, manufacturing, clean energy, infrastructure, and financial services.
Semiconductor and artificial-intelligence cooperation centres on a six-pillar semiconductor strategy encompassing chip design, semiconductor machinery and materials, fabrication, ATMP/OSAT, research and development, and talent development. Japanese participation is sought across semiconductor materials and equipment, power semiconductors, electronics, AI, logistics and related advanced technologies. Development of semiconductor clusters is linked to reliable power, ultra-pure water, skilled manpower and social infrastructure.
August 27, 2026
Show AI Summary
Financial inclusion through basic bank accounts enables direct welfare transfers, digital payments, insurance access and credit for excluded households.
PMJDY provides unbanked adults with basic bank accounts without minimum-balance or maintenance-charge requirements, free RuPay debit cards with accident insurance cover, and eligible overdraft support. Through the JAM framework, PMJDY accounts enable direct transfer of welfare benefits using bank accounts, Aadhaar-based biometric verification and mobile connectivity, reducing intermediary involvement and delays. The scheme emphasises rural, semi-urban, marginalised and women account holders while supporting access to insurance, pensions, savings, digital payments and credit, including MUDRA loans.
August 27, 2026
Show AI Summary
Contract food services expansion strengthens Rassense's nationwide institutional operations through new academic partnerships and technology-led service delivery.
Rassense Pvt Ltd reports crossing a workforce of more than 5,000 employees and projects revenue exceeding INR 600 crore. Its contract food services operations serve educational institutions, corporate campuses, healthcare facilities and industrial locations. New operations at IIM Jammu, IIM Bangalore and IIT Guwahati strengthen its nationwide institutional presence. Expansion is supported by academic institution partnerships, local workforce development, operational excellence, and technology-led capabilities in food production, food waste reduction and supply-chain management.
August 27, 2026
Show AI Summary
Cyber fraud awareness promotes safe digital banking by teaching customers to verify communications, protect credentials, and report suspicious transactions.
Cyber-fraud awareness and digital banking safety were promoted through community sessions addressing phishing, impersonation, OTP and UPI fraud, QR-code scams, digital-arrest fraud, and fraudulent customer-care calls. Participants were guided to identify authentic banking communications, avoid sharing confidential credentials, verify callers and links before acting, and promptly report suspected unauthorised transactions. Customer vigilance, financial literacy, and institutional security measures were emphasised as complementary safeguards against digital financial fraud.
August 27, 2026
Show AI Summary
Personal insolvency repayment plans may be approved despite minimal creditor recovery when requisite voting support and comparative valuation support them.
Personal insolvency repayment plan approval was granted under the Insolvency and Bankruptcy Code, 2016, despite objections that creditor recoveries were negligible and the proposed payment uncertain. The plan received 80.81 per cent voting support, while dissenting creditors held less than 20 per cent voting share. Valuation showed that the debtor's personal estate was materially below the offered amount, and rejection could result in bankruptcy and lower recovery. Assessment of settlement adequacy was treated as a matter of creditor commercial wisdom.
August 27, 2026
Show AI Summary
Prison escape security lapses prompt coordinated tracing measures, transport monitoring, inter-state alerts, and a detailed custodial-security inquiry.
Prison escape and custodial-security lapses arose after a detainee escaped from Aluva Sub Jail, allegedly by using an under-construction structure within the premises to cross the compound wall. Following his later appearance at a police station seeking return of his Aadhaar card, search measures included a lookout circular, information sharing with police stations, railway-security coordination, and alerting police in Assam. A detailed inquiry has been initiated into the prison-security deficiencies enabling the escape.
August 27, 2026
Show AI Summary
Women's savings account selection depends on practical benefits, charges, eligibility, and banking needs rather than the account label.
Women's Savings Accounts may provide standard banking facilities together with additional services or benefits for eligible women. Their suitability depends on practical use of digital banking, transfers, payments, alerts, debit-card facilities, accessibility, security features, charges, and minimum-balance conditions. Since regular Savings Accounts may offer comparable facilities, the additional benefits should be assessed against associated costs and conditions. Selection should be based on comparison of eligibility, facilities, balance requirements, benefits, customer support, and authentication safeguards rather than the account's women-focused label alone.
August 27, 2026
Show AI Summary
Retirement annuity selection prioritises payout structure, taxation, insurer strength and flexibility over brand comparison for informed retirement decisions.
Retirement planning may combine market-linked accumulation during working years, deferred annuities that lock future guaranteed income, and immediate annuities that convert retirement savings into regular payments. Annuity choice depends on whether the priority is higher income, continuation for a surviving spouse, or return of capital on death. Product comparison should consider market-linked growth versus income certainty, taxation of annuity income at applicable slab rates, insurer strength, and flexibility in deferment, payout frequency and policy loans.
August 27, 2026
Show AI Summary
Foreign exchange inflows through deposit and borrowing measures provided near-term rupee support amid lower crude prices.
Reserve Bank special measures relating to FCNR(B) deposits, Overseas Foreign Currency Borrowings and External Commercial Borrowings were identified as attracting foreign-exchange inflows and providing near-term support to the rupee. The Reserve Bank became a net dollar buyer in June after two months of sales to support the rupee. The FCNR(B) window remained open until August 31, while the market outlook anticipated broader rupee depreciation over subsequent weeks.

News

Back

All News

Showing Results for :
Reset Filters
No Records Found

News

Showing Results for : Reset Filters
Customs, DGFT & SEZ

Service Tax: Guidance Note 5 – Declared Services.

March 17, 2012

Contents
Plus +
Summary
Note

Note

-

Bookmark

Print

Print

Guidance Note 5 – Declared Services

In the definition of ‘service’ contained in clause (44) of section 65B of the Act it has been stated that service includes a declared service. The phrase ‘declared service’ is also defined in the said section as an activity carried out by a person for another for consideration and specified in section 66E of the Act. The following nine activities have been specified in section 66E:

1. renting of immovable property;

2. construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of certificate of completion by a competent authority;

3. temporary transfer or permitting the use or enjoyment of any intellectual property right;

4. development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software;

5. agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;

6. transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods;

7. activities in relation to delivery of goods on hire purchase or any system of payment by instalments;

8. service portion in execution of a works contract;

9. service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as part of the activity.

If the above activities are carried out by a person for another for consideration it would amount to provision of service. Most of these services are presently also being taxed except in so far as Sl. No.5 is concerned. It is clarified that they are amply covered by the definition of service but have been declared with a view to remove any ambiguity for the purpose of uniform application of law all over the country.

5.1 Renting of Immovable Property

Renting has been defined in section 65B as ‘‘allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property’

5.1.1 Is renting of all kinds of immovable property taxable?

No. Renting of certain kinds of property is specified in the negative list. These are –

  •  renting of vacant land, with or without a structure incidental to its use, relating to agriculture. (sl no 4 of Appendix 1)
  •  renting of residential dwelling for use as residence (sl no 13 of appendix 1)
  •  renting out of any property by Reserve Bank of India
  •  renting out of any property by a Government or a local authority to all non-business entity.

Renting of all other immovable properties would be taxable unless covered by an exemption (refer 5.1.2).

5.1.2 Are there any exemptions in respect of renting of immovable property?

Yes. These are:–

  •  Threshold level exemption up to Rs. 10 lakh.
  •  Renting of precincts of a religious place meant for general public is exempt.
  •  Renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a room below rupees one thousand per day or equivalent is exempt.

5.1.3 Would permitting usage of a property for a temporary purpose like conduct of a marriage or any other social function be taxable?

Yes. As per definition allowing or permitting usage of immovable property, without transferring possession of such property, is also renting of immoveable property.

5.1.4 Would activities referred to in column 1 of a table below be chargeable to service tax?

Sl. No.

Nature of Activity

Taxability

1.

Renting of property to educational body

Chargeable to service tax; no exemption

2.

Renting of vacant land for animal husbandry or floriculture

Not chargeable to service tax as it is covered in the negative list entry relating to agriculture

3.

Permitting use of immoveable property for placing vending/dispensing machines

Chargeable to service tax as permitting usage of space is covered in the definition of renting

4.

Allowing erection of communication tower on a building for consideration.

Chargeable to service tax as permitting usage of space is covered in the definition of renting

5.

Renting of land or building for entertainment or sports

Chargeable to service tax as there is no specific exemption.

6.

Renting of theatres by owners to film distributors

Chargeable to service tax as the arrangement amounts to renting of immovable property.

5.1.5 Would service tax be chargeable on renting of property located outside the taxable territory but where the property is owned by a person located in the taxable territory?

In respect of a service relating to immovable property the place of provision of service is the location of immovable property. If the immovable property is located outside taxable territory then it becomes a service provided outside the taxable territory even if the property owners is located in the taxable territory and would hence not be taxable.

For details please see the Guidance Paper: GPB on the Place of Provision of Service Rules, 2012.

5.2 Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of certificate of completion by a competent authority.

This service is already taxable as part of construction of residential complex service under clause (zzzh) of sub-section 105 of section 65 of the Act and as part of service in relation to commercial or industrial construction under clause (zzq) of sub-section 105 of section 65 of the Act. This entry covers the services provided by builders or developers where building complexes, civil structure or part thereof are offered for sale but the payment for such building or complex or part thereof is received before the issuance of completion certificate by a competent authority.

5.2.1 There are various types of arrangements under which builders or developers sell buildings, flats, office space etc. to buyers where entire consideration is received before completion certificate is issued including tripartite model, redevelopment model, investment model, reconversion model, BOT projects and joint development agreement model. How will the taxability of such arrangements be determined?

A detailed circular has been issued by the Board dealing with such arrangements in the context of existing taxable service of same description vide Circular no 151/2/2012 ST dated 10/2/12 issued from F.No. 332/13/2011 TRU. The said circular may be referred to for guidance on this point

5.2.2 In certain States requirement of completion certificate are waived of for certain specified types of buildings. How would leviability of service tax be determined in such cases?

In terms of explanation in section 66E in such cases the completion certificate issued by a architect or a chartered engineer or a licensed surveyor of the respective local body or development or planning authority would be treated as completion certificate for the purposes of determining chargeability of service tax.

5.3 Temporary transfer or permitting the use or enjoyment of any intellectual property right

5.3.1 What is the scope of the term ‘intellectual property right’?

‘Intellectual property right’ has not been defined in the Act. The phase has to be understood as it is understood in normal trade parlance as per which intellectual property right includes the following –

  •  Copyright
  •  Patents
  •  Trademarks
  •  Designs
  •  Any other similar right to an intangible property

5.3.2 Would the temporary transfer of a patent registered in a country outside India also be covered under this entry?

Since there is no condition regarding the law under which an intellectual right should be registered, temporary transfer of a patent registered outside India would be covered in this entry. However, it will become taxable only if the place of provision of service of temporary transfer of intellectual property right is in taxable territory.

For details please see the Guidance Paper: B on the Place of Provision of Service.

5.4 Development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software

The term ‘information technology software’ has been defined in section 65B of the Act as ‘any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment’.

5.4.1 Would sale of pre-packaged or canned software be included in this entry?

No. Sale of pre-packaged or canned software is in the nature of sale of goods and is not covered in this entry.

5.4.2 Is on site development of software covered under this entry?

Yes. On site development of software is covered under the category of development of information technology software.

5.4.3 Would providing advice, consultancy and assistance on matters relating to information technology software be chargeable to service tax?

These services may not be covered under the declared list entry relating to information technology software. However, such activities when carried out by person for another for consideration would fall within the definition of service and hence chargeable to service tax if other requirements of taxability are satisfied.

5.4.4 Would providing a license to use prepackaged software be a taxable service?

It is a settled position of law that prepackaged software or canned software or shrink wrapped software is goods. (Supreme Court judgment in case of Tata Consultancy Services vs State of Andhra Pradesh [2002(178) ELT 22(SC) refers]. To determine whether providing license to use a software is a service or sale of goods it would need to be seen whether the license to use packaged software tantamount to ‘transfer of right to use goods’. ‘Transfer of right to use goods’ is deemed to be a sale under Article 366(29A) of the Constitution of India and transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods is a declared service.

5.5 Activities in relation to delivery of goods on hire purchase or any system of payment by instalments

5.5.1 Is the delivery of goods on hire purchase of any system of payment by installments taxable?

No. The delivery of goods on hire purchase or any system of payment on installment is not chargeable to service tax because as per Article 366(29A) of the Constitution of India such delivery of goods is deemed to be a sale of goods.(For guidance on this aspect please refer to point nos. 2.5.7 to 2.5.12 of this Guidance Paper) However activities or services provided in relation to such delivery of goods are covered in this declared list entry.

5.5.2 What is the scope of the phrase delivery of goods on hire purchase of any system of payment by installments?

Please refer to point no 2.5.9 of this Guidance Paper.

5.5.3 If delivery of goods on hire purchase or any system of payment on installment is deemed to be sale of goods what are the activities in relation to such delivery which are covered in the declared service?

It has been held by Supreme court in the case of Association Of Leasing & Financial Service Companies Vs Union Of India [2010 (20) S.T.R. 417 (S.C.)] that in equipment leasing/hire-purchase agreements there are two different and distinct transactions, viz., the financing transaction and the equipment leasing/hire-purchase transaction and that the financing transaction, consideration for which was represented by way of interest or other charges like lease management fee, processing fee, documentation charges and administrative fees, which is chargeable to service tax. Therefore, such financial services that accompany a hire-purchase agreement fall in the ambit of this entry of declared services.

5.5.4 Is service tax leviable on the entire quantum of interest and other charges received in relation to a hire purchase?

No. In terms of the exemption notification relating to such activities, service tax is leviable only on 10% of the amount representing interest. No exemption is available in respect of other charges.

Important

Transfer of right to use goods is a well recognized constitutional and legal concept. Every transfer of goods on lease, license or hiring basis does not result in transfer of right to use goods.  ‘Transfer of right of goods’ involves transfer of possession and effective control over such goods.

For Details please see Point no 5.6 of this Guidance Note.

5.6 Transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods

5.6.1 What is the meaning and scope of the phrase ‘transfer of right to use such goods’

Transfer of right to use goods is a well recognized constitutional and legal concept. Every transfer of goods on lease, license or hiring basis does not result in transfer of right to use goods. ‘Transfer of right of goods’ involves transfer of possession and effective control over such goods in terms of the judgement of the Supreme Court in the case of State of Andhra Pradesh vs Rashtriya Ispat Nigam Ltd [Judgment dated 6/2/2002 in Civil Appeal no. 31 of 1991]. Transfer of custody along with permission to use or enjoy such goods, per se, does not lead to transfer of possession and effective control.

The test laid down by the Supreme Court in the case of Bharat Sanchar Nigam Limited vs Union of India [2006(2)STR161(SC)] to determine whether a transaction involves transfer of right to use goods, which has been followed by the Supreme Court and various High Courts, is as follows:

  •  There must be goods available for delivery;
  •  There must be a consensus ad idem as to the identity of the goods;
  •  The transferee should have legal right to use the goods – consequently all legal consequences of such use including any permissions or licenses required therefore should be available to the transferee;
  •  For the period during which the transferee has such legal right , it has to be the exclusion to the transferor – this is the necessary concomitant of the plain language of the statute, viz., a ‘transfer of the right to use’ and not merely a license to use the goods;
  •  Having transferred, the owner cannot again transfer the same right to others.

Whether a transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole, to determine the nature of the transaction.

5.6.2 Whether the transactions listed in column 1 of the table below involve transfer of right to use goods?

S.No.

Nature of transaction

Whether transaction involves transfer of right to use

1

A car is given in hire by a person to a company along with a driver on payment of charges on per month/mileage basis

Right to use is not transferred as the car owner retains the permissions and licenses relating to the cab. Therefore possession and effective control remains with the owner (Delhi High Court Judgment in the case of International Travel House in Sales Tax Appeal no 10/2009 refers). The service is, therefore covered in the declared list entry.

2

Supply of equipment like excavators, wheel loaders, dump trucks, cranes, etc for use in a particular project where the person to whom such equipment is supplied is subject to such terms and conditions in the contract relating to the manner of use of such equipment, return of such equipment after a specified time, maintenance and upkeep of such equipment.

The transaction will not involve transfer of right to use such equipment as in terms of the agreement the possession and effective control over such equipment has not been transferred even though the custody may have been transferred along with permission to use such equipment. The receiver is not free to use such equipment in any manner as he likes and conditions have been imposed on use and control of such equipment.

3

Hiring of bank lockers

The transaction does not involve the right to use goods as possession of the lockers is not transferred to the hirer even though the contents of the locker would be in the possession of the hirer.(refer to Andhra Pradesh High Court Judgment in the case of State Bank of India Vs State of Andhra Pradesh)

4

Hiring out of vehicles where it is the responsibility of the owner to abide by all the laws relating to motor vehicles

No transfer of right to use goods as effective control and possession is not transferred ( Allahabad High Court judgement in Ahuja Goods Agency vs State of UP [(1997)106STC540] refers)

5

Hiring of audio visual equipment where risk is of the owner

No transfer of right to use goods as effective control and possession is not transferred

Note: The list in the table above is only illustrative to demonstrate how courts have interpreted terms and conditions of various types of contracts to see if a transaction involve transfer of right to use goods. The nature of each transaction has to be examined in totality keeping in view all the terms and condition of an agreement relating to such transaction.

5.7 Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act

In terms of this entry the following activities if carried out by a person for another for consideration would be treated as provision of service.

  •  Agreeing to the obligation to refrain from an act.
  •  Agreeing to the obligation to tolerate an act or a situation.
  •  Agreeing to the obligation to do an act.

5.7.1 Would non-compete agreements be considered a provision of service?

Yes. In case a company or any other person enters into a non-compete agreement with another person for a consideration then it would be a provision of service.

5.8 Service portion in execution of a works contract

Works contract has been defined in section 65B of the Act as a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, improvement, repair, renovation, alteration of any building or structure on land or for carrying out any other similar activity or a part thereof in relation to any building or structure on land.

Typically every works contract involves an element of sale of goods and provision of service. In terms of Article 366 (29A) of the Constitution of India transfer of property in goods involved in execution of works contract is deemed to be a sale of such goods. It is a well settled position of law, declared by the Supreme Court in BSNL‘s case [2006(2) STR 161 (SC)], that a works contract can be segregated into a contract of sale of goods and contract of provision of service. This declared list entry has been incorporated to capture this position of law in simple terms.

Further, with a view to bring certainty and simplicity the manner of determining the value of service portion in works contracts will be given in the Valuation Rules.

5.8.1 Would labour contracts in relation to a building or structure treated as a works contract?

No. Labour Contracts do not fall in the definition of works contract. It is necessary that there should be transfer of property in goods involved in the execution of such contract which is leviable to tax as sale of goods. Pure labour contracts are therefore not works contracts and would be leviable to service tax like any other service and on full value.

5.8.2 Would contracts for tailoring of clothes or development of photographs also be treated as works contracts as these are also for carrying out a particular work?

No. The phrase used is ‘works contract’ and not work contract. ‘Works’ has a defined and accepted legal meaning. As per Black’s Law dictionary ‘works’ means ‘buildings or structures on land’. Moreover works contract has been defined in the Act as contract for carrying our specified activity, like construction, erection, commissioning, installation, completion, fitting out, improvement, repair, renovation, alteration etc., or a part thereof in relation to any building or structure on land. Therefore contracts which do not pertain to building or structures on land would be out of the ambit of works contracts.

5.8.3 Would contracts for construction of a pipe line or conduit be covered under works contract?

Yes. As pipeline or conduits are structures on land contracts for construction of such structure would be covered under works contract.

5.8.4 Would contracts for erection commissioning or installation of plant, machinery, equipment or structures, whether prefabricated or otherwise be treated as a works contract?

Such contracts would be treated as works contracts if –

  •  Transfer of property in goods is involved in such a contract; and
  •  The machinery equipment structures are attached or embedded to earth after erection commissioning or installation.

5.8.5 What is the scope of ‘building or structure on land’?

Buildings and structures on land means not only buildings or structures attached to earth but also things permanently fastened to a building or structure attached to earth.

5.8.6. Would contracts for painting of a building, repair of a building, renovation of a building, wall tiling, flooring be covered under ‘works contract’?

Yes, if such contracts involve provision of materials as well.

5.8.7 What is the way to segregate service portion in execution of a works contract from the total contract?

A simplified manner for determining the value of service portion of a works contract from the total works contract is given in Rule 2A of the Service Tax (Determination of Value) Rules, 2006 ( which will be amended partially for the negative list). In brief the value of the service portion is the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract.

Gross amount includes

Gross amount does not include

Labour charges for execution of the works

Value of transfer of property in goods involved in the execution of the said works contract.

Note:

Where Value Added Tax has been paid on the actual value of transfer of property in goods involved in the execution of the works contract, then such value adopted for the purposes of payment of Value Added Tax, shall be taken as the value of transfer of property in goods involved in the execution of the said works contract.

Amount paid to a sub-contractor for labour and services

Charges for planning, designing and architect’s fees

Charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract

Cost of consumables such as water, electricity, fuel, used in the execution of the works contract

Cost of establishment of the contractor relatable to supply of labour and services and other similar expenses relatable to supply of labour and services

Value Added Tax (VAT) or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract

Profit earned by the service provider relatable to supply of labour and services

 

5.8.8 Is there any simplified scheme for determining the value of service portion in a works contract?

Yes. The scheme will be contained in the revised Rule 2A of the Service Tax (Determination of Value) Rules, 2006.

As per this scheme the value of the service portion, where value has not been determined in the manner as explained at 5.8.7 above, shall be determined in the manner explained in the table below –

Where works contract is for…

Value of the service portion shall be…

(i) execution of original works

forty percent of the total amount charged for the works contract

(ii) execution of original works and the gross amount charged includes the value of land

twenty five per cent of the total amount charged including such gross amount

(iii) works contracts, other than contracts for execution of original works, including contracts for completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings.

sixty percent of the total amount charged for the works contract

Important - ‘total amount’ referred to in the second column of the table above would be the sum total of gross amount and the value of all goods and services supplied free of cost for use in or in relation to the execution of works contract, under the same contract or any other contract and, in case of (ii) in the table above, including the value of land charged as a part of the total consideration.

5.8.9 How is the value of goods or services supplied free of cost be determined to arrive at the total amount charged for a works contract?

If the value of goods and services supplied free of cost for use in or in relation to execution of a works contract is not ascertainable, the same shall be determined on the basis of the fair market value of the goods or services that have close resemblance to goods made available.

5.8.10 What are ‘’original works’?

‘ Original works’ means :

  •  all new constructions;
  •  all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;

5.8.11 Is duty paid on any goods, property in which is transferred (whether as goods or in some other form) in the execution of works contract, available as Cenvat credit?

No. Such Cenvat credit is not available, irrespective of the fact that the value of service portion in execution of the works contract is determined in the manner explained at Point no. 5.8.7 or 5.8.8 above, since such goods are not inputs for the service provided. However, the goods not forming part of such transfer will be eligible for input tax credit subject to the provisions of the Cenvat Credit Rules, 2004 including the provisions relating to reversal of credits contained in rule 6 of the said rules.

5.9 Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as part of the activity

In terms of article 366(29A) of the Constitution of India supply of any goods, being food or any other article of human consumption or any drink (whether or not intoxicating) in any manner as part of a service for cash, deferred payment or other valuable consideration is deemed to be a sale of such goods. Such a service therefore cannot be treated as service to the extent of the value of goods so supplied. The remaining portion however constitutes a service. It is a well settled position of law, declared by the Supreme Court in BSNL‘s case [2006(2)STR161(SC)], that such a contract involving service along with supply of such goods can be dissected into a contract of sale of goods and contract of provision of service. This declared list entry is has been incorporated to capture this position of law in simple terms.

5.9.1 What are the activities covered in this declared list entry?

The following activities are illustration of activities covered in this entry-

  •  Supply of food or drinks in a restaurant;
  •  Supply of foods and drinks by an outdoor caterer.

5.9.2 Are services provided by any kind of restaurant, big or small, covered in this entry?

Yes. Although services provided by any kind of restaurant are covered in this entry, the emphasis is to levy tax on services provided by only such restaurants where the service portion in the total supply is substantial and discernible. Thus the following category of restaurants are exempted –

  •  Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and which has a license to serve alcoholic beverage.
  • Below the threshold exemption

5.9.3. How is the value of service portion to be determined?

The manner of determination of service portion in such an activity is very simple and is proposed to be given in Rule 2C of the the Service Tax (Determination of Value) Rules, 2006 (as amended for the negative list). In terms of the said rule value of the service portion shall be determined in the following manner-

Value of service portion…..

Shall be ….. percentage of the total amount charged:

In a restaurant

40

By an outdoor caterer

60

Important - ‘Total amount’ referred to in the second column of the table above would be the sum total of gross amount and the value of all goods supplied free of cost for use in or in relation to the supply of food or any other article of human consumption or any drink, under the same contract or any other contract.

5.9.4 What are the restrictions, if any, on availment of Cenvat credit by such service providers?

In terms of the Explanation2 to the proposed Valuation rules any goods meant for human consumption classifiable under chapters 1 – 22 of Central Excise Tariff are not ‘inputs’ for provision of such service. Cenvat Credit is, therefore, not available on these items. Availability of Cenvat credit on other inputs, input services and capital goods would be subject to the provisions of the Cenvat Credit Rules, 2004 including the provisions relating to reversal of credits contained in rule 6 of the said rules.

Topics

Acts Income Tax