Negative List vs. Exempted Services Negative List Services are the services which are out of the ambit of chargeability of service tax Exempt Services are services which are prima facie taxable, but exempt from payment of service tax, which may be general or subject to conditions
Notifications to be discussed Notification No. 25 / 2012 – Service Tax dated 20.06.2012 Notification No. 12 / 2012 – Service Tax dated 17.03.2012 Notification No. 26 / 2012 – Service Tax dated 20.06.2012 Notification No. 13 / 2012 – Service Tax dated 17.03.2012 Notification No. 14 / 2012 – Service Tax dated 17.03.2012 Notification No. 30 / 2012 – Service Tax dated 20.06.2012 Notification No. 15 / 2012 – Service Tax dated 17.03.2012 WEF 01.07.2012
Classification of Exemptions Service provider Service – AN ACTIVITY Recipient Exemption based on nature of service Exemption based on class of service provider Exemption based on class of recipient of service
Based on Nature of Service Renting of religious places or for conduct of religious ceremony Legal services Training and coaching in recreational activities Sponsorship of tournaments or championships Erection, construction ….. of specified properties or original works Copyright services in specified circumstances Renting specified properties for residential or lodging purposes Transportation of goods by rail or vessel from one port to another in India GTA services for specified goods Hiring of motor vehicle
Based on Nature of Service Transport of passengers in specified cases Parking of motor vehicles Distribution or marketing of mutual funds Distributor or marketing of sim cards or recharge coupon vouchers Selling or marketing of lottery tickets General insurance business under specified schemes Job work in specified cases Business exhibitions held outside India Making telephone calls from specified phones Slaughtering of bovine animals Business transfer Public conveniences
Based on Nature of Service Provider By a clinical establishment / para medics / auth medical practitioner By a Veterinary clinic By an entity registered under 12AA of Income Tax Act Clinical trials by CRO approved by DCG By individual player, refree, umpire, coach or manager By a recognized sports body By a performing artist in folk or classical forms By an independent journalist, PTI or UNI By a restaurant, eating joint or a mess By an incubatee By an unincorporated body or an entity registered as society By Public libraries By ESIC By Govt. Authority
Based on Nature of Recipient To UN or specified international organisations To Government or Local Authority / Govt. Authority To an educational institution To a GTA To a stock broker To member of commodity exchange To banking company or an insurance company To an entity registered under Section 12AA
UN or Specified International Organization All taxable services provided by any person, to the United Nations or Specified International Organization is exempt from whole of service tax. Hitherto, exempt vide Notification No. 16/2002 – Service Tax dated 2 nd August, 2002.
Health care services Health Care Services provided by: 1. Clinical establishment 2. Authorised medical practitioner 3. Para-medics is exempt from whole of service tax. Hitherto, exempt vide Notifn No. 30/2011 – Taxable services under Section 65(105)(zzzzo)
Veterinary clinic Services of veterinary clinic in relation to health care of animals or birds is fully exempt from service tax.
Charitable Institutions / Trust All services by way of charitable activities provided by an entity registered u/s 12AA of the Income Tax Act, 1961 is fully exempt from service tax.
Renting of religious places Service rendered by a person by way of: a) Renting of precincts of a religious place meant for general public; OR b) Conduct of any religious ceremony is fully exempt from service tax Hitherto, exempt under the category of mandap keeper vide Notifn No. 14/2003
Legal services Services provided by: An arbitral tribunal (Hitherto, exempt vide Notifn No. 45/2011) To any person other than a business entity To a business entity with turnover upto Rs. 10 lakhs An individual as an ADVOCATE / PARTNERSHIP FIRM by way of legal services: To an advocate / partnership firm of advocates To any person other than a business entity To a business entity with turnover upto Rs. 10 lakhs A person represented on an arbitral tribunal to the arbitral tribunal is fully exempt from service tax.
Clinical Trials Services provided by an approved CRO by way of: technical testing OR analysis of newly developed drugs, including vaccines and herbal remedies on human participants is fully exempt from service tax. Hitherto, exempt vide Notifn No. 11/2007
Training or coaching Services by way of training or coaching in recreational activities relating to arts, culture or sports is fully exempt Hitherto – partly excluded and partly exempt – vide Notifn No. 24/2004 – Taxable under the category of commercial training or coaching services. What about? Computer training (Hitherto under Notifn No. 24/2004) Vocational training (Hitherto under Notifn No. 23/2010 and 24/2004) – Is under negative list under Section 66D(L) Pre school education – Under negative list Training for grant of certificate / diploma / degree – Under negative list Curriculum – No. 10/2003 – under Section 66D(L)
Educational Institutions Services provided TO / BY an educational institution Auxiliary educational services Renting of immovable property
Recognised sports body Services provided to a recognised sports body by: 1. An individual player, referee, umpire, coach or team manager 2. Another recognised sports body is exempt from service tax Hitherto, exempt vide Notifn No. 30/2010
Sponsorship Services by way of sponsorship of SPORTING EVENTS organised by the notified board / scheme / association is fully exempt from service tax
To Govt. / Local Auth / Govt. Auth Construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration Civil structures for other than commerce, industry or profession Historical monuments, archaeological sites Structure meant for use as educational, clinical or an art or cultural establishment Canal (Circular No. 116/10/2009 read with Notifn No. 41/2009), dam (Excluded) or other irrigational works Pipeline, conduit or plant for water supply, water treatment & sewage treatment. Residential complex for self use or use of employees (F No. 332/16/2010 – TRU dated 24.05.2010)
Construction…. Construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration Road, bridge, tunnel, or terminal for road transportation for use by general public; Civil works or any original works under JNNURM Building owned by an entity registered u/s 12 AA of the Income tax Act, 1961 and meant predominantly for religious use by general public; Pollution control or effluent treatment plant; or Structure for funeral, burial or cremation of deceased; Hitherto, roads were exempt vide Notifn No. 24/2009 and site formation, clearing activities etc vide Notifn No. 17/2005
Erection or const - original works Erection or Construction Airport, port or railways including monorail / metro Hitherto airport under WCT vide Notifn No. 10/2011 and ports under WCT vide Notifn No. 11/2011 and construction activities under 38/2010 and 27/2007 Single residential unit as part of residential complex Low- cost houses Post- harvest storage infrastructure for agricultural produce Mechanised food grain handling system, machinery or equipment for units processing agricultural produce
Copyright Temporary transfer or permitting the use or enjoyment of a copyright relating to: 1. Original literary 2. Dramatic 3. Musical 4. Artistic works 5. Cinematograph films is exempt from service tax
Performing artist Services by a performing artist in folk or classical art forms of: 1. Music; or 2. Dance; or 3. Theatre is fully exempt from service tax Exception to the above is the services provided by such artist as a brand ambassador (TAXABLE)
Collecting or providing news Services by way of collecting or providing news by: 1. An independent journalist 2. Press Trust of India 3. United News of India is fully exempt from service tax. Hitherto, exempt under the category of computer network services vide Notifn No. 13/2010
Renting of hotel, inn, etc. Services by way of renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a unit of accomodation below Rs. 1000/- per day or equivalent Hitherto, exempt vide Notifn No. 31/2011 – Short term accommodation services What if the renting is for more than 3 months?
Serving of food or beverages Services provided in relation to serving of food or beverage by a restaurant, eating joint or a mess which has a licence to serve alcoholic beverages but which do not have the facility of air-conditioning or central air heating is exempt from service tax Hitherto, excluded from the definition of restaurant services under Section 65(105)(zzzzv)
Transportation of notified goods Services by way of transportation by rail or a vessel from one place in India to another of the notified goods is exempt from service tax
Goods Transport Agency Services provided by a GTA by way of transportation of fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage Hitherto, exempt vide Notifn No. 33/2004
Goods Transport Agency Services provided by a GTA by way of transportation of goods where gross amount charged: on a consignment in a single goods carriage does not exceed Rs. 1,500/- or for a single consignee in the goods carriage does not exceed Rs. 750/- Hitherto, exempt vide Notifn No. 34/2004
Providing on hire Services by way of giving on hire: Motor vehicles meant to carry more than 12 passengers to a state transport undertaking; or A goods carriage to a goods transport agency; is exempt from service tax
Transport of passengers Transport of passengers with or without accompanied belongings by: Air, embarking from or terminating in an airport located in notified North eastern states; or A contract carriage for the transportation of passengers excluding tourism, conducted tour, charter or hire Ropeway, cable car or aerial tramway Hitherto, exempt vide Notifn No. 27/2010 and 20/2009
Motor vehicle parking Services by way of vehicle parking to general public is exempt from service tax. No exemption if the leasing of space is given to an entity for providing such parking facility.
To Govt. / Local Auth / Govt. Auth Activity in relation to function entrusted to municipality In relation to water supply, public health, sanitation conservancy, solid waste management or slum improvement and upgradation Repair of a ship, boat or vessel; Effluents and sewerage treatment; Waste collection or disposal; Storage, treatment or testing of water for drinking purposes; or Transport of water by pipeline or conduit for drinking purposes;
General insurance business Services of general insurance business provided under the notified schemes is exempt from service tax.
Incubatee Services Services provided by an incubatee up to a total turnover of Rs. 50 Lakh in a financial year subject to the prescribed conditions is exempt from service tax. Hitherto, exempt vide Notifn No. 10/2007 for TBI, STEP and NSTEDB
Unincorporated body Service by an unincorporated body or non-profit orgn To its own members By way of reimbursement of charges or share of contribution For the following: As a trade union Carrying out any activity which is exempt from payment of service tax Upto Rs. 5,000 per month per member in a housing society or a residential complex
Service provider based Services by following persons in respective capacities : 1. a sub-broker or an authorised person to a stock broker; (hitherto, exempt vide No. 31/2009) 2. an authorised person to a member of a commodity exchange; 3. a mutual fund agent to mutual fund or asset management company;
4. a selling or marketing agent of lottery tickets to a distributer or a selling agent; (Hitherto, exempt vide No. 50/2010) 5. a selling agent or a distributer of SIM cards or recharge coupon vouchers; or 6. a business facilitator or a business correspondent to a banking company or an insurance company in a rural area; 7. Sub contractor providing services by way of works contract to another contractor providing works contract services which are exempt; Service provider based
Intermediate production Carrying out an intermediate production process as job work in relation to notified goods / processes is exempt from service tax. Hitherto, exempt vide Notifn No. 14/2004
Business exhibition Services by an organiser to any person in respect of a business exhibition held outside India is exempt from service tax. Hitherto, exempt vide Notifn No. 5/2011
Telephone calls Services by way of making telephone calls from: departmentally run public telephone; guaranteed public telephones operating only for local calls; or free telephone at airport and hospitals where no bills are being issued is exempt from service tax Hitherto, exempt vide No. 3/1994
Slaughtering of bovine animals Services by way of slaughtering of bovine animals is exempt from service tax
By persons located in NTT Services provided by a service provider located in a non- taxable territory to: the Government, Local Authority or Governmental Authority An individual in relation to any purpose other than industry, business or commerce; or an entity registered under section 12AA of the Income tax Act, 1961 for the purposes of providing charitable activities; or A person located in non-taxable territory
Public libraries By public libraries By way of lending books, publications or any other knowledge enhancing content or material
ESIC By ESIC To persons governed under the ESI Act
Business transfer By way of transfer of a going concern, as a whole or an independent part thereof
Public conveniences By way of public conveniences Such as facilities of bathroom, washrooms, lavatories, urinal or toilets
By Govt. Authority By way of an activity in relation to function entrusted to a municipality under Article 243 of the Constitution
R&D Cess Exemption to the extent R&D Cess paid on transactions involving import of technology Subject to the condition that R&D Cess is paid within 6 months from the date of invoice OR within 6 months from the date of credit in the books (associated enterprise)
Are all existing exemptions continued under the new scheme?
Other existing exemptions !!! Service provided to SEZ developers / units in SEZ vide Notifn No. 40/2012 Notifn No. 17/2011 read with Notifn No. 52/2011 Distribution of electricity Notifn No. 32/2010 and Notifn No. 11/2010 Under negative list under Section 66D(K) Manufacturers of alcoholic beverages / medicinal preparations with alcohol Notifn No. 39/2009 / Notifn No. 32/2009 Under negative list under Section 66D(F)
Other existing exemptions !!! Transportation of Coastal goods Notifn No. 30/2009 Under negative list under Section 66D(P) SSI Scheme vide Notifn No. 33/2012 Notifn No. 6/2005 All services provided by RBI Notifn No. 22/2006 Under negative list under Section 66D(B)
Other existing exemptions !!! To the extent of air freight included in the value of goods reckoned for customs Notifn No. 9/2011 Packaged / Canned software when ED paid / when licensed for single use Notifn No. 53/2010 / Notifn No. 2/2010 Specified services when wholly provided within the Port / Airport Notifn No. 41/2010 and Notifn No. 31/2010 Air transport of passengers embarking in India for domestic / international journeys Notifn No. 26/2010 (based on the value of tickets)
Other existing exemptions !!! Air transport services provided to passengers in transit through India Notifn No. 25/2010 ECIS for food grain handling, cold storage, agriculture…. Notifn No. 12/2010 TTA services for seed testing – by Central / State seed testing Labs Notifn No. 10/2010 Transportation of specified goods by Rail Notifn No. 8/2010
Other existing exemptions !!! Inter-bank transactions of purchase and sale of foreign currency, provided to a Scheduled bank, by any other Scheduled bank Notifn No. 19/2009 Services provided for personal use of diplomatic agents or career consular officers Notifn No. 34/2007 Right to exhibit a cinematograph film Notifn No. 12/2007
Other existing exemptions !!! Transport of export goods by aircraft Notifn No. 29/2005 Collection of duties and taxes by the Banks Notifn No. 13/2004 Specified services provided to GTAs C&F, MPS, Cargo handling, S & W, BAS, Packaging, SSBC and supply of tangible goods Notifn No. 1/2009
Sl. No Description of taxable serviceTaxable Portion (in %) ProposedExisting 1 Financial leasing services including hire purchase 10 2 Transport of goods by rail30 3 Transport of passengers, with or without accompanied belongings by rail 30N.A 4Supply of food or drink, in any premises, including renting (hotel, convention centre, club, pandal, shamiana or any place specially arranged for organizing a function) 7030 5Transport of passengers by air, with or without accompanied belongings 40NA Partial Exemption
Sl. No Description of taxable serviceTaxable Portion (in %) ProposedExisting 6Renting of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes. 6050 7Transport of goods by road by Goods Transport Agency (GTA) 25 8Services provided in relation to chit70 9Renting of any motor vehicle designed to carry passengers 40 10Transport of goods in a vessel from one port in India to another 5075 11By aircraft operators for scheduled / unsch air transport of passengers embarking in India NA40 Partial Exemption
Sl. No Description of taxable serviceTaxable Portion (in %) ProposedExisting 12Service provided / to be provided by a tour operator in relation to a package tour. 25 13Service provided / to be provided by a tour operator limited to providing services solely of arranging or booking accommodation. 10 14Other tour operator service not covered above 40 15Construction of complex, civil structure – including the value of land 25 Partial Exemption
Notification No. 30 / 2012 Persons liable to pay tax Is this an exemption for the service provider?
Onus to discharge Service provider Service – AN ACTIVITY Recipient Prima facie, liability to discharge is that of the service provider In specified cases, the liability to discharge service is tax is vested with the recipient of services Proposal to divide the responsibility between the provider and recipient of services
Sl. No. Description of a service% of tax payable by ProviderRecipient 1Insurance agentNil100 2Transport of goods by road by a GTANil100 3SponsorshipNil100 4Arbitral tribunalNil100 5Individual advocateNil100 6Support service by Government or local authority excluding renting, and negative list services Nil100 7Services provided by any person who is located in NTT and received by any person located in the taxable territory Nil100 Onus to discharge
Sl. No. Description of a service% of tax payable by ProviderRecipient 8Renting or hiring any motor vehicle designed to carry passenger on abated value Nil100 9Renting or hiring any motor vehicle designed to carry passenger on non abated value 6040 10Supply of manpower for any purpose2575 11Works contract50 Onus to discharge
Questions ? Is this joint and several? Is this optional? What if the other person has paid? What if the provider is not registered? What is the recipient is not registered? What is the provider has not charged? What if the valuation adopted by the provider is incorrect?
Badrinath NR Partner, Singhvi, Dev & Unni firstname.lastname@example.org + 91 80 2226 1371 Thank you