No Service Tax on use of ATMs – clarification through PIB
When the excited boys of our editorial team wanted to do a piece on Service Tax on ATMs immediately after the budget, I for one was not impressed. There is no tax on the ATM user and for card services, users are already taxed. What’s there to write about? But our boys were persistent. They went out and surveyed for a solution and surprisingly they found that there was tremendous ignorance. Revenue officials and Bankers were more confused than ordinary, worried bank card users. There was a terrible fear that every ATM transaction is going to be taxed and as a percentage of the money you withdraw. Our teams told the worried users that there was no such tax but people really did not believe our boys.
In his report, our Senior Correspondent wrote
Whatever the case may be it seems that confusion is prevailing among the stakeholders and there is a need that the government should come out with a clarification. Especially the common man who doesn’t understand the fine-prints of the budget documents will not believe if TIOL team says that there is no need of worry and there will be no additional cost on the services they are availing from the banks.
His parting shot was,
So what’s new? But people and bankers are worried. The Government should clarify the position soon.
We carried this report on 2nd of March. We are happy to report that the Government has indeed come out with a clarification that Service Tax is not proposed to be levied on use of cards in ATMs. May be for wider coverage, the government has released this clarification through PIB. The clarification reads as follows :
Services provided in relation to Automated Teller Machine (ATM) operations, maintenance or management is proposed to be brought under the levy of service tax in the Finance Bill, 2006 vide section 65 (105) (zzzk) of the Finance Act, 1994. The term “Automated Teller Machine” is defined under clause (9a) of Section 65 and the term “Automated Teller Machine operations, maintenance or management service” is defined under clause (9b) of Section 65.
A question has been raised as to whether the proposed levy of service tax will have any impact on the holders of credit cards, debit cards, charge cards and other payment cards who use ATM for withdrawal of cash.
Service tax, under the proposed service, is not leviable for use of ATM by the card holders. Service tax on the proposed taxable service is leviable only if the services provided are in relation to operations, maintenance or management of ATM and are outsourced by banks to third parties. Third parties who provide services to banks in relation to ATM operation, maintenance or management are covered under the category of the proposed service. When ATMs are operated, maintained or managed by banks on their own, service tax liability does not arise.
It is, therefore, clarified that the proposed service under Section 65(105)(zzk) of the Finance Act, 1994 will not result into any additional service tax liability on the users of ATMs.