What is common to a Port and Jammu Kashmir?
SERVICES are not tangible. It is very difficult to define the “Borders” for services. How do you tax a service under Section 66A of the Finance Act, 1994? How can one say the service is received in India? Though difficult, at least there is a method in madness and we have the Taxation of Services (Provided from outside India and Received in India) Rules 2006. The services were divided into three categories to decide the tax liability.
Then, we have Jammu and Kashmir. The levy of service tax is as complicated as the J&K problem. As per the Finance Act, 1994, the provisions are not applicable to J&K. How do we treat a goods transport agency transporting goods from Punjab to J&K? Is it liable for service tax? What if the Truck starts in J&K and reaches Delhi? What if the services are provided from outside J&K and received in J&K? Are they liable to tax?
Now, we have the latest to the list. The PORT. When the demands of service tax on services rendered inside the port were set aside by the appellate forums on the ground that these service providers were not “authorised by the Port”, the helpless babus thought of an innovative solution. In this year's Budget, they removed the word “authorised by the port” from the definition of the service. This innovative solution has led to more problems. Now every service within a port became taxable under Port service. Rent-a-cab, erection commissioning, for that matter any other taxable service if provided within the Port will be taxed under the Avatar of Port service, of course with no abatement / exemption available to these services under Port services while outside the port, they are exempted/ entitled for abatements.
The babu has found one more solution. Amend all such notifications by adding port service to them. And finally after a couple of corrigendums, they did it.
Now the issue is how do you decide whether a service is rendered “wholly within” the port? The same J&K or Outside / Inside India problem. If a telephone is installed in a port, is it taxable under port service? If there is a branch of a Bank within the port, will it come under Port Service or Banking Service? What about an ATM installed in a Port? The service providers will have tough time in deciding the service head and for the babu, paying service tax under a wrong head means non-payment of service tax!
How about a notifying a new set of rules, called “Taxation of Services Provided wholly within the Port Rules, 2010” so that these issues can be thrashed out?