Do Renovation Payments To Builder Require Service Tax Payment?

I want to ask a question that if I am getting services of a builder for my residential house renovation , then am I liable to pay service tax on that or not. Asha , Noida

First of all, it should be noted that though service recipient has to pay the "service tax ", the responsibility to deposit, generally,is with the service provider. So , it is for your builder to charge service tax on the bill raised for the work.In case his gross receipt is below Rs 10 lakhs in a year, he may not charge you "service tax " despite the fact that he was providing taxable service.

The Finance Act 1994 provides u/s 105(zzg) provides that any service provided by any person to a customer in relation to management, maintenance or repair is a taxable service.

Further , mananagement ,maintenance or repair have been defined under section 65(64) as under :

• (64) “management, maintenance or repair” means any service provided by—
  (i) any person under a contract or an agreement; or
  (ii) a manufacturer or any person authorised by him, in relation to,—
  (a) management of properties, whether immovable or not;
  (b) maintenance or repair of properties, whether immovable or not; or
  (c) maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle;

Therefore, if the renovation was done by any person under a contract or an agreement or by the builder who had actually built your house, the work is taxable service.However , if the renovation is casual and without any contract or agreement with the builder who was not the original builder , in my opiniuon, service tax can not be imposed because it does not fall within the definition of taxable service.In other words, casual renovation to a building or house is not a taxable service .

Read More...

Summary only...

15 Services For Which Exporters Can Claim Refund of Service Tax!

The government has notified 15 services associated with the export activities eligible for refund of service tax paid . It is stated in the instruction no 341/15/2007-TRU, DATED 17-4-2008 issued by government as under

Accordingly, 16 taxable services have been notified and the service tax paid on these taxable services, which are attributable to exports even if they are not used as input services, shall be refunded to exporters [notification No.43/2007-ST, dated 29.11.07 and notification No.41/2007-ST, dated 06.10.07, as amended by notifications No.42/2007-ST, dated 29.11.07, No.03/2008-ST, dated 19.02.08 & No.17/2008-ST, dated 01.04.08].

However , the blog author could identify only 15 taxable services vide notification stated in the instruction. [Readers are requested to identify the 16 th and send the same , so that that also can be published for the benefit of readers.]

Sr. No	Classification under Finance Act, 1994	Description
1.	Section 65(105)(d)	Services provided to an exporter by an insurer, including a re-insurer
2.	Section 65(105)(zn)	Port Services
3.	Section 65(105)(zzh)	Services provided by a technical testing and analysis agency
4.	Section 65(105)(zzi)	Services provided by an inspection and certification agency in relation to inspection and certification of export goods where such technical inspection and certification is required to be undertaken as per written agreement between the exporter and the buyer of the export goods
5.	Section 65(105)(zzl)	Services provided for export of said goods
6.	Section 65(105)(zzp)	Services provided for transport of said goods from the inland container depot to the port of export
7.	Section 65(105)(zzzp)	Services provided for transport of said goods from the inland container depot to the port of export
“8.	Section 65(105)(zzzd)	Specialized cleaning services namely disinfecting, exterminating, sterilizing or fumigating of containers used for export of said goods provided to an exporter.
9.	Section 65(105)(zza)	Services provided for storage and warehousing of said goods.
“10.	section 65(105)(f)	Services provided by a courier agency to an exporter in relation to transportation of time-sensitive documents, goods or articles relating to export, to a destination outside India.
11.	section 65(105)(zzp)	Services provided to an exporter in relation to transport of export goods directly from the place of removal, to inland container depot or port or airport, as the case may be, from where the goods are exported.
12.	section 65(105)(zzzp)	Services provided to an exporter in relation to transport of export goods directly from the place of removal to inland container depot or port or airport, as the case may be, from where the goods are exported.
“13.	section 65(105)(h)	services provided by a custom house agent in relation export goods exported by the exporter.
14.	section 65(105)(zm)	(i) services provided in relation to collection of export bills, (ii) services provided in relation to export letters of credit such as advising commission, advising amendment, confirmation charges.
15.	section 65(105)(zzb)	Services provided by a commission agent, located outside India, and engaged under a contract or agreement or any other document by the exporter in India, to act on behalf of the exporter, to cause sale of goods exported by him.

Readers can get all these notification in one word file from here.

Read More...

Summary only...

Is Sound Recording Service To Film Liable To Service Tax?

I and a couple of friend of mine run a partnership firm which is in the business of providing Sound post production for feature Films ,So could you please tell me about TDS & Service Tax, applicable to us and payable by us.to whom are we entitled to charge service tax and entitled to deduct TDS, at which amount onwards do we need to charge service tax from our client & fill TDS. Someone told us we will liable to deduct TDS only after we cross a turnover of Rs.40 Lakhs in FY. Could please fill us with details so that we don't default on our taxes. ALLWIN REGO, Mumbai

You have not stated exactly what type of work you get done from others . I presume it is some specialised professional or technical work and on that presumption , am answering your question.

TDS necessary?

First of all you should know that the criteria of 40 Lakhs turnover is not for a firm , but only for individual or HUF. Since you are having a partnership firm , you will have to deduct tax for any professional or technical work taken from other person if payment exceeds Rs 20,000. for

1. any professional job you have taken from another person.

2. any technical job you received from another person.

For both 1 & 2 above, deduction is to be made u/s 194J and rate of deduction is 10% +SC+Cess. The rate chart can be found here.

The TDS should be deducted and deposited by you . A certificate should be issued to the deductee by you in the prescribed form. Then a return of TDS has to be submitted.

Liability To Service Tax?

You are in business of providing service of sound recording . So we have to first see what type of service in case of sound recording is liable to service tax.Section 65(105) (zj) of the Finance Act 1994 defines taxable service in case of sound service in following words

"any service provided or to be provided to a client by a sound recording studio or agency in relation to any kind of sound recording"

Section 65(98) defines service of sound recording of sound on any media or device including magnetic storage device and includes services relating to recording of so8und in any manner such as sound cataloguing ,storing of sound and sound mixing or remixing or any audio past -production activity.

Section 65(99) of the Finance Act defines the term ' sound recording studio or agency" as under

" means any person engaged in the business of rendering any service relating to sound recording "

Further , the concept of exemption to subcontractor within same taxable service is no more valid as CENVAT Credit is available across the board.

Prima facie , in my opinion you are covered u/s service tax . Remember you are supposed to pay service tax to government , therefore , you can charge the service tax to the client you work for . The rate of tax is 12.36%

Read More...

Summary only...

Are Print Media Liable To Service Tax On Advertisements?

Whether magazine publishers are liable to pay service tax for the advertisements published . Ravi M , Margoa, Goa

There are two sections under Service Tax laws (Finance Act 1994) which cover services related to advertisements . These are :

• Advertising services. [Section 65(105)(e)]
• Space selling Service [65(105)(zzzm)]

Advertising services. [Section 65(105)(e)]

Section 65(105)(e) defines taxable service for advertising service as under

"Taxable service means any service provided or to be provided to a client , by an advertising agency in relation to advertisements in any manner"

First of all this section is applicable on advertising agency which a newspaper or magazine is not.

Secondly service tax under this section is not payable for the actual making or display or exhibition of advertisement , but on the service connected with these activities. So, there is no service tax payable on advertisement charges paid to print media by advertising agency or the advertiser .

Space selling Service [65(105)(zzzm)]

Space selling came into service tax fold from 1/5/2006 . The taxable service defined under section 65(105)(zzzm) in following words

taxable service means any service provided or to be provided to any person , any other person , in relation to sale of space or time for advertisement , in nay manner ; but does not include sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organisation.

Therefore, the print media is out of service tax for advertisements appearing in it.

Read More...

Summary only...

Can The User of Service Be Liable to Pay Service Tax?

can user of service be liable to pay service tax any way, if service provider has not charge service tax in their bill.Also tell me relevant section in the act. RAMAKANT KHANDELWAL

The concept of service tax is generally implies that service provider is liable to pay service tax . However , there are some express provision in service tax laws which lays onus of paying service tax on the receiver of service. Therefore, in following cases, the 'person' who receives the taxable service is liable to pay Service Tax:

(i) Insurance Company pays service tax for service given by agents following under Insurance Auxiliary Service .
(ii) In respect of the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight should pay Service Tax, if the consignor or consignee falls under any of the seven categories viz. (a) a factory (b) a company (c) a corporation (d) a society (e) a co-operative society (f) a registered dealer of excisable goods (g) a body corporate or a partnership firm
(iii) In respect of the Business auxiliary services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund, the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.
(iv) The body corporate or firm, which receives the sponsorship service pays service tax
(v) As per Sec. 68(2) and Sec.66A of the Act read with Rule 2(1)(d) of the Service Tax Rules, 1994) in case any taxable service provided or to be provided by any person from a country other than India and received by any person in India, the person receiving such service should pay service tax.

Read More...

Summary only...

Is Consultant For Software Testing Service Provider Taxable Under Service Tax?

I am working as a Domain consultant for Software testing service provider. I raise a monthly Invoice for fees & I state " Fees towards services rendered as Domain Consultant for Software testing " . Please clarify if this falls under any of the category of the 107 which are subject to service tax . satya1254@hathway.com

Out of 107 services brought under service tax net, I feel your service may come under any of the following two services :

1. Consulting Engineering Services.
2. Scientific and Technical Consultancy Service.

The consulting engineering services may be ruled out in case the services given is purely related to software engineer because software engineering is kept explicitly out of definition of taxable service u/s 65(105)(g) which is given as under

“g) to a client, by a consulting engineer in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering including the discipline of computer hardware engineering but excluding the discipline of computer software engineering; “

However , if you are actually consulting  related to hardware engineering , then only such service can be taxed under this head

Scientific and Technical Consultancy Service??

The second head which suits to your service is  scientific and technical consultancy.I feel this is the head under which your service of consultancy for software testing may be covered. Section 65(92) defines this head as follows :

"scientific or technical consultancy" means any advice, consultancy, or scientific or technical assistance, rendered in any manner, either directly or indirectly, by a scientist or a technocrat, or any science or technology institution or organisation, to a client, in one or more disciplines of science or technology;

Therefore, from facts stated by you, it seems to me your service will be covered under "Scientific and Technical Consultancy Service" given u/s 65(92) of the Service Tax Act under Chapter V of Finance Act 1994.

Read More...

Summary only...

Easiest Way to Know If The Service You Provide Is Taxable?

There are 107 types of services which are covered under Service Tax law. It means that anybody providing such services and having total receipts from such service exceeding Rs 8,00,000 , has deposit the service tax.The liability to pay service tax , in ordinary circumstances , is with the service providers.The following list of 107 types of services are arranged alphabetically

Read More...

Summary only...

Are Indian Advertisers Liable To Pay Service Tax Themselves And Not Google,USA?

In my view , Indian advertisers who are taking services of Google ,USA for business campaign or commercial campaign, are themselves liable to pay service tax and not Google USA.Google is the leader in online advertising space selling. Its wonderful program AdWords is very effective way of advertising for business concerns because of its targeted appeal.Google also provides different types of ad formats.

It is now undisputed that the online space selling for advertisements is "taxable service" under the Service Tax law.Much before the explicit entry of online advertising space sale brought within Service Tax ambit , Authority on Advance Ruling had ruled that the Google was liable to pay service tax on sale of space on its website.Read this posting for knowing more.

Now , under the Service Tax law of India , it has been provided that in case

1. service provider is based in foreign country , and
2. it gives any service which is taxable service under service Tax laws and
3. the recipient of taxable service is based in India

then recipient shall be liable to pay the tax.

In this regard, it is interesting to know that Google has a permanent establishment in India.However, the AdWords or other advertisement program are run by Google ,USA and not its Indian office.The payment is taken by credit card . Therefore , the question who will pay the service tax becomes important.Fortunately ,the Service Tax Act has express provision u/s 66A of Chapter V of Finance Act 1994 to deal with such situation.The excerpt of the said section is :

66A. (1) Where any service specified in clause (105) of section 65 is,—

(a) provided or to be provided by a person who has established a business or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India, and

(b) received by a person (hereinafter referred to as the recipient) who has his place of business, fixed establishment, permanent address or usual place of residence, in India, such service shall, for the purposes of this section, be taxable service, and such taxable service shall be treated as if the recipient had himself provided the service in India, and accordingly all the provisions of this Chapter shall apply:

Provided that where the recipient of the service is an individual and such service received by him is otherwise than for the purpose of use in any business or commerce, the provisions of this sub-section shall not apply:

Provided further that where the provider of the service has his business establishment both in that country and elsewhere, the country, where the establishment of the provider of service directly concerned with the provision of service is located, shall be treated as the country from which the service is provided or to be provided.

(2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section.

Careful consideration of aforesaid provision makes it clear that the Indians who are utilising the AdWords for their business and not for personal use and are buying the service of AdWords as well as other types of advertisement from Google ,USA are liable to pay service tax themselves despite the fact that Google has presence in India. The reason is that section 66A(2) and the last proviso of section 66A(1) makes it clear that even if the Google has office in India, if the service is provided from USA , the Google USA shall be taken as separate person and there will no effect of Google having office in India.

Read More...

Summary only...

Who is liable to Service Tax For AdSense Sale-You or Google ?

The AdSense is a wonderful program. Most of the persons having online presence in form of website or blog are members of AdSense program of Google.The revenue sharing program , in Indian context, also brings with it issues of taxation not only income tax but also service tax. In this posting , I am covering service tax only :

Are you are liable to pay service tax ?

The AdSense program is a platform of Google where it auctions by bid system the advertisement space available on its AdSense members' site . Authority on Advance Ruling, had decided on an application by Google ,that the service provided by Google comes with in the ambit of Service Tax. The decision was delivered in December 2005 . Remember , the application of Google was for advance ruling on the issue of sale of space or time on its own site and not on other AdSense program subscribers. The exact questions [excerpt from the said order of AAR] raised by Google was following :

The applicant seeks advance ruling of the Authority on the following question :

“Whether the activity of providing/selling space for advertisement on ‘ Google Website’ as proposed to be carried out by the applicant and as detailed in annexure 1 of this application, is classifiable under any of the below mentioned heads of taxable services or as any other taxable service enumerated in Chapter V of the Finance Act, 1994 :

1. Advertisement services .....
2. Computer network service ......
3. Business auxiliary service ....
4. Any other taxable service ........"

The question was not raised for advertisement on AdSense program subscribers' websites or blogs.However, after this , the government of India , vide Budget 2006, made it absolutely clear that online sale of space or time for advertisements is taxable service under Service Tax Act . The said amendment effective from 1/4/2006 was vide definition of taxable Service in Section 65 (105)(zzzm). The explanation was also added to do away with any kind of confusion. The said section is given as under:

(105) “taxable service” means any service provided or to be provided,
....................
(zzzm) to any person, by any other person, in relation to sale of space or time for advertisement, in any manner; but does not include sale of space for advertisement in print media and sale of time slots by a broadcasting agency or organisation.
Explanation 1.—For the purposes of this sub-clause, “sale of space or time for
advertisement” includes,—

• (i) providing space or time, as the case may be, for display, advertising, showcasing of any product or service in video programmes, television programmes or motion pictures or music albums, or on billboards, public places, buildings, conveyances, cell phones,automated teller machines, internet;

The aforesaid insertion of clause(zzzm) and the Explanation has made it explicitly clear that providing space or time on web site or blogs is taxable service liable to service tax @ 12 %. The questions remain however are:

1. Who is liable -Google or Site owner -to pay service tax?
2. What is the taxable value of service on which tax is to be paid?

Who is liable?
As per Service Tax Act , taxable entity are either the service provider or in certain circumstances , even service receiver is liable to pay tax on taxable service. Therefore, this raises following questions with respect to advertisements placed through AdSense program

Who is providing service Google or site owner- in case of AdSense program?

Answer to this is not hard to find out.The facts of the case are:

1. Google sells the advertisement space or time on AdSense Subscribers' websites through a program called AdWords.
2. The advertisers are allowed to bid for the keywords for which there are variable rates.These are fixed by Google alone.The site owners have no say in this.
   
3. The advertisements are placed on the blog sites or other websites who are members of AdSense.But the placements software is made by Google according to conditions fixed by them.
   
4. Only Google knows the charges for advertisements paid by advertisers.
5. Only Google knows the revenue sharing formula.
6. Only Google has the control for finding out the context and advertisements to place.
7. Only Google can get the payments from the Advertiser.
8. Only Google has control over AdSense programs and who can be its members.
9. Only Google , in certain specified circumstances, helps advertisers to provide their staffs for the help of advertiser in guidance for making,enhanced advertisements.

Therefore, it is not hard to find out that if any liability comes to pay service tax , it is Google and not the site owners or blog owners.

What is the taxable value of service on which tax is to be paid?
The taxable value of service is total chrges paid by the different advertiser and received by Google in a year is the taxable value of service liable to tax @ 12 %.


Note: In any case, from 1/4/2007 , a person is liable to service tax only if total receipts of service charges exceeds Rs 8,00,000 a year .

Read More...

Summary only...