Service Tax on new services – TRU issues clarifications but strictly for departmental consumption
Better late than never. After nearly five months of presenting the Budget, TRU has now issued a detailed clarification on the changes made in the Budget 2005-06 relating to the levy of service tax on the new services and expanding the scope of existing services, along with the changes in the service tax rules and the legislative changes. But for some strange reasons the TRU did not want to make public its instructions; they are meant strictly for departmental use.
The TRU letter to the field ends sardonically,
The above explanation of various changes and provisions of law is only for purpose of guidance to facilitate understanding and implementation of various provisions. It is not a part of the law and does not override it. Adequate care may be taken to carefully read the relevant provisions of law.
In effect the letter is only an exercise in futility and can best be ignored.
The letter aims at clarifying the changes relating to the following apart from the new services:
a. taxable services received from abroad;
b. linking payment of service tax with receipt of payment for the taxable services provided or to be provided; and
c. issue of show cause notices and adjudication
DDT, having raised the issue relating to the issue of Show Cause Notice earlier, eagerly searched for the clarification. But in the entire 38 paragraphs, nowhere any clarification was found on the issue of who has to issue and adjudicate show cause notices. May be, we will have to wait for another clarification.
Regarding the new services, there is hardly anything clarified other than reproducing what is defined under the relevant sections and clauses. Highlights of the TRU letter are:-
1. Transport of goods through pipeline or other conduit: Consideration for the transportation service provided may be payable periodically or from time to time. The service provider is required to pay service tax as and when payment is received for the services provided or to be provided.
2. Site formation and clearance, excavation, earth moving and demolition services: The service provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies are specifically excluded and not within the scope of this service. Service provided in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, major and minor ports is exempted
3. Dredging services: Service tax is leviable only on dredging of river, port, harbour, backwater or estuary and dredging in any other cases does not attract service tax. May be the dredging of Sethusamudram is not covered as it involves dredging of SEA.
4. Survey and map making: The new service does not cover “survey and exploration of minerals” . Service rendered by agency under the control of Government of India or authorised by the Government, such as ‘Survey of India’ are specifically excluded.
5. Cleaning services: Services in relation to agriculture, horticulture, animal husbandry or dairying would be excluded from the purview of service tax. Further, such cleaning services in respect of non-commercial buildings and premises thereof would not be covered within the purview of service tax under this category. So no tax on cleaning of residential buildings.
6. Membership of Clubs or Associations: apart from membership fee or recurring subscription fee, such as amounts paid for provisions of services to the guests of a member, amount paid for get-togethers and functions charged over and above the subscription amount will also be liable to service tax. However, amount charged by club to its members for sale of items such as food or beverages would not be taxable provided the documents evidencing such sale are available. Any additional fee should be treated in the same way as subscription. Life membership fees must be treated in the same way as subscription.
7. Packaging services: packaging activity which amounts to manufacture within the definition of section 2(f) of Central Excise Act, 1944 would not be liable to service tax. Service tax would be leviable on the gross amount charged for rendering the packaging services.
8. Construction of residential complexes: residential complex constructed by an individual, which is intended for personal use as residence and is constructed by directly availing services of a construction service provider, is not covered under the scope of the service tax and not taxable.