"Commissioning and Installation Agency"means any agency providing service in relation to commissioning or installation, [Section 65(29)]

Indian Service Tax

Commissioning of Installation Service

Effective date: 1/7/2003

Authority: Notification No. 7/2003-ST, dt. 20/6/2003 (For full text see under "Business Auxiliary Service").

Rate of Service Tax: 8% upto 9/9/2004. 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%."

Definitions

"Commissioning and Installation Agency"means any agency providing service in relation to commissioning or installation, [Section 65(29)]

"Erection, Commissioning or Installation" means any service provided by a commissioning and installation agency in relation to erection, commissioning or installation of plant, machinery or equipment, [Section 65 (39a)]

Taxable Service: Any service provided by commissioning or installation service agency.

Value of Taxable Service: Gross amount charged to a customer. Cost of parts or materials, if any, is excludable.

Exemptions

• See Chapter on "General Exemptions"

• Specific exemptions

• Cost of parts or other materials sold to customers

• Putting up a water tank, piping, electric wiring

• Repairs & maintenance

Person liable to pay: Person/Agency providing services of commissioning or installation.

Head of A/C: Tax Collection 00440233, Other Receipts 00440234, Deduct Refunds 00440235

Question & Answer

Q. Whether commissioning or installation services provided by an individual would be taxable?

Ans. Exemption from payment of Service Tax has been provided for commissioning or installation services provided by a commissioning or installation agency other than a commercial concern. Accordingly, the commissioning or installation services provided by an individual will be exempt from Service Tax.

[Source: Directorate of Publicity and Public Relations, Customs & Central Excise, New Delhi,October, 2003.]

Changes from 10/9/2004

F.No. B2/8/2004-TRU, Date: 10/9/2004

14. Extension of service tax on installation and commissioning, to erection services:

Service tax was levied on commissioning and installation of plant, machinery and equipment w.e.f. 1/7/2003. The general practice is that 'erection, commissioning and installation' are contracted as a composite package. There have been a number of doubts and queries regarding the distinction between erection and commissioning/installation. Erection would refer to the civil works to installation/commissioning of a plant or machinery. In this year's budget, the scope of service tax under installation and commissioning is being extended to include erection also. Erection involves civil works, which would otherwise fall under the category of construction. services. However, in case of a composite contract for erection, commissioning and installation, the erection charges would be taxed as part of this category of service.

Main text of Department Circular/Trade Notice

To be issued [Para 2.6 of Cir.No. 59/8/2003-ST, dated 20/6/2003]

2.6 Commissioning and Installation Services:

Certain doubts have been raised in case of commercial coaching and training. In this regard, the following is clarified -

• In case of commissioning and installation it has been pointed out that in case of turnkey project, the contract may be indivisible and no separate value could be assigned to commissioning or installation of goods. Doubts have also been raised as to what would be the value of taxable service. It is submitted that it has been provided in law that service tax is leviable on erection and commissioning charges only and not on the material and goods supplied. However, it is upto the service provider to show the break-up of commissioning or installation charges. In case service provider shows consolidated charges, service tax would be leviable on such consolidated amount.

• A doubt has been raised as to whether charges for erection of plant are covered under the service tax or only commissioning and installation charges. It is clarified that the law specifically provides for taxation of commissioning and installation of plant, machinery or equipment. Thus all activities other than the commissioning and installation of the plant/machinery/equipmentper se will not be chargeable to service tax.

• Exemption 1 - Clause 151 (c) of Finance Bill, 2003 seeks to amend Section 67 of the said Act so as to clarify that the cost of parts or other materials, if any, sold to the customer during the course of providing maintenance or repair service or the cost of parts or other materials, if any, sold to the customer during the course of providing commissioning or installation services shall not be included while computing the service tax payable.

• Exemption 2 - (Para 2.9.1 of Cir.No. 59/812003-ST, dt. 20/6/2003): In case of authorized service stations, maintenance or repair services, commissioning and installation services and photography services it has been provided in the law that the cost of goods and material shall not form part of the value to be subjected to service tax, if evidence (like sale invoice/bill) shows that these goods were sold. Such dispensation has, however, not been provided for other services like commercial coaching and training centers, telecom services. In this regard, a general exemption under Notification No. 12/2003-service Tax, dated 20th June, 2003 has been issued exempting that part of the value of all taxable services from service tax, which represents the cost of goods or material sold by the service provider to the receiver of such services during the course of provision of the taxable services. This exemption would be available only in cases where the sale of such goods is evidenced and the sale value is quantified and shown separately in the invoice. It is also clarified that in case of commercial training and coaching institutes, the exclusion shall apply only to the sale value of standard textbooks, which are priced. Any study material or written text provided by such institute as a part of service which does not satisfy the above criteria will be subjected to service tax.

Erection, Installation & Commissioning

Cir.No. 79/9/2004-ST, Date: 13/5/2004

Sub: Application of service Tax on activities of Erection and Commissioning

I am directed to draw attention to the Circular No. 49/11/2002 –S.T., dated 18/12/2002, whereby it is clarified that the work of Erection and Commissioning is in the nature of services provided by a “Consulting Engineer” and hance taxable under Service Tax. Also in the year 2003 dated 20^thJune 2003, issued from File No. B-3/7/2003-tru, IT Was clarified that charges for erection of plant would not be covered under the Commissioning and Installation services.

In the light of above conflicting views, several representation have been received in the Board for clarification as to whether

• the charges for erection would be covered under Services Tax or not?

• the Commissioning or Installation services would be covered under Service Tax under Consulting Engineer service effective from 7/7/1997?

• The issue has been examined by the Board in consultation with the Ministryn of Law and Justice and in this regard I am directed to say that charges for erection installation & commissioning are not covered under the category of Consulting Engineer Services. Commissioning or Installation service will be separately taxable under relevant entry and are not chargeable under Consulting Engineer Services. Accordingly, the clarification issued vide the Circular No. 49/11/2002-S.T. dated 18/12/2002 stands modified to this extent.

[Para No.1 of Cir.No. 62/11/2003-ST, dt. 21/8/2003]

Cir.No. 62/11/2003-ST, Date: 21/8/2003

Sub:- Miscellaneous issues relating to the services on which service tax has been imposed with effect from 1/7/2003.

1. Commissioning or installation: 1 Commissioning or installation of plant, ipment or machinery by a commissioning or installation agency, is chargeable to service tax. A doubt has been raised as to whether the services like a plumber putting up a water tank, fitting pipes and tubing, an electrician putting up electric wire and fittings, installation of booster motors, air conditioners, water filt~rs, hand-pumps, water heaters etc. will be chargeable to service tax.

1.2 As commonly understood, the activity of installation means the act of putting an equipment, machinery or plant into its place and making it ready for use. The activity of installation will start after erection which would refer to putting up civil structures. Commissioning of a plant would mean operationalising an installed plant/equipment/machinery. In this backdrop it is clarified that putting up a water tank, piping, electric wiring, in a residential premises etc. would notbe covered in the defination of taxable service and thus would not be taxable. However, installing a booster pump, air-conditioner, water filter, water heater etc. would be covered in the definition and be taxable, as all these things are machinery or equipment.

1.3 Notification No.18/2003-Service Tax dated 21/8/03 has been issued which exempts commission or installation services provided by a commissioning or installation agency other than a commercial concern. Accordingly the commissioning or installation services provided by an individual will be exempt from service tax.

1.4 Notification No. 19/2003-Service Tax dated 21/8/03 has been issued which provides that in case of a contract which involves the commissioning or services alongwith supply of plant, machinery or equpiment, service tax will be payable only on 33% of the gross amount charge for commissioning or installation and supply of plant, machinery or equipment. Service. It is optional for the assessee to avail of this notification. It is emphasized under this notification that the gross amount (33% of which is chargeable to service tax) shall include the value of the plant, machinery, equipment, parts and any other material sold by the service provider alongwith the commission or installation service. The benefit of this notification can be availed for a contract only if the exemption under notification 12/2003 – service Tax dated 20/6/2003 is not availed for that contract.

1.5 Corrigendum to Circular No. 59/8/2003: In Service Tax Circular No.59/8/2003, dated 20th June 2003, in paragraph 2.6

• in the first sentence the words "Commercial Coaching and Training" may be read as "Commissioning or Installation"

• in the first bullet the sentence "It is submitted that it has been provided in law that service tax is leviable on erection and commissioning charges only and not on the material and goods supplied." may be read as "It is clarified that it has been provided in law that service tax is leviable on commissioning or installation charges only and not on the material and goods supplied.

"Vocational Training Institute" means a commercial training or coaching centre

Indian Service Tax

Notifications

Exemption to Commercial Training or Coaching Centre

[Notification No.1 0/2003-ST, dt. 20/6/2003]

In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided by a commercial training or coaching centre, in relation to commercial training or coaching, which form an essential part of a course or curriculum of any other institute or establishment, leading to is: uance of any certificate or diploma or degree or educational qualification recognised by law for the time being in force, to any person, from the whole of the service tax leviable thereon under sub-section (2) of section 66 of the said Act:

Provided that this exemption shall not be applicable if the charges for such services are paid by the person undergoing such course or curriculum directly to the commercial training or coaching centre.

2. This notification shall come into force on the 1st day of July, 2003.

Exemption to Vocational & Recreational Training Centre

[Notification No. 24/2004-ST, dt. 10/9/2004]

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided in relation to commercial training or coaching, by ­

• a vocational training institute or

• a recreational training institute

to any person, from the whole of the service tax inviable thereon under section 66 of the said Act.

Explanation: For the purposes of this notification,

(i) "Vocational Training Institute" means a commercial training or coaching centre which provides vocational training or coaching that impart skills to enable the trainee to seek employment or undertake self-employment, directly after such training or coaching,

(ii) "Recreational Training Institute" means a commercial training or coaching centre which provides training or coaching relating to recreational activities such as dance, singing, martial arts or hobbies.

"Commercial Training or Coaching" means any training or coaching provided by a commercial training or coaching centre;

Indian Service Tax

Commercial Traininig or Coaching Centre

Effective date: 1/7/2003

Authority: Notification No. 7/2003-ST, dt. 20/6/2003 (For full text see under "Business Auxiliary Service").

Rate of Service Tax: 8% upto 9-92004. 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions

"Commercial Training or Coaching" means any training or coaching provided by a commercial training or coaching centre; [Section 65 (26)]

"Commercial Training or Coaching Centre" means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any subject or field .other than the sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include preschool coaching and training centre or any institute or establishment which issues any certificate or diploma or degree or any educational qualification recognised by law for the time being in force; [Section 65 (27)]

Taxable Service: Services rendered by a commercial training or coaching centre to any person

Value of Taxable Service: Gross amount charged for providing such taxable service

Exemptions

• See Chapter on "General Exemptions"

• Specific exemptions

• Centre/establishment/institute which issues a certificate/degree/diploma recognised by law even if coaching is provided for competitive examinations

• Pre-schooling upto 9th standard

• Sports

• Individuals going to houses to import coaching/tuition

• Free in housing training provided by employer

Person liable to pay: Commercial training or coaching centre

Head of A/c: Tax collection - 00440229, Other Receipts - 00440230, Deduct Refunds - 00440231.

Questions & Answers

Q. Whether intensive tuition/coaching institutes/group of individuals for various competitive exams/correspondence and foreign degree courses/ spoken language course liable for Service Tax?

Ans. Commercial coaching and training services provided by institutes that prepare applicants for Board examinations and competitive exams, like entrance examinations for IIT, Joint Entrance Exams/Pre-medical Tests, Civil Services Exam, etc. are chargeable to service tax.

However, services in relation to Commercial Coaching and training, provided by:

• Vocational Training Institute

• Computer Training Institute and

• Recreational Training Institute

have been exempted from service tax w.e.f. 1st July, 2003 vide Notification No. 9/2003 Service Tax. Therefore, vocational coaching and training services provided by typing and shorthand institutes, TV/Vehicle repairs training institutes, tailoring institutes, industrial training institutes, foreign language institutes, computer training centres, hobby classes, institutes teaching martial arts, painting, dancing etc., would not be chargeable to Service Tax. This exemption Notification 9/2003-S.T. is effective only up to 29th February 2004.

Q.Whether service tax is leviable on postal/correspondence coaching?

Ans. Service Tax is leviable on any coaching or training provided by an institution on commercial basis. Therefore, the coaching provided by postal means would also be covered under the service tax.

Q. Whether individuals going to houses to impart tuition/coaching would be chargeable to service tax?

Ans. Service tax is on institutions/establishments. Only those service providers are covered under service tax who have some establishment for providing commercial coaching or training.

Thus, individuals providing services at the premises of a service receiver would not be covered under service tax. However, if coaching or training center provides commercial coaching by sending individuals to the premises of service receivers, such services would be chargeable to service tax.

Q. Whether commercial coaching imparted to students of standards 1 to 9 is taxable?

Ans. The coaching imparted to students of standard 1 to 9 is taxable as service tax is applicable on commercial coaching provided by institutes that prepare applicants for Board examination and competitive exams.

Whether commercial coaching provided by institute to the students of degree exams held by universities are chargeable to service tax?

Ans. Yes. The commercial coaching given to t}: students to prepare them to prepare for university degree exam is liable for service tax.

[Source: Directorate of Publicity and Public Relations, Customs & Central Excise, New Delhi, October, 2003].

Changes from 10/9/2004

F.No. B2/8/2004-TRU, Date: 10/9/2004

22. Vocational and Recreational Coaching Institute:

Vocational and recreational training institute have been exempted from service tax. (Refer Notification No. 24/2004-S.T., dated 10/9/2004).

Main text of Department Circular/Trade Notice

[Paras 2.2.1 to 2.2.3 of Circular No. 59/8/2003, dt. 20/6/2003] 2.2 Vocational Training and Coaching Centres:

2.2.1 Commercial coaching and training services provided by institutes that prepare applicants for Board examinations and competitive exams like entrance examinations for Indian Institute of Technology-Joint Entrance Examinations/Pre Medical Tests, Civil Services exams etc. are chargeable to service tax. However, services in relation to commercial coaching and training, provided by ­

• Vocational training institute

• Computer training institute and

• Recreational training institute

have been exempted from service tax w.e.f. 1st July, 2003 vide Notification No.912003-Servtice Tax dated 20th June 2003. Therefore, vocational coaching and training services provided by typing and shorthand institutes, TV/Vehicle repair training institutes, tailoring institutes, industrial training institutes, foreign language institutes, computer-training centers, hobby classes, institutes teaching martial arts, painting, dancing etc would not be chargeable to service tax. This exemption would remain in force upto 29th February 2004.

2.2.2 Institutes like the Institute of Chartered Accountants of India some time hire the services of other institutes to impart some part of training (like language or computer training) to the students undertaking courses for obtaining recognized degrees/diplomas (like Chartered Accountancy) from their institute.

Whereas institutes like the Institute of Chartered Accountants of India will not be chargeable to service tax because they confer qualifications recognized by law, the institutes or centers providing such part of training may be, otherwise under service tax net. Vide notification No. 1O/2003-Service tax dated. 20th June, 2003, exemption has been provided w.e.f. 1st July, 2003 to such services rendered by commercial training or coaching centers from service tax which form an essential part of the course or curriculum leading to issuance of recognized certificate, diploma, degree or any other educational qualification. The exemption is subject to the condition that the receiver of such service (for example, student) makes payment for the entire course or curriculum to the institute or establishment issuing such certificate, diploma etc. and not to the commercial coaching or training center.

2.2.3 Certain doubts have been raised in case of commercial coaching and training. In this regard, the following is clarified ­

• Whether service tax is leviable on postal coaching: It is clarified that service tax is leviable on any coaching or training provided by an institution on commercial basis. Therefore, the coaching provided by postal means would also be covered under the service tax and the charges, including the postal charges collected for rendering this service would be subjected to service tax.

• Whether service tax is leviable on institutes providing commercial coaching in addition to recognized degree courses: Some institutes like colleges, apart from imparting education for obtaining recognized degrees/diploma/certificates, also impart training for competitive examinations, various entrance tests etc. It is clarified that by definition, such institutes or establishments, which issue a certificate, diploma or degree recognized by law, are outside the purview of "commercial training or coaching institute". Thus, even if such institutes or establishments provide training for competitive examinations etc., such services rendered would be outside the scope of service tax.

• Whether individuals going to houses to impart tuition/coaching would be chargeable to service tax: It is clarified that service tax is on institutions/establishments. Therefore, only those service providers are covered under the service tax who have some establishment for providing commercial coaching or training i.e. institutional coaching or training. Thus, individuals providing services at the .premises of a service receiver would not be covered under service tax. However, if coaching or training center provides commercial coaching by sending individuals to the premises of service receivers, such services would be chargeable to tax, as in this case, the individuals are rendering services On behalf of an institution.

• Whether free summer training! in house training provided by employers to their employees are covered under service tax net: It is clarified that in case employers provide any free training themselves, no service tax is chargeable. However if an employer hires an outside commercial coaching or training center for imparting some training to its employees, then the payment made by the said employer to such coaching center will be chargeable to service tax.

Services rendered indirectly connected with clearing and forwarding operations

Indian Service Tax

Notification

Effective date

[Notification No. 26/97-ST, dated 11/07/1997]

In exerciseofthe powers conferred by Section 88ofthe Finance Act, 1997 (26of1997), the Central Government hereby appoints the 16th dayofJuly, 1997, as the date on which the service -tax on taxable service specified in sub-clause (j) and(r) ofclause (41)ofSection 65ofthe Finance Act, 1994 (32 of 1994) shall come into force.

Case Law

Services rendered indirectly connected with clearing and forwarding operations are also covered under the definition - 2002 (145) ELT 222 (Kolkatta - Cegat).

The levy of Service Tax on Goods Transport Operators

Indian Service Tax

Clarifications

Sub:- Service Tax - Clearing & Forwarding Agents and Goods Transport Operators - Supreme Court Judgment in W.P. No. 53/98 in case of M/s. Laghu Udyog Bharati v. U.O.I.

[TN No. 93/99, dated 10/9/1999 of the Madurai Commissionerate)

Further to this office Trade Notice No. 85/99 (4/Service Tax/99), dated 27/8/1999, the following information/guidelines are issued for the convenience of the assessees concerned and the general Trade as well in respect of the above said two services.

• The levy of Service Tax on Goods Transport Operators and Clearing and Forwarding Agents was initially imposed on the Service providers, i.e. Goods Transport Operator and Clearing & Forwarding Agents, in the Budget 1997. However, the said levy was transferred to user, after introduction of sub­rule (xii) under Notification No. 27/97, dated 16/7/1997 for Clearing and Forwarding Agents, and Sub-rule (xvii) of Rule 2( d) of Service Tax Rules under Notification No. 42/97, dated 5/11/1997 in respect of Goods Transport Operators. (Notification Nos. 27/97 and 42/97 were communicated vide this office Trade Notice No. 8, 7/97 (10/Service Tax/97), dated 14/7/1997 and Trade Notice No. 144/97 (18/SerVice Tax/97), dated 11/11/1997 respectively]. The effect of these two notifications making the receivers of Service as being liable to pay the tax has been set at bought by the Hon'ble Supreme Court who have held that the levy of tax from the receiver was illegal. Hence the refund.

• The provisions of Section 11B of the Central Excise Act, 1944 will regulate all the refund claims arising in relation to the Service Tax matters. Therefore, all the assessees Or the persons who intend to file the refund claim In view of the captioned judgment of the Hon'ble Supreme Court are required to file a regular refund claim in Prescribed Form "R". Such refund claims should be filed within 6 months from the date of judgment of Supreme Court which is 27th July, 1999 which would be the relevant date for the purpose.

• All such refund claims, if filed within time, are required to be finalised within 12 weeks from the date of filing and the amount duly worked out and verified should be effectively refunded to the claimant or the consumer welfare fund, as the case may be, within such 12 weeks.

• The Government of India under Notification No. 49/98, dated 2/6/1998 had exempted the levy of Service Tax on Goods Transport Operators, among other enumerated services. Therefore, the refund claims shall not arise in respect of the services received with effect from 2/6/1998, so far ,as, Goods Transport Operators are concerned.

• However, since the said exemption notification does not encompass the services provided by the Clearing & Forwarding Agents, the users of this service have been paying Service Tax, till date. In view of the above judgment of Hon'ble Supreme Court, refund claims ma)f be filed by those who had availed themselves of Clearing and Agents and Goods Transport Operators to be illegal. The Court has only struck down those provisions in the Service Tax Rules, 1994 which had shifted in 1997 the burden of levy and collection of tax from the Service Provider to Service Receiver.

In case of any difficulty or for any clarification you are requested to contact the jurisdictional Superintendent of Central Excise or the Deputy/Assistant Commissioner of Central Excise in charge of Central Excise Divisions or the Service Tax Unit of this office or the undersigned.

Coal Merchants

F.No. 159/1/2003-CX. 4, Date: 10/12/2003

Your kind attention is invited towards your representation received by the Board on above cited subject, inquiring as t6 whether the services of Coal Merchants would be covered under the category of Clearing and Forwarding Agents for applicability of Service Tax? Also it has been informed vide above representation that the Coal Merchants primarily act as buyer's agents and carry out such jobs/assignments as asked for by the respe8tive consumers/buyers.

The issue has been examined by the Board and 1h this regard I am directed to say that on the basis of mode of functioning of coal Merchants, it has been observed that in terms of definition of Clearing and forwarding Agents under the Section 65(25) of Finance Act, 1994 (as amended), functions of Coal Merchants are fully covered and accordingly their services are liable to Service Tax under the category of Clearing and Forwarding Agents. Also in this case it is immaterial as to whether they are working as agents of buyers or sellers, in terms of definition of Clearing and Forwarding Agents as referred.

Foodgrain Agents

Cir.No. 73/3/2004-ST, Date: 5/1/2004

Sub:- Levy of Service Tax under category of Clearing & Forwarding Agents in respect of Adhatiyas.

I am directed to say that under Section 65 of Finance Act, 1994 and as brought out by Board's letter no. EB.43/7/97-TRU. dated 11/7/97 there must exist a relationship of principal and an agent for bringing grain agent in the .ambit of C & F agent of the farmer and in CBEC Circular no. 48/1 O/2002-ST, dated 13/9/2002, it has been clarified that Adhatiya's (Food grain agents) activity do not fall under the scope of Clearing and Forwarding Agents services and hence would not be liable for Service Tax under this category. The circular issued is a general circular and is not with reference to any state or class of Adhatiyas. Even though a bunch of representations received from various trade associations in Maharashtra specifically have misinterpreted the circular to apply only to the State of Rajasthan. In fact reference to. Rajasthan and Section 75 of the Rajasthan Agricultural Marketing Products Act, 1954 is only to explain the situation.

2. Incidentally the activity of grain agent is covered under the 'Commission Agent' falling under the purview of 'Business Auxiliary Services', which has come into force from 1st July, 2003. Commission Agents as per the definition are covered under the Notification No 13/2003- ST dated 20th June 2003 and are exempt from Service Tax.

Foodgrain Commission Agent

Cir. No. 48/10/2002-ST, Date: 13/9/2002

Sub:- Levy of Service Tax on Food Grain Commission Agents under the category of 'Clearing and Forwarding Agents'.

I am directed to say that doubts have been raised as to whether foodgrain Commission Agents would be liable to pay Service tax or not under the category of Clearing and Forwarding Agents (C&F Agents). In some States such agents are also referred to as Adhat Vyaparies or as Adhatiyas.

2. In some cases it has been reported that a foodgrain agent purchase the grains outright from farmers in auctions. After purchasing the foodgrains he carries out certain physical processing such as sieving, winding (cleaning) and blending etc. The grains are then graded according to the quality and sold to retailers against orders.

3. The matter has been examined in the Board. As per the definition of Clearing and Forwarding Agents under Section 65 of the Finance Act, 1994, and as brought out in Board's letter E No. B. 43/7/97-TRU, dt. 11/7/1997, there must exist a relationship of a principal and an agent. In this case since the grain agents actually purchases the goods from the farmer he does not function as an agent of the farmer. He is therefore not a C&F Agent.

4. In other type of cases, particularly relating to Rajasthan, it has been reported that the Grain Agents collect grain from the farmers and sell it to a buyer on terms and conditions dictated by the farmer . The agent collects a Commission (presently 2%) from the buyer of the foodgrain and not from the farmer . As per Section 75 of the Rajasthan Agricultural Marketing Products Act, 1954 the agents or adhatiyas are barred from charging any commission from the farmers.

5. Since in such cases no commission is payable by the farmer to the adhatiyas it cannot be said that the adhatiya is a C&F Agent of the farmer. As per Board's letter dated 11/7/1997 a C&F Agent collects his commission from his principal and in the absence of such a feature he cannot be called a C&F agent of the principal (In some cases it has been reported that the adhatiyas illegally take a cut from the amount payable to the farmer though they are barred from doing so. This cannot be a basis for considering them to be C&F Agents of the farmers. In fact such cases should be reported to the State Govts. for appropriate action).

6. However, in respect of cases where the grain agents legally receive commission from the farmers and satisfy the other conditions mentioned in Board's letter dt. 11/7/97, they would be considered as Clearing and Forwarding agents and be liable to pay service tax on their commission

ICDs/CFs

Cir.No. 39/2/2002-ST, Date: 20/02/2002

Sub:- Service Tax on Clearing & Forwarding Agents ­ Clarification reg.

It has been brought to the notice of the Board, that certain doubts have emerged, whether, Service Tax is leviable on ICDs/CFs dealing with import! export cargo as "C & F agents". In this regard, the matter is clarified as under.

2. As defined under Section 65 (16) of the Finance Act, 1994 "C&F agent" means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing & forwarding operations in any manner to any other person and includes a consignment agent. As per clause (j) to Section 65 (72), taxable service means, any service provided to a client by a clearing and forwarding agent in relation to clearing and forwarding operations III any manner.

3. Normally C & F agents do the job of clearing and forwarding. In a typical situation clearing & forwarding agents are appointed in outstation location by manufacturers or wholesale distributors so that they may clear the goods, store them and then forward the goods according to the instructions of the Principal owner. Thus the person concerned is an agent and an agent is an authorised representative of a named principal owner.

4. There is a contract between the principal (owner) and C&F agent detailing the terms and conditions and also indicating the commission or remuneration to which the C&F agent is entitled. Therefore, ICDs/CFS can not be considered as C&F agents on the following grounds:

(i) There is no agreement or contract between service Provider (ICD/CFS) and Service receiver (importer/exporter);

(ii) ICDs/CFS are functioning under authority of Govt. of India and not for any principal or owner (importer/exporter).

5. It is also clarified that, so far as domestic handling of cargo by the container Depots is concerned, (like CONCOR), their case may be examined separately. If they do not meet the parameters mentioned in Board's letter F.No.B/43/7/97-TRU dated 11/7/97, they will also not be considered as C & F Agents.

Storage of Liquid Cargo

Order No. 2/1/2002-ST, Date: 24/04/2002

Sub:- Providing service of storage facility and charging rent for storage of liquid cargo in tanks - whether liable to service tax as C & F Agents - Regarding.

• In exercise of the powers conferred under Section 37B of the Central Excise Act, 1994 (as made applicable to Service Tax by Section 83 of the Finance Act, 1994), the Central Board of Excise & Customs considers it necessary; for the purposes of uniformity in connection with classification of services, to issue the following instructions.

• Doubts have been raised as to whether service of storage facility and charging rent for storage of liquid cargo in tanks, provided by certain agencies, can be considered as a service provided by 'clearing and forwarding agents' or not.

• This matter was raised by four such agencies before the Mumbai High Court in Writ Petition Nos. 170/2002, 171/2002, 2962/2001 & 2994/2001. The petitions were disposed of by Hon'ble Court with directions to the Central Board of Excise & Customs to pass appropriate speaking clarification/and/or orders after hearing the petitioners.

• The agencies were accordingly heard in the matter on 19th March, 2002 and on 3rd April.

• Views of DGST and concerned Commissioners of Central Excise have also been obtained.

• It is observed that the above agencies are engaged in the activity of providing storage (tanks) facility for liquid cargo which has been imported or is intended for export. They charge rent for storageofliquid cargo deposited with them.

• It is observed that, as per Section 65ofFinance Act, 1994, 'Clearing & Forwarding Agent' means "any person who is engaged in providing any service, either directly or indirectly connected with the clearing and forwarding operations in any manner to any other persons and includes a consignment Agent". Further, 'taxable service' with respect to C & F Agents means, any service provided to a client by a clearing and forwarding agent in relation to clearing and forwarding operations, in any manner.

• The issue is whether the activity/serviceofproviding storage facility and charging rent, for storageofliquid cargo in tanks, can fall under the categoryof'Clearing and Forwarding' operations as defined under Section 65ofFinance Act, 1994.

• The main point raised by the agencies is that they are not at all rendering any clearing and forwarding services and hence they do not come under the categoryofclearing and forwarding agents. They simply issue Invoices /Bills to their customers' towards storage charges only and for no other charges.

• The matter has been examined. Normally, a C & F agent receives goods from the factories or premisesofthe Principal or his agents, stores these goods, despatches these goods as per orders received from the Principal or owner, arranges transport, etc. for the purpose and prepares invoices on behalfofthe Principal. For this service, the C & F agents receives commissions on the basisofagreed terms. Therefore, an essential characteristicofany services, to fall in the categoryofC & F agent, is that the relationship between the service provider and receiver should be in the natureofprincipal (owner) and agent. The C & F agent carries out all activities in respectofgoods right from stageoftheir clearances from the premisesofthe principal to its storage and delivery to the customers.

• However, in the cases under consideration, the agencies are providing only storage facility for liquid cargo which has been imported or is intended for export. They charge rent for storageofliquid cargo deposited with them. They are not connected with the vessel bringing the goods and are not concerned with customs formalities. They issue invoices to customers towards storage charges and for no other charges. These agencies are not receiving any commission from the principal but only rental for storage facility, whereas a C & F agent's remunerations is in the formofcommission. The transactions between the parties are not transactions between principal and an agent but between principal and principal. These agencies are neither receiving any despatch orders from the ownersofthe goods, nor are they arranging for the despatchofgoods as per their directions by engaging transport, as is done normally by C & F agents. They are also not carrying out any service directly or indirectly in connection with clearing and forwarding operations. Therefore, services renderedbysuch agencies, in relation to storageofcargo, cannot be considered to be in the natureof'clearing and forwarding' and such agencies cannot be considered as "Clearing and Forwarding Agents".

• However, under the Finance Bill,. 2002, "storage and warehousing services for goods including liquids and gases" is proposed to be made to liable to service tax. Section 65(87)ofthe proposed amended Finance Act, 1994, defines "storage and warehousing" to include storage and warehousing services for goods including liquids and gases but does not include any service provided for storageofagricultural produce' or any services provided by cold storage. Therefore, as and when these provisionsofthe Finance Bill come into effect the above typesofcases shall be liable to service tax under the head "storage and warehousing".

Value of taxable service: Gross amount charged by clearing and forwarding agent

Indian Service Tax

Clearing & Forwarding Agent*

Effective Date: 16/07/1997

Authority: Notification No. 26/97-ST, dt. 11/07/1997 (See at the end of this Chapter).

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition

"Clearing and Fforwarding Agent" means any person who is engaged in providing any service, either directly or indirectly, connected with the clearing and forwarding operations in any manner to any other person and includes a consignment agent, [Section 65(25)].

Taxable service: Clearing and forwarding service by a clearing and forwarding agent in relation to clearing and forwarding operations, in any manner.

Value of taxable service: Gross amount charged by clearing and forwarding agent from the client for services of clearing or forwarding operations in any manner.

Exemptions

• See Chapter on "General Exemptions"

• Specific exemptions

• Foodgrain Agent

• ICDs/CFSs

• Separate contract for transportation charges

• Storage of liquid cargo and charging rent

• Wholesalers, distributors

Person liable to pay: Clearing & Forwarding Agent.

Head of Account

SI. Code SCCD Minor-head 004400111 Clearing &Forwarding Agent Services Sub-head 00440011101 Tax Collection 00440045 113 Sub-head 00440011102 Other Receipts 00440046 116 Sub-head 00440011103 Deduct Refunds 00440047 115

Clause 150 of Finance Bill, 2003 seeks to amend restrospectively Section 68 and to insert a new Section 71A in the Finance Act, 1994 from 16/07/1997 to 16/10/1998 to validate the collection of Service Tax from the customer in case of services provided by goods transport operators and Clearing & Forwarding Agents.

Questions & Answers

Q. Who are clearing and forwarding agents?

Ans. Clearing and forwarding agents are those who provide services relating to the clearing and forwarding operations and are engaged/appointed by manufacturer of goods (both excisable and non-excisable), producers and distributors of goods and also include such agents appointed for agricultural and mineral goods.

Q. Who is the person responsible for payment of Service Tax in case of a clearing and forwarding agent?

Ans. As in the case of all other services, the service providers are responsible for payment of Service Tax in respect of clearing and forwarding agents also.

Earlier, it was directed that receivers of the service would be responsible for paying the Service Tax. The same has been held to be invalid by the Hon'ble Supreme Court of India in the case of Mis. Laghu Udyog Bharati and Another Vs. Union of India {1999 (89) ELT.247 (SC)}. Finance Bill 2000 has sought to revalidate earlier position for limited period from 16/07/1997 to 01/08/1998.

Q. What are the types of services provided by clearing and forwarding agents which attract Service Tax?

Ans. The levy of Service Tax will applies to services rendered by clearing and forwarding agents, who undertake, among other things, services of receipt, warehousing, despatch, record maintenance and account of goods on behalf of the principal who appoint or engage such agents.

Normally, there would be a contract between the principal and the clearing and forwarding agent detailing the terms and conditions and also indicating the commission or remuneration to which the C&F agent is entitled. A clearing and forwarding agent normally undertakes the following activities on behalf of a principal:

• Receiving the goods from the factories or premises of the principal or his agents;

• Warehousing these goods

• Receiving despatch orders from the principal

• Arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorised transporters of the principal

• maintaining records of the receipt and despatch of goods and the stock available at the warehouse,

Service Tax is payable in respect of the above services.

Q. What is the taxable value of services provides by the clearing and forwarding agents?

Ans: The Service Tax is computed on the gross amount of remuneration or commission paid to the clearing and forwarding agent by the principal engaging such agent.

Under Service Tax Rules, it has been provided that the value of taxable service in relation to services rendered by clearing and forwarding agents to a client shall deemed to be the gross amount of remuneration or commission (by whatever name called) paid to such agent by the client engaging such agent:

For the services rendered, the C&F agent receives commission or remuneration, which usually consists of two components:

(1) Minimum commission on a flat rate or turnover basis depending on the packages/consignments handled, and

(2) A variable commission based on performance which is computed on the performance indicators agreed upon between the agent and the principal.

The above two constitute the remuneration or commission paid to the C & F agent by the principal.

Q. Is the facility of Centralised registration available to company having C&F services in various towns, states, or areas?

Ans: Yes. In cases where C&F agents engaged for various towns, states or areas are paid only by the regional or the head office of the company appointing such agents, for service Tax purposes it would suffice to register only such regional or head offices. In such cases the regional office or the head office, as the case may be, should also be required to give an undertaking to discharge the Service Tax liability.

Q. Whether brokers, through whom factories/persons send their goods direct to the customers, could be covered under the expression C&F agents?

Ans. Yes, If factories or persons are engaging brokers for sending their good engaged in providing any service, either directly or indirectly, connected with directly to their customers, on the basis of orders procured by them, clearing and forwarding operations in any manner to any other person and services rendered by brokers would amount to services provided by a Clearing & Forwarding Agents and would be liable for payment of Service Tax.

Q. Is the tax on service of C & F agents abolished.

Ans. No, the service tax. on C & F agents is not abolished but the manner of collection of the tax has changed, With effect from 1.9.99, the C & F agents themselves have to apply for registration and pay the Service Tax to the Govt. for services rendered to their clients.

Q. What is the value of taxable services in case of 'turn-key' contracts handled by the C & F agents?

Ans. The value of taxable services rendered by a C & F agent is the gross amount charged by such agent from the clients for the services of Clearing & Forwarding operations in any manner, Further, the gross amount means the amount of commission or remuneration received for such services. Therefore, the remuneration received towards 'turn-key' contracts would be chargeable on gross basis.

Q. (a) Whether the "Arhatiya" (commission agent) working in the mandies (such as vegetable mandi, food grain mandi and fruit mandi) who are providing the service with regard to selling the goods on behalf of agriculture producers and getting commission for the same will be covered under the definition of consignment agents or not?

Q. (b) Whether consignment agents are included under the category of clearing & forwarding agents?

Ans: Yes, consignment agents are included under the category of clearing & forwarding agent. The clearing & forwarding agent means any person who is engaged in providing any services either directly or indirectly, connected with the clearing and forwarding operation in any manner to any other persons and includes a consignment agent. Since the consignment agents provide service in respect of clearing & forwarding of a consignment, the services provided by them are chargeable to service tax as C & F agents.

(Authority : S. 65(12) OF Finance Act, 1994) [Source CBEC Website]

Main text of Departmental Circular/TN

F.No. B. 43/7/97-TRU, Date : 11/07/1997

2.1 "Clearing and Forwarding agent" has been defined as "any person who is engaged in providing any service, either directly or indirectly, connected with clearing and forwarding operations in any manner to any other person and includes a consigning agent". The taxable service has been defined as "any service provided to a client, by C&F agent in relation to clearing and forwarding agents are engaged/appointed by manufacturer of goods (both excisable and non-excisable goods).

2.2 Normally, there is a contract between the principal and the clearing and forwarding agent detailing the terms and conditions and also indicating the commission or remuneration to which the C&F agent is entitled. A clearing and Forwarding agent normally undertakes the following activities -

• Receiving the goods from the factories or premises of the principal or his agents,

• Warehousing these goods,

• Receiving despatch orders from the principal,

• Arranging despatch of goods as per the directions of the principal by engaging transport on his own or through the authorised transporters of the principal,

• Maintaining records of the receipt and despatch of goods and the stock available at the warehouse,

• Preparing invoices on behalf of the principal

2.3 It has been decided that the person responsible for collecting the service tax in the case of services rendered by a clearing and forwarding agent shall be the person engaging/appointing a clearing and forwarding agent (Notification No. 26/97-service tax refers). It may be noted that unlike in the case of other service tax levies where the service provider is the person responsible for collecting the service tax, in the case of services rendered by the clearing and forwarding agents the service tax liability shall be discharged by the person availing the service so rendered. In order words, the principal who engages a clearing and forwarding agent is the person responsible for collecting and paying the service tax to the exchequer, Commissioners of Central Excise may therefore take necessary action accordingly and also make this position clear by issue of suitable trade notice.

2.4 Further under the Finance Act, 1997 the value of taxable service rendered by a clearing and forwarding agent has been defined as the gross amount charged by such agents from the client for the services of clearing and forwarding operations in any manner. However, under service Tax rules it has been provided that the value of taxable service in relation to services rendered by clearing and forwarding agents to a client shall deemed to be the gross amount of remuneration or commision (by whatever name called) paid to such agent by the client engaging such agent (Notification No. 27/97-ST refers).

2.5 For their services rendered, the C&F agent receives commission or remuneration which usually consists of two components:

• Minimum commission on a flat rate or turnover basis depending on the packages/consignments handled;

• A variable commission based on performance which is computed on the performance indicators agreed upon between the agent and the principal. This is usually given as a percentage of the turnover.

The above two constitute the remuneration or commission paid to the C&F agent by the principal

2.6 In cases where C&F agents engaged for various towns, states or areas are paid only by the regional or the head office of the company appointing such agents, for service tax purposes it would suffice to register only such regional or head office. In such cases the regional office or the head office, as the case may be, should also be required to give an undertaking to discharge the service tax liability.

taxable services provided. by a practising chartered accountant

Indian Service Tax

Notificatons

Effective date­

[Notification No. 57/98-ST, dated 07/10/1998]

In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services other than of auditing and accounting, provided by a practising chartered accountant, in his professional capacity to a client from the whole of service tax leviable thereon.

2. This notification shall come into force on the 16th day of October, 1998.

Taxable Services

[*Notification No. 59/98-ST, dated 16/10/1998 Amended by Noti. 15/2002-ST, dt. 1/8/2002, 6/2003-ST, dated 14/5/2003J

In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), and in suppression of the notification of Government of India in the Ministry of Finance (Department of Revenue) No. 57/98-Service Tax, dated the 7th October, 1998, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided. by a practising chartered accountant, a practising company secretary or a practising cost accountant, in his professional capacity to a client, other than the taxable services relating to

• Accounting and auditing or

• Cost accounting and cost auditing or

• Secretarial auditing or

• Verification of declarations in prescribed forms of compliance's for obtaining a certificate of commencement of business or commencement of other business under Section 149 of the Companies Act, 1956 (1 of 1956) or

• Signing of the annual return of listed companies under Section 161 of the Companies Act, 1956 (1 of 1956) or

• Certification that requirements of Schedule XIII to the Companies Act, 1956 (1 of 1956) have been complied with as regards statutory guidelines for appointment of managerial personnel and payment of managerial remuneration to them without the approval of the Central Government under Section 269 and Schedule XIII, of the Companies Act, 1956 (1 of 1956) or

• Certification of documents to be filed by companies with the Registrar of Companies under the Companies Act, 1956 (1 of 1956) or

• Certification in Form 1 that the whole of the amount remaining unpaid or unclaimed for a period of three years from the date of transfer to the special account under sub-section (1) and sub-section (2) of Section 205A of the Companies Act, 1956 (1 of 1956) has been transferred to the General Revenue' Account of the Central Government under the Companies Unpaid Dividend (Transfer to General Revenue Account of the Central Government) Rules, 1978 or

• Certification of documents under the Exports and Imports Policy (1997 ­ 2002) of the Government of India or

• Certification for exchange control purposes which a practicing chartered accountant can issue as documentary evidence in support pf certain applications under the Foreign Exchange Regular Act, 1973 (46 of 1973) or

• Certification in respect of valuation of instruments or assets as per rule 8A(7) of the Wealth Tax Rules, 1957,

from whole of service tax leviable thereon.

¹[Explanation: Nothing contained in this notification shall apply to the services provided by a practising chartered accountant, a practising company

Ins. by Noti. No. 15 of 2002-S.T, dt. 01.08.2002, w.e.f. 01.08.2002.

secretary or a practising cost accountant which may fall in any other taxable services as defined in clause (105) of Section 65 of the said Act.

Illustration: The service provided by a practising chartered accountant, a practising company secretary or a practising cost accountant in connection with the management of' any organization in any manner or recruitment of manpower in any manner shall be deemed to be the taxable service provided under the category of management consultant or manpower recruitment agency, as the case may be. Therefore no exemption under this notification shall be applicable to such practising chartered accountant, a practising company secretary or a practising cost accountant.]

Case Law

Constitutional validity of service tax on chartered accountants was upheld - 2002 (139) ELT 245 (Mad.).

Chartered Accountant providing service to a client in his professional capacity, in any manner.

Indian Service Tax

Chartered Accountant

Effective Date: 16/10/1998

Authority: Notification No. 53/98-ST, dt. 7/10/1998 (for full text of Notification see under'Architect').

Rate of Service Tax: 8% from 14-5-2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition

"practising chartered accountant" means a person who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provisions of the Chartered Accountants Act, 1949 (38 of 1949) and includes any concern engaged in rendering services in the field of chartered accountancy; [Section 65 (83)].

Taxable Service: Chartered Accountant providing service to a client in his professional capacity, in any manner.

Value of taxable service: The gross amount charged by such accountant from the client for services rendered in professional capacity in any manner.

Exemptions

• See Chapter on "General Exemptions"

• Specific exemptions

• Employees

• Services relating to manpower recruitment

Person liable to pay : Practising Chartered Accountant.

Head of Account

SI. Code SCCD Minor –head 004400124 Chartered AccountantServices 00440091 Sub-head 00440012401 Tax Collection 00440092 111 Sub-head 00440012402 Other Receipts 00440093 110 Sub-head 00440012403 Deduct Refunds 00440094 119

Questions & Answers

Q. Who is practicing Chartered Accountant?

Ans: “Practicing Chartered Accountants” is a person who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provisions of the Chartered Accountants Act,

1949 and includes any concern engaged in rendering services in the field of chartered accountancy.

Q. What is the taxable service in case of practicing Chartered Accountant?

Ans: Taxable service means any service provided to a client, by a practicing chartered accountant in his professional capacity, in any manner.

Q. What is the value of the taxable service in case of practicing Chartered Accountant?

Ans: Value of the taxable service in relation to the service provided by a practicing chartered accountant to a client, is the gross amount charged by such accountant from the client for services rendered in professional capacity in any manner.

The nature and scope of the services rendered by the chartered accountants are delineated under the respective enactments and the rules and regulations made there under. The services rendered by such professionals are of a specified nature and are provided by virtue of their professional experience and specialized education.

Q. Who is a practicing Cost Accountant?

Ans. A "practicing Cost Accountant" is a person, who is a member of the Institute of Cost and Works Accountants of India and is holding a certificate of practice granted under the provisions of the Cost and Works Accountant Act, 1959 and includes any concern engaged in rendering services in the field of cost accountancy.

Main text of Departmental Circular/TN

[TN No. 116/98-ST, Dated 15-10-1998 of Hyderabad Commissionerate]

12.1 *Section 65(31) of the Finance (No.2) Act, 1998 defines a "practicing chartered accountant" to mean a person who is a member of the Institute of Chartered Accountants of India and is holding a certificate of practice granted under the provisions of the Chartered Accountants Act, 1949 and includes any concern engaged in rendering services in the field of accountancy. Section 65(32) of the Finance (No.2) Act, 1998 defines a "practising cost accountant" to mean a person who is a member of the Institute of Cost and Works Accountant of India and is holding certificate of practice granted under the provisions of the Cost and Works Accountants Act, 1959 and includes any concern engaged in rendering services in the field of cost accountancy. As per Section 65(33), "practising company secretary" means a person who is a member of the Institute of company Secretaries of India and is holding a certificate of practice granted under the provisions of the Company Secretaries Act, 1980 and includes any concern engaged in rendering services in the field of company secretaryship.

12.2 The nature and scope of the services rendered by the chartered accountants, cost accountants and company secretaries are delineated under the respective enactments and the rules and regulations made thereunder. The services rendered by these professions are of a specialised nature and is provided by virtue of their professional experience and specialised education.

12.3 One of the issues raised is whether the service tax is leviable on services rendered by chartered accountants on services which are not exclusively performed by them, but also by others such as advocates etc. It has been decided that service tax is to be paid only on services of auditing and accounting rendered by practising chartered accountants in their professional capacity. The services rendered by chartered accountants which shall attract service tax, include audit/ certification services required to be rendered in terms of various statutes and/or under any specific notification/requirements issued by Government or other authorities and, inter alia, include the following services:

• Statutory audit of companies under the Companies Act, 1956, both in respect of private sector and the public sector.

• Audit of Companies carrying on General Insurance business under the Insurance Act, 1938.

• Audit of Life Insurance Corporation.

• Audit of Banking Sector including Reserve Bank of India, State Bank of India, Banking Companies, Foreign Banks, Regional Rural Banks and Cooperative Banks.

• Audit of Statutory Corporations established under special enactments.

• Audit of Financial Institutions established under special enactments.

• Audit of Cooperative Societies under the Central Cooperatives Act.

• Audit of accounts of Members of Stock Exchanges under the Securities Contracts (Regulation) Act, 1956.

• Audit of financial information given in the offer document including accounting ratios pursuant to the clarifications XIII and XIV of the Guidelines for Disclosure and Investor Protection issued by SEBI.

• Audit/Inspection of various Mutual Funds, Financial Institutions andother entities under SEBI Regulations.

• Audit under Sales Tax Act of different States.

• Tax audit under Section 44AB of the Income-tax Act, 1961.

• Audit/Clarification under Sections 80HH, 80HHA, 80HHB, 80HHBA, 80HHC, 80HHD, 80HHE, 80-1 and 80-IA of the Income-tax Act, 1961.
  

• Audit of Accounts of Political parties under Section 13A of the Income­tax Act, 1961.

• Audit under Section 142(2A) of the Income-tax Act, 1961.

• Audit under Section 35D and 35E of the Income-tax Act, 1961. (q) Audit under Section 33AB (Tea Development Account) of the Income­ tax Act, 1961.

• Audit under Section 33ABA (Site Restoration Fund) of the Income­ tax Act, 1961.

12.4 The above audit/accounting services rendered by practising chartered accountants are only illustrative and not exhaustive. Service tax on other than accounting and auditing services rendered by practising chartered accountants has been exempted (Noti. No. 57/98-ST, dt. 7/10/1998 refers).

Exemption to Agricultural produce & cold storage

Indian Service Tax

Notification

Exemption to Agricultural produce & cold storage

[Notification No. JO/2002-ST, dated 01/08/2002]

In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided to any person by a cargo handling agency in relation to, agricultural produce or goods intended to be stored in a cold storage, from the whole of the service tax leviable there on under Section 66 of the said Act.

2. This notification shall come into force on the 16th day of August, 2002.

Is loading/unloading within factory premises for transportation of goods

Indian Service Tax

Clarifications

Is loading/unloading within factory premises for transportation of goods in connection with import or other cargo covered under "Service provided by Cargo handling agencies" as provided under Section zr to S. 90?

Reply

Yes - The Chairperson clarified that, as per clause (21) of the Finance Act, 1994, the term "cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport and any other service incidental to freight, but does not include handling of export cargo or passengers baggage or mere transportation of cargo. The taxable service as per sub-clause zr or clause (90), is any service provided to any person by cargo handling agency in relation to cargo handling services.

(Authority: RAC on 30.12.2002, Mumbai-II Commissionerate)

Cargo Handling Services

2.1 The Annexure clarifies that individual undertaking the activity loading or unloading of cargo by hiring labour will not come under the purview of service tax as a cargo handling agency. What is the implication of this clarification?

The Chairman replied that if any individual in his day to day life hires labour for handling of goods i.e. for loading or unloading of goods, it will not come under the purview of service tax as a cargo handling agency. For example an individual hires labour for shifting of his own household goods, then such a person shall not be termed as a person rendering the service of Cargo-Handling.

2.2 Cargo-Handling Service in relation to goods meant to be stored in cold storage have been exempted from the levy of service tax. The term "cold storage" needs to be identified.

Reply

The Chairman replied that in relation to cargo handling service, by Notification No. 10/2002-S.T., dated 1.8.2002, taxable service provided to any person by a cargo handling agency in relation to agricultural product or agricultural goods intended to be stored in a cold storage has been exempted from the whole of the service tax leviable thereon under Section 66 of the said Act. The term cold storage has to be understood accordingly as a place where goods/product are stored at a low temperature.

(Authority: RAC on 6.9.2002 of Vadodara Commissionerate)

"Cargo Handling Service" means loading, unloading, packing or unpacking of cargo

Indian Service Tax

Cargo Handling Service

Effective Date 16/08/2002

Authority Notification No. 8/2002-ST dt. 1/8/2002 (for full text of Notification

see under'Beauty Parlour').

Rate of Service Tax 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition

"Cargo Handling Service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal; for all modes of transport and cargo handling service incidental to freight, but does not include handling of export. cargo or passenger baggage or mere transportation of goods; [Section 65(23)].

Taxable service Cargo handling services provided by the cargo handling agent in relation to movement of cargo (excluding export cargo) except actual transportation of goods.

Value of taxable service Gross amount charged by a cargo handling agency in relation to cargo handling services.

Exemptions See Notification No. 10/2002-ST, dt. 01/08/2002.

• See Chapter on "General Exemptions"

• Specific exemptions

• (i) Handling of export cargo, passenger baggage, mere transportation of cargo, unaccompanied baggage, cost of transportation on actual basis, abandoned cargo, marketing/canvassing for airlines, storing/washing/ repairing and handling of empty containers, individuals

• (ii) Agricultural produce, cold storage

• (iii) Crane services, warehousing services

Person liable to pay: Cargo Handling Agency:

Head of Account

SI. Code SCCD Minor-head 004400147 Cargo handling Services 00440188 Sub-head 00440014701 Tax Collection 00440189 114 Sub-head 00440014702 Other Receipts 00440190 114 Sub-head 00440014703 Deduct Refunds 00440191 117

Questions & Answers

Q. Whether the services in the form of supply of provisions called "Ship Stores" provided by Ship Chandlers to the vessels are taxable?

Ans. The services rendered by Ship Chandlers are services rendered in relation to the vessel under authorization from port authorities and hence come within the ambit of Port Services and liable to Service Tax.

Q. Whether storage of empty containers attracts levy of Service Tax?

Ans. The handling/storage and warehousing of empty containers would be covered within the scope of storage and warehousing services and are liable for Service Tax.

Q. Whether handling/storage of empty containers within a port area would attract Service Tax?

Ans. The handling/storage of empty containers within a port area would be covered within the scope of Port Services, as empty containers would come under the definition of goods under Section 65(41) of the Finance Act, 1994. The earlier clarification regarding not to consider empty containers as cargo in the context of Cargo Handling Services has got no relevance vis-a-vis Port Services.

[Source: Directorate of Publicity and Public Relations, Customs & Central Excise, New Delhi, October, 2003].

Main text of Departmental Circular/TN

F. No. B11/1/2002-TRU, Date: 1/8/2002

1. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the finance Act, 2002. Reference to sub­clause or clause means clause or sub-clause of Section 65 of the Finance Act, 1994 as amended by the Finance Act, 2:002.

2. As per clause (21), the term "cargo handling service" means loading, unloading, packing or unpacking of cargo and includes cargo handling services provided for freight in special containers or for non-containerised freight, services provided by a container freight terminal or any other freight terminal, for all modes of transport, and any other service incidental to freight, but does not include handling of export cargo or passenger baggage or mere transportation of cargo. The taxable service, as per sub-clause (zr) of clause (90), is any service provided, to any person, by a cargo handling agency in relation to cargo handling services.

3. The services which are liable to tax under this category are the services provided by cargo handling agencies who undertake the activity of packing, unpacking, loading and unloading of goods meant to be transported by any means of transportation namely truck, rail, ship or aircraft. Well known examples of cargo handling service are services provided in relation to cargo handling by the Container Corporation of India, Airport Authority of India, Inland Container Depot, Container Freight Stations. This is only an illustrative list. There are several other firms that are engaged in the business of cargo handling services.

3.1 The services provided in relation to export cargo and passenger baggage are excluded from tax net.

3.2 Mere transportation of goods is not covered in the category of cargo handling and is therefore not liable to service tax.

3.3 Cargo handling service provided in relation to storage of agricultural produce (scope of the term "agricultural produce" is given under the storage and warehousing service) or for goods meant to be stored in cold storage have been exempted from the levy of service tax. (See Notification No. 1O/2002-S.T.).

4. A point has been raised as to what would be the value of service tax in a case where transport and cargo handling service is provided in a composite manner. The measure of tax is the gross amount charged by the cargo handling agency from the customer. Therefore, if lump sum amount is charged for both transportation and cargo handling, the tax will be payable on the entire amount. On the other hand, if the bill indicates the amount charged for cargo handling and transportation separately on actuals basis (verifiable by documentary evidence), then the tax would be leviable only on the cargo handling charges.

5. Cargo handling services are provided in the port also. Whether such service will be covered in the category of port services or cargo handling service. In this context it may be mentioned that 'port services cover any service provided in relation to goods or vessels by a port, or a person authorized by the port. This includes the cargo handling service provided within the port premises. Therefore to this extent there may be an overlap in cargo handling service and the port service. However since port services covers all the service in relation to goods and vessels and therefore more specific to port, the service provided in a port in relation to handling of goods would be appropriately covered under port service and no separate levy will be attracted under the category of cargo handling agency service. Similar would be the case in respect of service provided for storage of goods in the port premises.

6. All goods meant for export are excluded from the scope of this levy. There may be cases where goods may be transhipped at a place other than the place of packing before reaching a place from where it is exported. For example goods are packed say at Agra for transportation to Bhopal where it is transhipped and ultimately reaches Mumbai, from where it is exported. A doubt has been raised as to whether service tax would be leviable on cargo handling service at Agra. It is clarified service provided in relation to any cargo which is meant for export, would not be taxable irrespective of the fact that it reaches the place of export after transhipment. However, the relevant documents should show that the Goods are for export.

7. Passenger baggage has been excluded from the levy of service tax. In this regard a point has been raised as to whether unaccompanied baggage of a passenger attracts service tax under the category of passenger baggage. It is clarified that unaccompanied baggage of a passenger will not be leviable to service tax.

8. A point has been raised by Airports Authority of India (AAI) as to whether service tax will be leviable in respect of handling of transhipment of export cargo from one international carrier to another international carrier or from a domestic carrier to an international carrier. It is clarified that so long as the cargo is for export, no service tax on handling of such cargo is leviable. For domestic cargo service tax will be applicable.

9. Another point raised by them is that they undertake transhipment of import cargo from international to domestic carrier which will be ultimately cleared at the final domestic destination. It is stated that the service rendered by them should be held as exempted and it merely relates to transportation of goods. This is not factually correct. Under the Notification No. Cargo/13519/Pt. I, dated the 4th June, 1993, issued under the International Airports Authority Act, 1973, the AAI can levy charges towards demurrage, handling charges, special charges for live animals, hazardous cargo, radio-active cargo and cargo requiring strong room facilities, storage and processing charges, terminal charges. They are not supposed to levy any transportation charges. Therefore whatever charges they levy in this regard would be only towards handling charges and accordingly, service tax would be leviable.

10. It has been pointed out that Container Freight Stations that they do not have any direct contact with the importer and they only provide facility to the Customs House Agents (CHA) to handle the container and import cargo for which they have a contract on a mutually agreed rate. It is the CHA who claims all the charges from the importer including the charges made by the CFS on CHA and remit to the CFS. Since services of a CHA is already covered under the tax net, the CFS service providers should be exempt from tax when the billing is done on CHAs; otherwise there will be double taxation. The 'above contention is not correct. In the case of CHAs, the service tax is levied only on the agency or agency and attendance charges and not on the reimbursible expenses (on actuals basis) such as port fees, statutory levies, landing and container charges, dock fees, examination charges, terminal handling charges, etc. The CHA does not pay service tax on the handling charges charged by the CFS. Thus there is no double taxation. Further, as per the law, whatever charges, the cargo handling agency charges from any person (including the CHA) is--liable to service tax.

11. Another point raised relates to cases where the CFS offers a total package rate, which includes transportation and handling in respect of imported laden containers from Port to CFS. The question is if the cost of transportation is shown separately in the bill raised, will it be excluded from the levy of service tax. If the cost of transportation is claimed on actuals basis, then it will not be includible in the taxable value of cargo handling services.

12. A clarification has been sought as to whether service tax is payable on abandoned cargo which are auctioned by the CFS as no service is rendered to any person. In the case of auctioned goods, the proceeds of the auction goes first to the cost of auction, then towards customs duties and then to the custodian of the goods. It is clarified that no cargo handling service can be said to have been rendered in such cases, therefore service tax is not leviable.

13. Some of the cargo handling agencies may also act as marketing agents for individual airlines for which they get a commission, which seems to range from 5% to 15% of the freight. The question is whether service tax is payable on this. Marketing or canvassing for cargo for airlines does not come within the ambit of cargo handling services. Hence no service tax is payable under the category of cargo handling service.

14. CFSs also sometimes undertake storing/washing/repairing and handling of empty containers for the shipping lines for which they charge the shipping lines. Empty containers cannot be treated as cargo. Therefore, the activities mentioned above do not come within the purview of cargo handling services.

15. Another doubt raised in relation to cargo handling services is that whether individuals undertaking the activity of loading or unloading of cargo would be leviable to service tax. For example, if someone hires labour/labourer for loading or unloading of goods in their individual capacity, whether he would be liable to service tax as a cargo handling agency. It is clarified that such activities will not come under. the purview of service tax as a cargo handling agency.

"cable operator"has the meaning assigned to it in clause (aa) of Section 2 of the Cable Television Networks (Regulation) Act, 1995

Indian Service Tax

Cable Operator

Effective Date: 16/08/2002

Authority: Notification No. 8!2002-ST, dt. 1/8/2002 (for full text of Notification see under'Beauty Parlour').

Rate of Service Tax: 8% from 14-5-2003 (5% upto 13-5-2003) 10% from 10.9.2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions

"cable operator"has the meaning assigned to it in clause (aa) of Section 2 of the Cable Television Networks (Regulation) Act, 1995 (7 of 1995), [Section 65(21 )].

"cable service"has the meaning assigned to it in clause (b) of Section 2 of the Cable Television Networks (Regulation) Act, 1995 (7 of 1995), [Section 65(22)].

Taxable service: Cable operator providing cable service to subscribers through a cable television network.

Value of taxable service: Gross amount charged from subscribers.

Exemptions

(a) See Chapter on "General Exemptions"

(b) Specific exemptions

• Entertainment tax if clearly shown

• Broadcasting services

• Cost of cable and installation charges

Person liable to pay: Cable operator

Head of Account

SI. Code SCCD Minor-head 004400154 Cable Operators Services 00440216 Sub-head 00440015401 Tax Collection 00440217 110 Sub-head 00440015402 Other Receipts 00440218 119 Sub-head 00440015403 Deduct Refunds 00440219 112

Changes from 10-9-2004

F.No. B2/8/2004-TRU, Date:10-9-2004

17. Extension of service tax on cable operators to Multi System Operators (MSOs)

In cable TV services, broadcast channels transmit television signals to multi system operators (MSO) who further send them to the cable operator The services Provided by the MSOs to the cable operators have been made taxable.

Main text of Departmental Circular/TN

F. No. Bl1/1/2002-TRU, Date: 1-8-2002

l. The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to sub­clause or clause means clause or sub-clause of Section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002.

2. As per clause (20), "cable service" shall have the meaning assigned to it in clause (b) of Section 2 of the Cable Television Networks (Regulation) Act, 1995. As per clause (19) "cable operator" shall have the meaning assigned to it in clause (a) of Section 2 of the Cable Television Networks (Regulation) Act, 1995. The taxable service, as per sub-clause (zs) of clause (90) is any service provided to a customer, by a cable operator in relation to cable services.

3. As per the Cable Television Network (Regulation) Act, 1995, the definitions of cable service and cable operator are as follows:

"cable operator" means any person who provides, cable service through a cable television network or otherwise controls or is responsible for the management and operation of a cable television network;

"cable service" means the transmission by cables of programmes including re-transmission by cables of any broadcast television signals;

4. The taxable service in this case is the cable services provided by the cable operators. The programme broadcast by television channel are received either by Multi System Operators (MSO) or directly by cable operators in the form of signals., Where MSO receives the signals, they first retransmit signals to the cable operator who in turn retransmits the same to the viewers through the cable network provided by the cable operator. Service tax is liable to be paid by the cable operator providing service to ultimate subscriber of cable services.

5. In some States, cable operators are also liable to pay entertainment tax. In such cases, a cable operator charges from his customer an amount inclusive of entertainment tax. A point has been raised as to whether the amount paid as entertainment tax is liable to be included in the value of taxable service. It is clarified that the entertainment tax collected and paid to the Government will not be includible in the value of taxable service, provided the cable operator clearly indicates the entertainment tax element in his bill to the customer.

Notifications

Prior to 10/9/2004

[Notification No. 25/2004-ST, dated 10-9-2004]

For full text see under "Banking & Other Financial Services".

Business Exhibition" means an exhibition -to market or promote

Indian Service Tax

Business Exihibition Service

Effective Date: 10/09/2004.

Authority: Finance (No.2) Act, 2004

Rate of Service Tax: 10% - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition

"Business Exhibition" means an exhibition -

• to market or

• to promote or

• to advertise or

• to showcase

any product or service, intended for the growth in business of the producer or provider of such product or service, as the case may be, [Section 65 (19a)].

Taxable Service

Taxable service means any service provided to an exhibitor, by the organiser of a business exhibition, in relation to business exhibition, [Section 65(1 05)(zzo)]

Value of taxable service: Gross amount

Exemptions: See Notification No. 18/2004-ST, dt. 10-9-2004. For full text see under "Airport Services".

Person liable to pay: Service provider of Business Exhibition Service.

Head of Account: To be issued.

Changes from 10/9/2004

F.No. B2/8/2004-TRU, Date: 10/9/2004

04. Business exhibition services

4.1 Business exhibition service is a service rendered to an exhibitor by an organizer of a business exhibition that intends to market, promote, advertise or show case products or services for growth in business of the producers or providers of such products or services. Thus, organizers of events such as trade fairs, road shows, fashion shows, display show-cases kept in airports, railway stations, hotels etc. would be covered under this new levy. A display of consumer goods in shops or shopping centers for customers to select and purchase would normally not attract any service tax, as normally no separate charges are collected by the shop-keepers for displaying such goods. However, in case an amount is collected for merely displaying an item, the same would be chargeable to service tax.

4.2 While event management service (a currently taxable service) also relates to organizing such events, but in that case, the services are rendered to the organizer by an event manager in relation to planning, promoting, organizing etc. Thus, an organizer of a business exhibition is not covered under Event Management Services, but would be covered under the new levy of 'Business Exhibition Services'. Similarly, while services rendered in relation to a circular, label, documents, hoardings or any other audio visual representation of a product or service falls under 'advertisement services', the services relating to actual exhibition or display of the product or services would fall under the category of 'Business Exhibition Services'.

call centre" means a commercial concern which

Indian Service Tax

Notifications

Call Centres & Medical Transcription Centre

[Notification No. 8/2003-ST, dated 20-6-2003]

In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable services provided, by a call centre' or a medical transcription centre, to a client from the whole of the service tax leviable thereon under sub-section (2) of section 66 of the said Act.

Explanation:-For the purposes of this notification -

¹[(i) "call centre" means a commercial concern which -

• Provides assistance, help or information or

• Contacts customer including prospective customer, for the purposes of sales, telemarketing, payments through telephone, leased lines, satellite links, mail, fax, web chat and use of information system for monitoring and recording information on behalf of another person]

(ii) "medical transcription centre" means a commercial concern which transcribes medical history, treatment, medical observations and the like.

2. This notification shall come into force on the 1st day of July, 2003.

Commission Agents

[Notification No. 13/2003-ST, dated 20/6/2003]

In exercise of the powers conferred by section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the business auxiliary services provided by a 2[ commission agent in relation to sale or purchase of agricultural produce from the service tax leviable thereon under Section 66 of the said Act.]

³[Explanation: For the purposes of this notification ­

• Commission agent" means a person who causes sale or purchase of goods, on behalf of another person for a consideration which is based on the quantum of such sale or purchase.

• Agricultural produce" means any produce resulting from cultivation or plantation, on which either no further processing is done or such processing is done by the cultivator like tending, pruning, cutting, harvesting, drying which does not ..lter its essential characteristics but makes it only marketable and includes all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute indigo

1. Subs. by Noti. No. 12/2004-ST, dt. 10-9-2004.

2. Subs. for "commission agent from the service tax leviable thereon under sub-section (2) of section 66 of the said Act" by Noti. No. 8/2004-ST, dt. 9-7-2004.

3. Subs. for Explanation by Noti.No. 8/2004-ST, dt. 9-7-2004, earlier it reads:

Explanation:-For the purposes of this notification, "commission agent" means a person who causes sale or purchase of goods, on behalf of another person for a consideration which is based on the quantum of such sale or purchase. unmanufactured tobacco, betel leaves, tendu leaves, rice, coffee and tea but does not include manufactured products such as sugar, edible oils, processed food and processed tobacco. "]

2. This notification shall come into force on the 1st day of July, 2003.

Effective Date

[Notification No. 7/2003-ST, dated 20-6-2003]

In exercise of the powers conferred by sub-section (2) of section 66 of the Finance Act, 1994 (32 of 1994), the Central Government hereby appoints the 1st day of July, 2003, as the date from which the service tax shall be levied under sub-section (2) of section 66 of the said Finance Act.

Exemption

[Notification No. 14/2004-ST, dated 10-9-2004]

In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable service provided to a client by a commercial concern in relation to the business auxiliary service, in so far as it relates to -

• Procurement of goods or services, which are inputs for the client

• Production of goods on behalf of the client

• Provision of service on behalf of the client or

• A service incidental or auxiliary to any activity specified in (a) to (c) above, from the whole of the service tax leviable thereon under section 66 of the said Finance Act: Provided that nothing in this notification shall apply to ­

• (i) a factory registered under or governed by the Factories Act, 1948 (63 of 1948),

  (ii) a company established by or under the Companies Act, 1956 (1of 1956),

  (iii) a partnership firm, whether registered or not registered,

  (iv) a society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India

  (v) a co-operative society established by or under any law,

  (vi) a corporation established by or under any law or

  (vii) a body corporate established by or under any law

unless such factory, company, partnership firm, society, co-operative society, corporation or body corporate, as the case may be, provides any business auxiliary service in respect of any activity specified in (a) to (d) above in relation to agriculture, printing, textile processing or education.

Prior to 10/9/2004

[Notification No. 25/2004-ST, dated 10/9/2004]

For full text see under "Banking & Other Financial Services".