TaxTMI 
TaxTMI 
TaxTMI 
Negative List of Services
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....ife insurance, and agency services carried out on payment of commission on non government business; (b) services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport; (c) transport of goods and/or passengers; (d) support services, other than those covered by clauses (a) to (c) above, to business entities. 4.1.2 Would the taxable services provided by the Government be charged to tax if they are otherwise exempt or specified elsewhere in the negative list? No. If the services provided by the government or local authorities that have been excluded from the negative list entry are otherwise specified in the negative list then such services would also not be taxable. 4.1.3 'Government' has not been defined in the Act. What is the meaning of Government? Please refer to point no. 2.4.7. 4.1.4 Are various corporations formed under Central Acts or State Acts or various government companies registered under the Companies Act, 1956 or autonomous institutions set up by a special Acts covered under the definition of 'Government'? No. For detailed analysis please refer to point no. 2.4.10. 4.1.5 What entities are then covered un....
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....ervices provided by government security agencies are covered by the main portion of the definition of support service as similar services can be provided by private entities. In any case it is also covered by the inclusive portion of the definition. However the tax will be actually payable on reverse charge by the recipient. 4.1.9 What is the meaning of local authority? Please refer to point no 2.4.8 and 2.4.9. 4.1.10 Department of Posts provides a number of services. What is the status of those services for the purpose of levy of service tax? As per sub-clause (i) of clause (a) of section 66D services provided by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services carried out on payment of commission on non government business are excluded from the negative list. Therefore, the following services provided by Department of Posts are not liable to service tax. ♦ Basic mail services known as postal services such as post card, inland letter, book post, registered post provided exclusively by the Department of Posts to meet the universal postal obligations. ♦ Transfer of money through money orders, operation of savi....
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....sing of agricultural produce; ♦ agricultural extension services; ♦ services provided by any Agricultural Produce Marketing Committee or Board or services provided by commission agent for sale or purchase of agricultural produce; 4.4.1 What is the meaning of 'agriculture'? 'Agriculture' has been defined in the Act as cultivation of plants and rearing or breeding of animals and other species of life forms for foods, fibre, fuel, raw materials or other similar products but does not include rearing of horses. 4.4.2 Are activities like breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture, forestry included in the definition of agriculture? Yes. These activities are included in the definition of agriculture. 4.4.3 What is the meaning of agricultural produce? Agricultural produce has also been defined in section 65B of the Act which means any produce of agriculture on which either no processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. I....
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.... defined in clause (5) of section 65B as 'any produce resulting from cultivation or rearing of plants, animals including all life- forms, on which either no further processing is done or such processing is done as is usually done by the cultivator or producer which does not alter essential characteristics of agricultural produce but make it marketable for primary market'. The processes contemplated in the said definition are those as are 'usually done by the cultivator or producer'. 4.4.8 Would the processes of grinding, sterilizing, extraction packaging in retail packs of agricultural products, which make the agricultural products marketable in retail market, be covered in the negative list? No. Only such processes are covered in the negative list which makes agricultural produce marketable in the primary market. 4.4.9 Would leasing of vacant land with a green house or a storage shed meant for agricultural produce be covered in the negative list? Yes. In terms of the specified services relating to agriculture 'leasing' of vacant land with or without structure incidental to its use' is covered in the negative list. Therefore, if vacant land has a str....
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.... futures be covered under trading of goods? Yes. In commodity futures actual delivery of goods does not normally take place and the purchaser under a futures contract normally offsets all obligations or closes out by selling an equal quantity of goods of the same description under another contract for delivery on the same date. There are, therefore, two contracts of sale/purchase involved which would fall in the category of trading of goods. 4.5.4 Would auxiliary services relating to future contracts or commodity futures be covered in the negative list entry relating to trading of goods? No. Such services provided by commodity exchanges clearing houses or agents would not be covered in the negative list entry relating to trading of goods. 4.6 Processes amounting to manufacture or production of goods The phrase 'processes amounting to manufacture or production of goods' has been defined in section 65B of the Act as a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944) or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which....
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....ll phones, automated teller machines, internet Aerial advertising 4.7.2 Would services provided by advertisement agencies relating to preparation of advertisements be covered in the negative list entry relating to sale of space for advertisements? No. Services provided by advertisement agencies relating to making or preparation of advertisements would not be covered in this entry and would thus be taxable. This would also not cover commissions received by advertisement agencies from the broadcasting or publishing companies for facilitating business, which may also include some portion for the preparation of advertisement. 4.7.3 In case a person provides a composite service of providing space for advertisement that is covered in the negative list entry coupled with taxable service relating to design and preparation of the advertisement how will its taxability be determined? ♦ This would be a case of bundled services taxability of which has to be determined in terms of the principles laid down in section 66F of the Act. ♦ Bundled services have been defined in the said section as provision of one type of service with another type or types of services. ♦ If ....
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....ntry to Entertainment Events and Access to Amusement Facilities. 'Entertainment events' has been defined in section 65B of the Act 'as an event or a performance which is intended to provide recreation, pastime, fun or enjoyment, such as exhibition of cinematographic films, circus, concerts, sporting events, fairs, pageants, award functions, dance performances, musical performances, theatrical performances including cultural programs, drama, ballets or any such event or programme'. 'Amusement facility' has been defined in the Act as 'a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other places but does not include a place within such facility where other services are provided'. 4.10.1 If a cultural programme, drama or a ballet is held in an open garden and not in a theatre would it qualify as an entertainment event? Yes. The words used in the definition are 'theatrical performances' and not 'performances in theatres'. A cultural programme, drama or a ballet preformed in the open does not cease to be a theatrica....
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.... licensed under the Electricity Act, 2003. 4.11.3 If the services provided by way installation of gensets or similar equipment by private contractors for distribution of electricity covered by this entry? No. the entry does not cover services provided by private contractors. Moreover the services provided are not by way of transmission or distribution of electricity. 4.12 Specified services relating to education The following services relating to education are specified in the negative list - ♦ pre-school education and education up to higher secondary school or equivalent; ♦ education as a part of a prescribed curriculum for obtaining a qualification recognized by law for the time being in force; ♦ education as a part of an approved vocational education course. 4.12.1 What is the meaning of 'education as a part of curriculum for obtaining a qualification recognized by law'? It means that only such educational services are in the negative list as are related to delivery of education as 'a part' of the curriculum that has been prescribed for obtaining a qualification prescribed by law. It is important to understand that to be in the negat....
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....ot covered under the negative list entry. However certain services provided to or by educational institutions are separately exempted under the mega-notification. These are services provided to or by an educational institution in respect of education exempted from service tax, by way of,- (a) auxiliary educational services; or (b) renting of immovable property. 4.12.6 What are auxiliary educational services? 'Auxiliary educational services' are defined in the mega notification. In term of the definition, the following activities are auxiliary educational services: ♦ any services relating to imparting any skill, knowledge or education, or ♦ development of course content, or ♦ any other knowledge - enhancement activity, whether for the students or the faculty, or ♦ any other services which educational institutions ordinarily carry out themselves but may obtain as outsourced services from any other person, including following services relating to: ■ admission to such institution ■ conduct of examination ■ catering for the students under any mid-day meals scheme sponsored by Government ■ transportation of stude....
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....titutes such as IITs, IIMs charge a fee from prospective employers like corporate houses/MNCs, who come to the institutes for recruiting candidates through campus interviews. Whether services provided by such institutions are taxable? Yes. Service tax is liable on services provided by such institutions in relation to campus recruitment as such services are not covered in the negative list. 4.12.13 Are services of conducting admission tests for admission to colleges exempt? Yes in case the educational institutions are providing qualification recognized by law for the time being in force (please refer to point no 4.12.3 above). 4.12.14 In addition to the services specified in the negative list, which educational services are exempt if provided by a charitable organization? Please refer to point no 7.4.1. 4.13 Services by way of renting of residential dwelling for use as residence 'Renting' has been defined in section 65B as "allowing, permitting or granting access, entry, occupation, usageor 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, leasi....
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.... Banks and financial institutions provide a bouquet of financial services relating to lending or borrowing of money or investments in money. For such services invariably a variety of instruments, often complex in nature, are used in the financial markets. Transactions in such instruments have to be examined on the touchstone of definition of 'service' given in clause (44) of section 65B and the list of services specified in the negative list to see whether such transactions would be chargeable to service tax. Broadly, the following legal provisions would have a bearing on determining the taxability of such transactions. ♦ The definition of 'service' excludes activities that constitute only transactions in money or actionable claims. 'Money' has been defined in clause (33) of section 65B to include instruments like cheques, drafts, pay orders, promissory notes, letters of credit etc. Therefore activities that are only transactions in such instruments would be outside the definition of service. This would include transactions in Commercial Paper ('CP') and Certificate of Deposit ('CD') (on the understanding of being in the nature of pr....
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....s in so far as the consideration is represented by way of interest or discount"? The negative list entry covers any such service wherein moneys due are allowed to be used or retained on payment of interest or on a discount. The words used are 'deposits, loans or advances and have to be taken in the generic sense. They would cover any facility by which an amount of money is lent or allowed to be used or retained on payment of what is commonly called the time value of money which could be in the form of an interest or a discount. This entry would not cover investments by way of equity or any other manner where the investor is entitled to a share of profit. Illustrations of such services are - ♦ Fixed deposits or saving deposits or any other such deposits in a bank or a financial institution for which return is received by way of interest. ♦ Providing a loan or overdraft facility or a credit limit facility in consideration for payment of interest. ♦ Mortgages or loans with a collateral security to the extent that the consideration for advancing such loans or advances are represented by way of interest. ♦ Corporate deposits to the extent that ....
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....ch are goods. 4.14.7 Would subscription to or trading in Commercial Paper (CP) or Certificates of Deposit (CD) be taxable? Commercial Paper ('CP') and Certificate of Deposit ('CD') are understood as unsecured money market instruments which may be issued in the form of a promissory note or in a dematerialized form through any of the depositories approved by and registered with SEBI. CPs are normally issued by highly rated companies, primary dealers and financial institutions at a discount to the face value. CDs can be issued by Scheduled Commercial Banks (excluding RRBs and Local Area Banks) and All - India Financial Institutions (FIs) permitted by RBI. Since these are instruments for lending or borrowing money where in consideration is represented by way of a discount issue or subscription to CPs or CDs would be covered in the negative list entry relating to 'serivces by way of extending deposits, loans or advances in so far as consideration is represented by way of interest or discount'. It may also be borne in mind that promissory note is included in the definition of money in the Act as given in clause (33) of section 65B. However if some service charges or service fees or d....
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....ility of payment of the purchases made by the card holder within a specified period failing which some charges are levied. The question that arises is whether the credit so extended for this payment is in the nature of a loan or advance for interest. Interest for delayed payment of any consideration for the sale of goods or provision of service has been specifically excluded from value by rule 6 of valuation rules. Thus ordinarily any interest charged for delayed payment of consideration would have been outside the gambit of service tax. However in the case of credit cards the credit extended is not for the delayed payment of consideration for the provision of services. The services in the case of the credit card are by way of levy of issuing charges or the commission charged from merchants etc. The interest in this case is not for the consideration for the use of the card. Thus the benefit under the valuation rules will not be available to credit card companies. The other question is whether such credit extended will amount to loans or advances. Loans and advances are meant to signify amounts contractually negotiated as such (loan or advance) and not merely failure to pay an amo....
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....ly for tourism purpose' qualify the preceding words "public transport". This implies that the public transport by a vessel should not be predominantly for tourism purposes. Normal public ships or other vessels that sail between places located in India would be covered in the negative list entry even if some of the passengers on board are using the service for tourism as predominantly such service is not for tourism purpose. However services provided by leisure or charter vessels or a cruise ship, predominant purpose of which is tourism, would not be covered in the negative list even if some of the passengers in such vessels are not tourists. 4.16 Service relating to transportation of goods The following services provided in relation to transportation of goods are specified in the negative list of services:- ♦ by road except the services of (i) a goods transportation agency; or (ii) a courier agency ♦ by aircraft or vessel from a place outside India up to the customs station of clearance in India; or ♦ by inland waterways. 4.16.1 Are all services provided by goods transport agency excluded from the negative list? Yes. However, there are sepa....