Ca Final Complete Notes On Service Tax

Prof.
Tayals Compendium on Indirect Taxes

[Service Tax Part I - Statutory Provisions]
SERVICE TAX
[Part I Statutory Provisions]
1
Prof. Tayals Compendium on Indirect Taxes
Contents
1 - asics of Service Tax
! - Concepts of Service
" - #eclared Service
$ - %e&ative 'ist
( - )e&a *xemption %otification
+ - Place of Provision of Service ,ules- !.1!
/ - Classification of Taxa0le Services
1 - 2aluation of Taxa0le Services
3 - Person 'ia0le to Pay Service Tax
1. - ,e&istration
11 - ,ecords and #ocuments
1! - Payment of Service Tax
1" - *xport of Service
1$ - ,eturns
1( - 4ssessment
1+ - ,ecovery of service tax not levied or paid or s5ort-levied or s5ort-paid or
erroneously refunded
1/ - Interest and Penalty
11 - ,efunds
13 - Searc5 and Sei6ure
!. - Special 4udit
!1 - ,ectification of )ista7e
!! - ,evie8 0y Commissioner
!" - 4ppeals
!$ - 4dvance ,ulin&s
!( - Provisions of t5e Central *xcise 4ct 4pplica0le to Service Tax
!+ - Provisional 4ttac5ment of Property
!/ - ,esponsi0ility of t5e person collectin& service tax
!1 - Pu0lication of information
!3 - #ue #ates
". - Input Service #istri0utor
"1 - Point of Taxation ,ules- !.11
2
1
asics of Service Tax

4. Service Tax and Constitution of India
No tax can be levied without authority of the law and no law can be made without the authority of the
constitution.
Accordingly, power to levy service tax has been derived from the entry No. 92C of the ist ! "called as
#nion list$ of the %eventh %chedule read with article 2&' of the Constitution of !ndia. (ntry No. 92C is
appearing as under) 93!C Taxes on services9. *his entry has been inserted by the Constitution
"(ighty+eighth Amendment$ Act, 2,,-.
. Incidence of Service Tax -
!n each taxing enactment there has to be a charging section.
!ncome *ax %ection & of the !ncome *ax Act, 19'1is the charging section
Central (xcise section - of the Central (xcise Act, 19&& is the charging section,
Customs .uties %ection 12 of the Customs Act, 19'2 is the charging section
%ervice *ax %ection ++ of the Chapter / of the 0inance Act, 199& is the charging section.
Section 66B. Charge of service tax on and after Finance Act, 2012.
There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent on
the value of all services, other than those services specified in the negative list, provided or agreed to be
provided in the taxable territory by one person to another and collected in such manner as may be
prescribed.
Explanation.- For the removal of doubts, it is hereby clarified that the references to the provisions of
section 66 in hapter ! of the Finance "ct, #$$%(&' of #$$%) or any other "ct, for the purpose of levy
and collection of service tax, shall be construed as references to the provisions of section 66(.

C. 4pplica0ility of Provision of Service Tax [Section +$:1;] -
%ervice tax is levied on the basis of the place where services are provided.
1rovisions of Chapter / of the 0inance Act are applicable throughout !ndia except the %tate of
2ammu and 3ashmir.
4hole !ndia except the %tate of 2ammu and 3ashmir is referred as Taxale Territor!.
-
%tate of 2ammu and 3ashmir as well as whole world outside !ndia is referred as "on#Taxale
Territor!.
%ervice tax can be levied only if place of provision of service is in taxable territory.
9India9 means,55
"a$ the territory of the #nion as referred to in clauses "2$ and "-$ of article 1 of the
Constitution6
"b$ its territorial waters, continental shelf, exclusive economic 7one or any other maritime
7one as defined in the *erritorial 4aters, Continental %helf, (xclusive (conomic 8one
and other 9aritime 8ones Act, 19:'6 "7;, of 19:'.$
"c$ the seabed and the subsoil underlying the territorial waters6
"d$ the air space above its territory and territorial waters6 and
"e$ the installations, structures and vessels located in the continental shelf of !ndia and the
exclusive economic 7one of !ndia, for the purposes of prospecting or extraction or
production of mineral oil and natural gas and supply thereof6 $section 6%B&2'()

#. *xport of Services $*+le 6A of the Service Tax *+les)
*he essential re<uisites before a service can be designated as export service are)
!t must be a service as defined under sub+section "&&$ of section '=>
by a service provider located in the taxable territory
to a service receiver located outside !ndia
the service is not a service specified in the negative list
the place of provision of the service is outside !ndia
the payment for such service is received by the service provider in convertible foreign exchange
the service provider and service receiver are not merely establishments of a distinct person by
virtue of item "b$ of (xplanation 2 of clause && of section '=> of the Act .
!t means where a person a having an establishment in taxable territory and another in non+taxable
territory, then services provided by establishment in taxable territory to the establishment in non+
taxable territory cannot be treated as export of service.

=========
&
%e8 Sc5eme of taxation for Service Tax

*erm ?service@ has been defined in clause "&&$ of section'=> of the Act.
%ection ''> provides that the service tax shall be levied on all services provided or agreed to be
provided in a taxable territory, other than services specified in the negative list.
%ince service tax is attracted only if service is provided in taxable territory. %ection ''C
empowers the Central Aovernment to maBe rules for determination of place of provision of service.
>y virtue of this section, the 1lace of 1rovision of %ervices Cules, 2,12 have been made.
*he negative list of services is contained in section ''..
%ection ''( contains a list of services which have been .eclared to be service.
*o remove some ambiguities certain activities have been specifically defined by description as
services and are referred as .eclared %ervices "section ''($.
!n addition to the services specified in the negative list, certain exemptions have been given. 9ost
of the exemptions have been consolidated in a single mega exemption for ease of reference.
DNotification No. 2=E2,12 dated 2,E,'E2,12F
1rinciples have been laid down in section ''0 of the Act for interpretation wherever services
have to be treated differentially for any reason and also for determining the taxability of bundled
services.
*here is no change in provisions related to valuation and C(N/A* credit.

=
!
Concepts of Service

*he term service has been defined under section +(:$$; as under 5
&,,( -service- means any activity carried out by a person for another for consideration, and includes
a declared service, but shall not include)
(a) an activity which constitutes merely,**
(i) a transfer of title in goods or immovable property, by way of sale, gift or in any
other manner+ or
(ii) such transfer, delivery or supply of any goods which is deemed to be a sale within
the meaning of clause ('$") of "rticle &66 of the onstitution+ or
(iii) a transaction in money or actionable claim+
(b) a provision of service by an employee to the employer in the course of or in relation to his
employment+
(c) fees ta,en in any ourt or tribunal established under any law for the time being in force.
Explanation 1.. For the removal of doubts, it is hereby declared that nothing contained in this clause
shall apply to,**
(") the functions performed by the -embers of .arliament, -embers of /tate 0egislative,
-embers of .anchayats, -embers of -unicipalities and -embers of other local authorities
who receive any consideration in performing the functions of that office as such member+ or
(() the duties performed by any person who holds any post in pursuance of the provisions of the
onstitution in that capacity+ or
() the duties performed by any person as a hairperson or a -ember or a 1irector in a body
established by the entral 2overnment or /tate 2overnments or local authority and who is not
deemed as an employee before the commencement of this section.
Explanation 2.// For the purposes of this clause, transaction in money shall not include any activity
relating to the use of money or its conversion by cash or by any other mode, from one form, currency
or denomination to another form, currency or denomination for which a separate consideration is
charged.
Explanation 0.// For the purposes of this hapter,)
(a) an unincorporated association or a body of persons, as the case may be, and a member
thereof shall be treated as distinct persons+
(b) an establishment of a person in the taxable territory and any of his other establishment in a
non-taxable territory shall be treated as establishments of distinct persons.
Explanation ,.. " person carrying on a business through a branch or agency or representational
office in any territory shall be treated as having an establishment in that territory+

Taxa0ility of service
'
According to %ection ''>, to be taxable, a service should be 5
provided or agreed to be provided
by a person to another
in the taxable territory, and
should not be specified in the negative list.
1lease note that a taxable service may also be exempt under notification number 2=E2,12 dated
2,E,'E2,12.
0rom the point of view of service provider it is also relevant to note that the service may be taxable but
the service provider is not liable to pay service tax if he is availing exemption available to the small
service provider.
<4&reed to 0e provided
*he implications of phrase Gagreed to be providedH are 5
%ervices which have only been agreed to be provided but are yet to be provided are taxable
Ceceipt of advances for services agreed to be provided become taxable before the actual
provision of service
Advances that are retained by the service provider in the event of cancellation of contract of
service by the service receiver become taxable as these represent consideration for a service that
was agreed to be provided.
*herefore agreements to provide taxable services will become liable to pay tax only on issuance of
invoice or date of completion of service if invoice is not issued within prescribed period of completion or
on receipt of payment, whichever is earliest. 0or specific cases covered under the said Cules, including
continuous supply of service, the 1oint of *axation Cules, 2,11 shall be referred.
<4ctivity
*he word activity includes an act or worB or deed done, an operation carried out, execution of an act,
provision of a facility etc. Activity could be active or passive. Agreeing to an obligation to refrain from
an act or to tolerate an act or a situation has been specifically listed as a declared service under section
''( of the Act.
<y a person for anot5er]
*he phrase ?provided by one person to another@ indicates that services provided by a person to self are
outside the ambit of taxable service e.g. service provided by one branch of a banB to another branch.
)eanin& of t5e 8ord <Person [Section +(:"/;]
*he following shall be considered as persons for the purposes of the Act)
an individual
a Iindu undivided family
:
a company
a society
a limited liability partnership
a firm
an association or body of individuals, whether incorporated or not
Aovernment
a local authority, or
every artificial Juridical person, not falling within any of the preceding sub+clauses.
)eanin& of <=overnment>
*he term ?Aovernment@ has not been defined in the Act. As per clause "2-$ of section - of the Aeneral
Clauses Act, 1;9: ?Aovernment@ includes both Central Aovernment and any %tate Aovernment.
Central Aovernment means the 1resident and the officers subordinate to him while exercising the
executive powers of the #nion vested in the 1resident and in the name of the 1resident.
%tate Aovernment means the Aovernor or the officers subordinate to him who exercise the
executive power of the %tate vested in the Aovernor and in the name of the Aovernor.
'ocal aut5ority [Section +(:"1;]
ocal authority means the following)+
A 1anchayat as referred to in clause "d$ of article 2&- of the Constitution
A 9unicipality as referred to in clause "e$ of article 2&-1 of the Constitution
A 9unicipal Committee and a .istrict >oard, legally entitled to, or entrusted by the Aovernment
with, the control or management of a municipal or local fund
A Cantonment >oard as defined in section - of the Cantonments Act, 2,,'
A regional council or a district council constituted under the %ixth %chedule to the Constitution
A development board constituted under article -:1 of the Constitution, or
A regional council constituted under article -:1A of the Constitution.
*he definition given above is exhaustive. !t does not include other bodies which are merely described as a
local body by virtue of a local law.
A statutory body, corporation or an authority created by the 1arliament or a %tate egislature is neither
?Aovernment@ nor a ?local authority@. %uch a statutory body, corporation or an authority as a legal entity is
separate from the state and cannot be regarded as Central or %tate Aovernment and also do not fall in the
definition of ?local authority@.
<=overnmental aut5ority
!t means a board or an authority or any other body established with 9,K or more participation by way of
e<uity or control by Aovernment and set up by an Act of the 1arliament or a %tate egislature to carry out
any function entrusted to a municipality under article 2&-4 of the Constitution. *hus some of these local
bodies may comprise governmental authorities.
;
Iowever it may be noted that services by a governmental authority by way of any activity in relation to
any function entrusted to a municipality under article 2&-4 of the Constitution are specifically exempt
under the mega exemption.

Taxa0ility of services provided 0y =overnment or local aut5ority
!f services are provided by one department of the Central Aovernment to another department of the
Central Aovernment or by a department of a %tate Aovernment to another department of the same %tate
Aovernment then such service would not be taxable as it would amount to self+service.
Ln the other hand if a service is provided by a Central Aovernment department to a %tate Aovernment
department or vice versa or a by a %tate to another %tate Aovernment or by a Aovernment to an
autonomous body, the same would be taxable if such service does not fall in the negative list.
!t is to be noted that most of the services provided by the Aovernment are in the negative list. Lnly those
activities of Aovernment or local authorities are taxed where similar or substitutable services are provided
by private entities. *he rationale is as follows+
to provide a level playing field to private entities in these areas as exemption to Aovernment in
such activities would lead to competitive ine<uities6 and
to avoid breaB in C(N/A* chain as the support services provided by Aovernment are normally
in the nature of intermediary services.
*xceptions - services provided 0y a person to oneself are taxa0le
*wo exceptions have been carved out to the general rule that only services provided by a person to
another are taxable. *hese exceptions, contained in (xplanation 2 of clause "&&$ of section '=>, are)
an establishment of a person located in taxable territory and another establishment of such person
located in non+taxable territory are treated as establishments of distinct persons.
an unincorporated association or body of persons and members thereof are also treated as distinct
persons.
!t means inter+se provision of services between such persons, who are deemed to be separate persons,
would be taxable e.g. services provided by a club to its members and services provided by the branch
office of a multinational company to the head<uarters of the multi+national company located outside !ndia
would be taxable provided other conditions relating to taxability of service are satisfied.
<Consideration
As per (xplanation "a$ to section ': of the Act GconsiderationH includes any amount that is payable for
the taxable services provided or to be provided.
%ince this definition is inclusive it will not be out of place to refer to the definition of ?consideration@ as
given in section 2 "d$ of the !ndian Contract Act, 1;:2 as follows+
34hen, at the desire of the promisor, the promisee or any other person has done or abstained from
doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or
abstinence or promise is called a consideration for the promise5
9
!n simple terms, ?consideration@ means everything received or recoverable in return for a provision of
service which includes monetary payment and any consideration of non+ monetary nature or deferred
consideration.
4ctivity for a consideration
*he concept ?activity for a consideration@ involves an element of contractual relationship wherein the
person doing an activity does so at the desire of the person for whom the activity is done in exchange for
a consideration e.g.
a reward given for an activity performed explicitly on the understanding that the winner will
receive the specified amount in reciprocity for a service to be rendered by the winner would be a
consideration for such service. *hus amount paid in cases where people at large are invited to
contribute to open software development "e.g. inux$ and getting an amount if their contribution
is finally accepted will be examples of activities for consideration.
if an artist is called to perform on payment of an amount of money then the performance
becomes an activity for a consideration.
Ln the other hand, a an activity done without such contractual relationship i.e. without the express or
implied contractual reciprocity of a consideration would not be an ?activity for consideration@ even
though such an activity may lead to accrual of gains to the person carrying out the activity e.g.
an award received in consideration for contribution over a life time or even a singular
achievement carried out independently or without reciprocity to the amount to be received will
not comprise an activity for consideration.
an artist performing on a street does an activity without consideration even though passersby may
drop some coins in his bowl Bept after feeling either reJoiced or merely out of compassion. *hey
are, however, under no obligation to pay any amount for his services.
1rovisions of free tourism information, access to free channels on */ and a large number of
governmental activities for citi7ens are some of the examples of activities without consideration.
Importance of <consideration
*o be taxable an activity should be carried out by a person for a ?consideration@
Activity carried out without any consideration liBe donations, gifts or free charities are therefore
outside the ambit of service e.g. grants given for a research where the researcher is under no
obligation to carry out a particular research would not be a consideration for such research.
.onations to a charitable organi7ation are not consideration unless charity is obligated to provide
something in return e.g. display or advertise the name of the donor in a specified manner or such
that it gives a desired advantage to the donor.
%ubsidies allowed by the Aovernment having no direct relation with the value of goods or
services. Conditions in a grant stipulating merely proper usage of funds and furnishing of account
also will not result in maBing it a provision of service.
)eanin& of monetary consideration
9onetary consideration means any consideration received in the form of money. ?9oney@ has been
defined in section '=> and includes not only cash but also che<ue, promissory note, bill of exchange,
1,
letter of credit, draft, pay order, traveler@s che<ue, money order, postal or electronic remittance or any
such similar instrument.
%on-monetary consideration>
Non+monetary consideration essentially means compensation in Bind such as the following)
%upply of goods and services in return for provision of service
Cefraining or forbearing to do an act in return for provision of service
*olerating an act or a situation in return for provision of a service
.oing or agreeing to do an act in return for provision of service
Illustrations
If?? 4nd in return?
A agrees to dry clean >@s clothes > agrees to clicB A@s photograph
A agrees not to open dry clean shop in >@s
neighborhood
> agrees not to open photography shop in A@s
neighborhood
A agrees to design >@s house > agrees not to obJect to construction of
A@s house in his neighborhood
A agrees to construct - flats for > on land owned
by >
> agrees to provide one flat to A without any
monetary consideration
T5en
0or the services provided by A to >, the acts of > specified in 2nd column are non+ monetary
consideration provided by > to A. Conversely, for services provided by > to A, similar reasoning is to
be adopted.
2aluation of service in case of non-monetary consideration
%ince amount of service tax is calculated on monetary value the value. 0or determining the tax liability it
becomes obvious that value of non+monetary consideration be converted into monetary terms. As per
clause "ii$ of sub+section "1$ of section ': of the Act where the consideration received is not wholly or
partly consisting of money the value of taxable service shall be the e<uivalent money value of such
consideration. !f the same is not ascertainable then the value of such consideration is determined under
clause "iii$ of section ': read with rule - of the %ervice *ax ".etermination of the value$ Cules 2,,' as
follows)+
Ln the basis of gross amount charged for similar service provided to other person in the ordinary
course of trade6
4here value cannot be so determined, the e<uivalent money value of such consideration, not less
than the cost of provision of service.
Cases of non-monetary consideration
11
*here may be various situations wherein it may be difficult to determine the consideration received by
service provider for provision of service. %uch situations can arise on account of several factors such as
consideration of service being embedded in the total amount received as consideration for a composite
activity involving elements of provisions of service and element of sale of goods or consideration for
service being included in the gross amount charged for a particular transaction or consideration of service
being wholly or partly in the nature of non+monetary consideration.
*he %ervice *ax ".etermination of /alue$ Cules 2,,' contain provisions in respect of the following
situations)
.etermination of value of service portion involved in execution of worBs contract.
.etermination of value of service in relation to money changing.
.etermination of value of service portion involved in supply of food and any other
article of human consumption or any drinBs in a restaurant or as outdoor catering.
.etermination of value where such value is not ascertainable.
*he said rules also specify certain expenditures or costs that are incurred by the
service provider which have to be included or excluded
*he said rules also specify certain commissions or costs that are received by the service provider
that have to be included or excluded while arriving at the taxable value.
!n addition to the %ervice *ax ".etermination of /alue$ Cules 2,,', certain sub+rules in rule ' of the
%ervice *ax Cules, 199& also provide simplified compounded mechanism for determination of value of
taxable services in specified situations.

Consideration from t5ird party
*he consideration for a service may be provided by a person other than the person receiving the benefit of
service as long as there is a linB between the provision of service and the consideration e.g. %ome body
maBing payment for the hotel accommodation provided to his guests. !n this case service provider is the
hotel, receiver of service is the guest while payment for the service is made by third person.
Transfer of title of &oods or immova0le property - *xcluded
-ere transfer of title in goods or immovable property by way of sale, gift or in any other manner for a
consideration does not constitute service.
1oods 5 As per section '=>"2=$ goods means ?every Bind of moveable property other than
actionable claims and money6 and includes securities, growing crops, grass and things attached to
or forming part of the land which are agreed to be severed before sale or under contract of sale@.
233ovale propert! 5 According to Clause "2'$ of the Aeneral Clauses Act, 1;9: immovable
property includes land, benefits to arise out of land, and things attached to the earth, or
permanently fastened to anything attached to the earth.
4Transfer of title5 means change in ownership. 9ere transfer of custody or possession over goods
or immovable property where ownership is not transferred does not amount to transfer of title e.g.
giving the property on rent or goods for use on hire would not involve a transfer of title.
Importance of t5e 8ord <merely
12
*he word ?merely@ signifies that activities which constitute only)
transfer of title in goods or immovable property6 or
transfer, supply or delivery which is deemed to be a deemed sale of goods
a transaction in money or an actionable claim+ are outside the definition of service.
4here a transaction involves transfer of title of goods or property and an element of service, such
transaction cannot be excluded from the definition of service.
!f two transactions, although associated, are two discernibly separate transactions then each of the
separate transactions would be assessed independently. !n other words the discernible portion of
the transaction which constitutes a transfer of title in goods, would be excluded from the
definition of service while the service portion would be included in the definition of service e.g.
a builder carrying out an activity for a client wherein a flat is constructed by the builder for the
client for which payments are received in installments and on completion of the construction the
title in the flat is transferred to the client involves two elements namely provision of construction
service and transfer of title in immovable property. *he two activities are discernibly separate.
*he activity of construction carried out by the builder would, therefore, be a service and the
activity of transfer of title in the flat would be outside the ambit of service.
!n this case it is also worth noting that where a flat has already been completed and the builder
has already obtained certificate of completion from competent authority, then service tax will not
be applicable on transfer of title because it will be a case of transfer of title in immovable
property.
4here transactions involving an element of provision of service and an element of transfer of title
in goods are so inextricably linBed that they essentially form one composite transaction then the
nature of such transaction would be determined by the application of the dominant nature test laid
down by the %upreme Court in >%N@s case.
#ominant nature test in S%'s case
*he following principles emerge from the said Judgment for ascertaining the taxability of composite
transactions+
(xcept in cases of worBs contracts or catering contracts composite transactions cannot be split
into contracts of sale and contracts of service.
Lne of the important factor is to see whether the parties had the intention to have separate rights
and obligations in relation to supply of goods and as well as in relation to providing of service. !f
such intention is missing then the transaction is a composite transaction even if the contracts
could be disintegrated.
*he nature of a composite transaction would be determined by the element which determines the
?dominant nature@ of the transaction.
+ !f the dominant nature of such a transaction is sale of goods or immovable property then such
transaction would be treated as such.
+ !f the dominant nature of such a transaction is provision of a service then such transaction
would be treated as a service and taxed as such even if the transaction involves an element of
sale of goods.
1-
!n case of worBs contracts and ?service wherein goods, being food or any other article of human
consumption or any drinB "whether or not intoxicating$ is supplied in any manner as part of the
service@ the ?dominant nature test@ does not apply and service portion is taxable as a ?service@
!f the transaction represents two distinct and separate contracts and is discernible as such then
contract of service in such transaction would be segregated and chargeable to service tax if other
elements of taxability are present. *his would apply even if a single invoice is issued.
*he principles explained above would, mutatis mutandis, apply to composite transactions involving an
element of transfer of title in immovable property or transaction in money or an actionable claim.

Securities Section !:5; of Securities Contracts :,e&ulations; 4ct- 13(+
?%ecurities@ includes 5
%hares, scrips, stocBs, bonds, debentures, debenture stocB or other marBetable securities of a liBe
nature in or of any incorporated company or other body corporate.
.erivative.
%ecurity receipt as defined in clause "7g$ of section 2 of the %ecuritisation and Ceconstruction of
0inancial Assets and (nforcement of %ecurity !nterest Act, 2,,2.
#nits or any other such instrument issued to the investors under any mutual fund scheme.
Any certificate or instrument "by whichever name called$, issued to any investor by any issuer
being a special purpose distinct entity which possesses any debt or receivable, including
mortgage debt, assigned to such entity, and acBnowledging beneficial interest of such investor in
such debt or receivable, including mortgage debt, as the case may be6
Aovernment securities6
%uch other instruments as may be declared by the Central Aovernment to be securities.
Cights or interest in securities.
!t is to be noted that activities that are in the nature of only transfer of title by way of sale, redemption,
purchase or ac<uisition of securities on principal+to+principal basis, excluding services of dealers, broBers
or agents in relation to such transactions, are outside the scope of the word ?services. All other activities
in relation to securities which are not in the nature of transfer of title in securities would be taxable e.g.
entry and exit load charged by the mutual funds are the charges to cover up expenses of documentation,
initial expenses etc.
<#eemed sales 4s defined in article "++:!34;>
*he six categories of deemed sales as defined in article -''"29A$ of the Constitution are 5
transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred
payment or other valuable consideration
transfer of property in goods "whether as goods or in some other form$ involved in the execution
of a worBs contract
delivery of goods on hire+purchase or any system of payment by installments
transfer of the right to use any goods for any purpose "whether or not for a specified period$ for
cash, deferred payment or other valuable consideration
1&
supply of goods by any unincorporated association or body of persons to a member thereof for
cash, deferred payment or other valuable consideration
supply, by way of or as part of any service or in any other manner whatsoever, of goods, being
food or any other article for human consumption or any drinB "whether or not intoxicating$,
where such supply or service, is for cash, deferred payment or other valuable consideration.
!n these cases, the transaction, that amounts to deemed sales, is excluded from taxability. %ervice tax is
chargeable only on service component in these activities.

Transactions only in money
0ollowing are few examples of transaction in money only ++
*he principal amount of deposits in or withdrawals from a banB account.
Advancing or repayment of principal sum on loan to someone.
Conversion of Cs 1,,,, currency note into one rupee coins to the extent amount is received in
money form.
(xplanation 2 to the definition of the term ?service@ clarifies that transaction in money does not include
any activity in relation to money by way of its use or conversion by cash or by any other mode, from one
form, currency or denomination to another form, currency or denomination for which a separate
consideration is charged. !t means if other elements of taxability are present, then service tax is
chargeable on such transactions e.g. a foreign exchange dealer while exchanging one currency for
another also charges a commission "often inbuilt in the difference between the purchase price and selling
price of forex$.
*he activity of exchange of currency would be a transaction only in money, but the related
activity of providing the services i.e. documentation and other services for which a commission is
charged separately or built in the margins would be very much a ?service@.
!n business chit fund since certain commission received from members is retained by the
promoters as consideration for providing services in relation to the chit fund it is not a transaction
only in money. *he consideration received for such services is therefore chargeable to service
tax.
%ince the banB charges a commission for preparation of a banB draft or a pay order it is not a
transaction only in money. Iowever, for a draft or a pay order made by banB the service provided
would be only to the extent of commission charged for the banB draft or pay order. 1lease note
that the money received for the face value of such instrument would not be consideration for a
service since to the extent of face value of the instrument it is only a transaction in money.
!nvestment of funds by a person with another for which the return on such investment is returned
or repatriated to the investors without retaining any portion of the return on such investment of
funds is a transaction only in money. *hus a partner being admitted in a partnership against his
share will be a transaction in money. Iowever, if a commission is charged or a portion of the
return is retained as service charges, then such commission or portion of return is out of the
purview of transaction only in money and hence taxable. Also, if a service is received in lieu of
an investment it would cease to be a transaction only in money to the extent the investment
represents the consideration for the service received.
.ebt collection services or credit control services are not the services only in money.
1=
4ctiona0le claims
Actionable claims means a claim to any debt, other than a debt secured by mortgage of immovable
property or by hypothecation or pledge of movable property or to any beneficial interest in movable
property not in the possession, either actual or constructive, of the claimant, which the Civil Courts
recogni7e as affording grounds for relief, whether such debt or beneficial interest be existent, accruing,
conditional or contingent. D%ec. - of the *ransfer of 1roperty Act, 1;9-F e.g. "a$ unsecured debts "b$ right
to participate in the draw to be held in a lottery.
%ince unsecured debt is an actionable claim, transfer of unsecured debt to a third person is a transaction
only in such actionable claim is outside the ambit of service. Iowever if a service fee or processing fee or
any other charge is collected in the course of transfer or assignment of a debt then the same would be
chargeable to service tax.
Service 0y an employee to t5e employer
All the services provided by the employee to the employer in the ordinary course of employment
are excluded from the definition of %ervice. *herefore, there will be no service tax.
%ervices, provided by employee to the employer, outside the ambit of employment for a
consideration would be a service and liable to service tax e.g. if an employee provides his
services on contract basis to an associate company of the employer because services provided on
contract basis i.e. principal+to+principal basis are not services provided in the course of
employment.
Any amount paid or payable by the employer to employee by way of compensation for pre+
mature termination is to be treated as amounts paid in relation to services provided by the
employee to the employer in the course of employment.
Any amount paid by the employer for not Joining a competing business would be liable to be
taxed being paid for providing the service of forbearance to act.
)eanin& of explanations
*xplanation 1 clarifies that ?service@ does not cover functions or duties performed by 9embers of
1arliament, %tate egislatures, 1anchayat, 9unicipalities or any other local authority, any person who
holds any post in pursuance of the provisions of the Constitution or any person as a Chairperson or a
9ember or a .irector in a body established by the Central or %tate Aovernments or local authority and
who is not deemed as an employee.
*xplanation ! clarifies that transaction in money does not include any activity in relation to money by
way of its use or conversion by cash or by any other mode, from one form, currency or denomination to
another form, currency or denomination for which a separate consideration is charged.
*xplanation " creates two exceptions, by way of a deeming provision, to the general rule that only
services provided by a person to another are taxable. As per these deeming provisions establishment of a
person located in taxable territory and establishment of such person located in non+taxable territory are
deemed to be establishments of distinct persons. 0urther an unincorporated association or body of persons
and members thereof are also deemed as separate persons.
*xplanation $ explains that a branch or an agency of a person through which the
1'
person carries out business is also an establishment of such person.

1:
"
#eclared Service
[Section ++*]
The following shall constitute declared services, namely6**
&a( renting of immovable property+
&( construction of a complex, building, civil structure or a part thereof, including a complex or
building intended for sale to a buyer, wholly or partly, except where the entire consideration is
received after issuance of completion-certificate by the competent authority.
Explanation.) For the purposes of this clause,)
(7) the expression 8competent authority8 means the 2overnment or any authority authori9ed to
issue completion certificate under any law for the time being in force and in case of
nonre:uirement of such certificate from such authority, from any of the following, namely6**
(") architect registered with the ouncil of "rchitecture constituted under the "rchitects
"ct, #$;'+ ('< of #$;'.) or
(() chartered engineer registered with the 7nstitution of =ngineers (7ndia)+ or
() licensed surveyor of the respective local body of the city or town or village or
development or planning authority+
(77) the expression 8construction8 includes additions, alterations, replacements or remodeling
of any existing civil structure+
&c( temporary transfer or permitting the use or en>oyment of any intellectual property right+
&d( development, design, programming, customisation, adaptation, upgradation, enhancement,
implementation of information technology software+
&e( agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an
act+
&f( transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of
right to use such goods+
&g( activities in relation to delivery of goods on hire purchase or any system of payment by
instalments+
&h( service portion in the execution of a wor,s contract+
&i( service portion in an activity wherein goods, being food or any other article of human
consumption or any drin, (whether or not intoxicating) is supplied in any manner as a part of the
activity.
1;
:1;
,entin& of immova0le property for Commercial purpose
,entin& [Section +(:$1;]
!t means ??allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or
partly, in an immovable property, with or without the transfer of possession or control of the said
immovable property and includes letting, leasing, licensing or other similar arrangements in respect of
immovable property@
Cases in 85ic5 service tax is not applica0le on rentin& of immova0le property
renting of vacant land, with or without a structure incidental to its use, relating to agriculture.
renting of residential dwelling for use as residence
renting out of any property by the Ceserve >anB of !ndia
renting out of any property by a Aovernment or a local authority to a non+business entity.
4dditional exemptions
*hreshold level exemption up to Cs. 1, laBh.
Centing of precincts of a religious place meant for general public.
Centing of a hotel, inn, guest house, club, campsite or other commercial places meant for
residential or lodging purposes, having declared tariff of a room below rupees one thousand per
day or e<uivalent.
Centing to an exempt educational institution
Taxa0ility
Centing of all other immovable properties would be taxable unless covered by any exemption referred
above.
As per definition allowing or permitting usage of immovable property, without transferring possession of
such property, is also renting of immoveable property. *herefore, Ialls, rooms etc. let out by
hotelsErestaurants for a consideration for organi7ing social, official or business or cultural functions are
covered within the scope of renting of immovable property and would be taxable if other elements of
taxability are present.
19
Illustrations
Sr.
%o.
Transaction Taxa0ility
1. Centing of property to an educational
body
(xempted if provided to an educational institution
for the purpose of education which is exempt from
the levy of service tax6 to others will be taxable.
!. Centing of vacant land for animal
husbandry or floriculture
Not chargeable to service tax as it is covered in the
negative list entry relating to agriculture
". 1ermitting use of immoveable property
for placing vendingE dispensing
machines
Chargeable to service tax as permitting usage of
space is covered in the definition of renting
$. Allowing erection of a communication
tower on a building for consideration.
Chargeable to service tax as permitting usage of
space is covered in the definition of renting
(. Centing of land or building for
entertainment or sports
Chargeable to service tax as there is no specific
exemption.
+. Centing of theatres by owners to film
distributors "including under a profit+
sharing arrangement$
Chargeable to service tax as the arrangement
amounts to renting of immovable property.
:!;
Construction of a complex- 0uildin&- civil structure or a part t5ereof- includin& a complex or
0uildin& intended for sale to a 0uyer- 85olly or partly- except 85ere t5e entire consideration is
received after issuance of certificate of completion 0y a competent aut5ority.
*his entry covers the services provided by builders or developers or any other person, where building,
complexes, civil structure or part thereof are offered for sale but the payment for such building or
complex or part thereof is received before the issuance of completion certificate by a competent authority.
!n certain %tates re<uirement of completion certificate are waived of for certain specified types of
buildings. !n terms of (xplanation to clause "b$ of section ''( in such cases the completion certificate
issued by an architect or a chartered engineer or a licensed surveyor of the respective local body or
development or planning authority would be treated as completion certificate for the purposes of
determining chargeability of service tax.
@uestion - A5at 8ould 0e t5e lia0ility to pay service tax on flatsB5ouses a&reed to 0e &iven 0y
0uilderBdeveloper to t5e land o8ner to8ards t5e land Bdevelopment ri&5ts and to ot5er 0uyers. If
paya0le- 5o8 8ould t5e services 0e valued>
4ns8er
!n the given case there are two important identifiable transactions
"a$ sale of land by the landowner which is not a taxable service6 and
"b$ construction service provided by the builderEdeveloper.
2,
*he builderEdeveloper receives consideration for the construction service provided by him, from two
categories of service receivers) "a$ from landowner) in the form of landEdevelopment rights6 and "b$ from
other buyers) normally in cash.
0or the first transaction i.e. transfer of development rights to the builder, value of service will be the value
of land. %ince development rights of the land are received by the builderE developer before the issuance of
completion certificate, service tax would be re<uired to be paid by builderE developers even for the flats
given to the land owner.
!n the second transaction, service tax is attracted only if any consideration is received by the builderE
developer from the buyer before obtaining completion certificate.
@uestion A5at 8ill 0e service tax lia0ility 85ere a residential society &ets construction 8or7 done
on its o8n>
4ns8er - Ce+construction undertaBen by a building society on its own by directly engaging a
builderEdeveloper will be chargeable to service tax as worBs contract service.
@uestion - A5at 8ould 0e t5e service tax lia0ility on uild- Cperate - Transfer :CT; ProDects>
4ns8er - #nder >L* proJects, *here are three parties i.e. "1$ Aovernment "2$ Concessionaire "who may
be a developerEbuilder himself or may be independent$6 and "-$ user.
Aovernment by an agreement transfers the ?right to use@ andEor ?right to develop@ for a period specified,
usually thirty years or near about, to the concessionaire. !n the entire proJects transactions taBe place at
three different levels 5
a. >etween Aovernment and Concessionaire
b. >etween Concessionaire and the contractor
c. >etween Concessionaire and the user
At the first level, Aovernment transfers the right to use andEor develop the land, to the concessionaire, for
a specific period, for construction of a building etc. for furtherance of business or commerce "partly or
wholly$. Consideration for this taxable service may be in the nature of upfront lease amount or annual
charges paid by the concessionaire to the Aovernment. %uch services provided by the GAovernment@
would be in the negative list entry contained in clause "a$ of section ''. unless these services <ualify as
?support services provided to business entities@ under exception sub+clause "iv$ to clause "a$ of section
''.. ?%upport services have been defined in clause "&9$ of section '=> as ?infrastructural, operational,
administrative, logistic marBeting or any other support of any Bind comprising functions that entities carry
out in the ordinary course of operations themselves but may obtain as services by outsourcing from others
for any reason whatsoever and shall include advertisement and promotion, construction or worBs contract,
renting of movable or immovable property, security, testing and analysis@. !f the nature of concession is
such that it amounts to ?renting of immovable property service@ then the same would be taxable. *he tax
is re<uired to be paid by the government as there is no reverse charge for services relating to renting of
immovable property.
!n this model, though the concessionaire is undertaBing construction of a building etc. to be used wholly
or partly for furtherance of business or commerce, he will not be treated as a service provider since such
construction has been undertaBen by him on his own account and he remains the owner of the building
during the concession period. Iowever, if an independent contractor is engaged by a concessionaire for
21
undertaBing construction for him, then service tax is payable on the construction service provided by the
contractor to the concessionaire.
At the third level, the concessionaire enters into agreement with several users for commercially exploiting
the building or road developedEconstructed by him, during the lease period e.g. the user may be paying a
rent or premium on the sub+lease for temporary use of immovable property or part thereof, to the
concessionaire. At this third level, concessionaire is the service provider and user of the building is the
service receiver. %ervice tax would be leviable on the taxable services provided by the concessionaire to
the users if the ingredients of taxability are present. Iere it may be noted that the toll fee for use of road
or bridges is covered in negative list.
@uestion - If t5e 0uilder instead of receivin& consideration for t5e sale of an apartment receives a
fixed deposit- 85ic5 it converts after t5e completion of t5e 0uildin& into sales consideration- 8ill it
amount to receivin& any amount 0efore t5e completion of service.
4ns8er !n this transaction, actually the builder has received consideration for the sale of apartment in
the name of advance and after the completion of flat, he is going to convert this amount into sale
consideration. 4hole transaction is only a coloured device.
!n the given case, the amount of deposit and interest accrued thereon will form consideration for the
transaction and it will be subJect to service tax.
:";
Temporary transfer or permittin& t5e use or enDoyment of any intellectual property ri&5t
A5at is <Intellectual property ri&5t>
*his term has not been defined in the Act. !n normal trade parlance it includes 5
"1$ Copyright "2$ 1atents "-$ *rademarBs "&$ .esigns
"=$ Any other similar right to an intangible property
%ince there is no condition regarding the law under which an intellectual right should be registered,
temporary transfer of a patent registered outside !ndia would also be covered in this entry. Iowever, it
will become taxable only if the place of provision of service of temporary transfer of intellectual property
right is in taxable territory.
9ega exemption Notification No. 2=E2,12 dated 2,E,'E2,12 provides that ++
*emporary transfer of a copyright relating to original literary, dramatic, musical, artistic worB or
cinematographic film falling under clause "a$ and "b$ of sub+section "1$ of section 1- of the
!ndian Copyright Act, 19=: is exempt.
A music company would be re<uired to pay service tax as the copyright relating to sound
recording falls under clause "c$ of sub+section "1$ of section 1- of the !ndian Copyright Act,
19=:.
*he copyright relating to original worB of composing song falls under clause "a$ of subsection "1$
of section 1- of the !ndian Copyright Act, 19=: which is exempt from service tax.
22
%imilarly an author having copy right of a booB written by him would not be re<uired to pay
service tax on royalty amount received from the publisher for publishing the booB. A person
having the copyright of a cinematographic film would also not be re<uired to pay service tax on
the amount received from the film exhibitors for exhibiting the cinematographic film in cinema
theatres.
No service tax is payable on temporary transfer of copyright in relation to cinematographic films.
:$;
#evelopment- desi&n- pro&rammin&- customi6ation- adaptation- up &radation- en5ancement-
implementation of information tec5nolo&y soft8are
*he term ?information technology software@ has been defined in section '=> of the Act as ?any
representation of instructions, data, sound or image, including source code and obJect code, recorded in a
machine readable form, and capable of being manipulated or providing interactivity to a user, by means
of a computer or an automatic data processing machine or any other device or e<uipment@.
Service Tax on Pre-pac7a&ed or canned soft8are>
!t is a settled position of law that pre+pacBaged or canned software which is put on a media is in the nature
of goods D%upreme Court Judgment in case of *ata Consultancy %ervices vs %tate of Andhra 1radesh
D2,,2"1:;$ (* 22"%C$. %ale of pre+pacBaged or canned software is, therefore, in the nature of sale of
goods and is not covered in this entry.
As per the definition of ?service@ as contained in clause "&&$ of section '=">$ only those
transactions are outside the ambit of service which constitute merely a transfer of title in goods or
such transfers which are deemed to be a sale within the meaning of Clause 29"A$ of article -'' of
the Constitution. *he relevant category of deemed sale is transfer of right to use goods contained
in sub+clause "d$ of clause "29A$ of the Constitution.
?*ransfer of right to use goods@ is deemed to be a sale under Article -''"29A$ of the Constitution
of !ndia and transfer of goods by way of hiring, leasing, licensing or any such manner without
transfer of right to use such goods is a declared service under clause "f$ of section ''(.
*ransfer of right to use goods is a well+recogni7ed constitutional and legal concept. (very
transfer of goods on lease, license or hiring basis does not result in transfer of right to use goods.
A license to use software which does not involve the transfer of ?right to use@ would neither be a
transfer of title in goods nor a deemed sale of goods. %uch an activity would fall in the ambit of
definition of ?service@ and also in the declared service category specified in clause "f$ of section
''(.
*herefore, if a pre+pacBaged or canned software is not sold but is transferred under a license to
use such software, the terms and conditions of the license to use such software would have to be
seen to come to the conclusion as to whether the license to use pacBaged software involves
transfer of ?right to use@ such software in the sense the phrase has been used in sub+clause "d$ of
article -''"29A$ of the Constitution.
2-
!n case a license to use pre+pacBaged software imposes restrictions on the usage of such licenses,
which interfere with the free enJoyment of the software, then such license would not result in
transfer of right to use the software within the meaning of Clause 29"A$ of Article -'' of the
Constitution. (very condition imposed in this regard will not maBe it liable to service tax. *he
condition should be such as restraints the right to free enJoyment on the same lines as a person
who has otherwise purchased goods is able to have. Any restriction of this Bind on transfer of
software so licensed would tantamount to such a restraint.
4hether the license to use software is in the paper form or in electronic form maBes no material
difference to the transaction.
Iowever, the manner in which software is transferred maBes material difference to the nature of
transaction. !f the software is put on the media liBe computer disBs or even embedded on a
computer before the sale the same would be treated as goods.
!f software or any programme contained is delivered online or is down loaded on the internet the
same would not be treated as goods as software as the Judgment of the %upreme Court in *ata
Consultancy %ervice case is applicable only in case the pre+pacBaged software is put on a media
before sale.
.elivery of content online would also not amount to a transaction in goods as the content has not
been put on a media before sale. .elivery of content online for consideration would, therefore,
amount to provision of service.
4dvice- consultancy and assistance on matters relatin& to information tec5nolo&y
Advice, consultancy and assistance on matters relating to information technology are not covered under
this category of declared services. Iowever, such services provided by one person for another for a
consideration becomes taxable if other elements of taxability are satisfied.

Customised soft8are delivered on C# or ot5er media
%uch a transaction would be in the nature of composite transaction involving an element of provision of
service, in as much as the contract is for design and development of software and also an element of
transfer of title in goods, in as much as the property in C. containing the developed software is
transferred to the client. Iowever, the C. remains only a media to transmit or deliver the outcome of
which is essentially and pre+dominantly a contract of service.
*herefore, such a transaction would not be excluded from the ambit of the definition of ?service@ as the
transaction does not involve ?only@ transfer of title in goods and dominant nature of the transaction is that
of provision of service.
:(;
4ctivities in relation to delivery of &oods on leaseB 5ire purc5ase or any system of payment 0y
installments

2&
%ection 2 of the Iire 1urchase Act, 19:2 defines a Ghire purchase agreementH as ?an agreement under
which goods are let out on hire and under which the hirer has the option to purchase them in accordance
with the terms of the agreement and includes an agreement under which+
"i$ possession of goods is delivered by the owner thereof to a person on condition that such person
pays the agreed amount in periodical installments, and
"ii$ the property in the goods is to pass to such person on the payment of the last of such
installments, and
"iii$ such person has a right to terminate the agreement at any time before the property so passes.@
*he delivery of goods on hire purchase or any system of payment on installment is not chargeable to
service tax because as per Article -''"29A$ of the Constitution of !ndia such delivery of goods is deemed
to be a sale of goods. Iowever activities or services provided in relation to such delivery of goods are
covered in this declared list entry.

Eirin& a&reement and a Eire-Purc5ase a&reement>
!n a mere hiring agreement the hirer has no option to purchase the goods hired and the risBs and rewards
incidental to ownership of goods remain with the owner and are not transferred to the hirer. !n a hire+
purchase agreement the hirer has an option or an obligation to purchase goods.
Taxa0ility of Eire-purc5ase or finance lease a&reements
#nder ?0inancial leases@ the lessee pays maintenance costs and taxes and has the option of purchasing the
lease end. %uch arrangements resemble a hire+purchase agreement and would fall under the said ?deemed
sale@ category.
!t has been held by %upreme court in the case of "ssociation ?f 0easing @ Financial /ervice ompanies
!s Anion ?f 7ndia B'<#< ('<) /.T.C. %#; (/..)D that in e<uipment leasingEhire+purchase agreements there
are two different and distinct transactions, vi7., the financing transaction and the e<uipment leasingEhire+
purchase transaction and that the financing transaction, consideration for which was represented by way
of interest or other charges liBe lease management fee, processing fee, documentation charges and
administrative fees, which is chargeable to service tax. *herefore, such financial services that accompany
a hire+purchase agreement fall in the ambit of this entry of declared services.
2alue if service
!n terms of the exemption notification relating to such activities, service tax is leviable only on 1,K of the
amount representing interest plus other charges explicitly charged as mentioned above.
:+;
Transfer of &oods 0y 8ay of 5irin&- leasin&- licensin& or any suc5 manner 8it5out transfer of ri&5t
to use suc5 &oods
)eanin& and scope of t5e p5rase <transfer of ri&5t to use suc5 &oods
*ransfer of right to use goods is a well recogni7ed constitutional and legal concept. (very transfer of
goods on lease, license or hiring basis does not result in transfer of right to use goods. ?*ransfer of right
2=
of goods@ involves transfer of possession and effective control over such goods in terms of the Judgment
of the %upreme Court in the case of %tate of "ndhra .radesh vs Cashtriya 7spat Eigam 0td BFudgment
dated 6G'G'<<' in ivil "ppeal no. &# of #$$#D. *ransfer of custody along with permission to use or enJoy
such goods, per se, does not lead to transfer of possession and effective control.
*he test laid down by the %upreme Court in the case of (harat /anchar Eigam 0imited vs Anion of 7ndia
B'<<6(')/TC#6#(/)D to determine whether a transaction involves transfer of right to use goods, which
has been followed by the %upreme Court and various Iigh Courts, is as follows)
*here must be goods available for delivery6
*here must be a consensus ad idem as to the identity of the goods6
*he transferee should have legal right to use the goods 5 conse<uently all legal conse<uences of
such use including any permissions or licenses re<uired therefore should be available to the
transferee6
0or the period during which the transferee has such legal right , it has to be the exclusion to the
transferor 5 this is the necessary concomitant of the plain language of the statute, vi7., a ?transfer of
the right to use@ and not merely a license to use the goods6
Iaving transferred, the owner cannot again transfer the same right to others.
4hether a transaction amounts to transfer of right or not cannot be determined with reference to a
particular word or clause in the agreement. *he agreement has to be read as a whole, to determine the
nature of the transaction.
Illustrations
%o. %ature of transaction A5et5er transaction involves transfer of ri&5t to use
1. A car is given in hire by a person
to a company along with a driver
on payment of charges on per
monthE mileage basis
Cight to use is not transferred as the car owner retains the
permissions and licenses relating to the cab. *herefore
possession and effective control remains with the owner
".elhi Iigh Court 2udgment in the case of !nternational
*ravel Iouse in %ales *ax Appeal no 1,E2,,9 refers$.
*he service is, therefore covered in the declared list
entry.
!. %upply of e<uipment liBe
excavators, wheel loaders, dump
trucBs, cranes, etc for use in a
particular proJect where the
person to whom such e<uipment
is supplied is subJect to such
terms and conditions in the
contract relating to the manner of
use of such e<uipment, return of
such e<uipment after a specified
time, maintenance and upBeep of
such e<uipment.
*he transaction will not involve transfer of right to use
such e<uipment as in terms of the agreement the
possession and effective control over such e<uipment has
not been transferred even though the custody may have
been transferred along with permission to use such
e<uipment. *he receiver is not free to use such
e<uipment in any manner as he liBes and conditions have
been imposed on use and control of such e<uipment.
". Iiring of banB locBers *he transaction does not involve the right to use goods as
possession of the locBers is not transferred to the hirer
2'
even though the contents of the locBer would be in the
possession of the hirer."refer to Andhra 1radesh Iigh
Court 2udgment in the case of %tate >anB of !ndia /s
%tate of Andhra 1radesh$
$. Iiring out of vehicles where it is
the responsibility of the owner to
abide by all the laws relating to
motor vehicles.
No transfer of right to use goods as effective control and
possession is not transferred "Allahabad Iigh Court
Judgment in AhuJa Aoods Agency vs %tate of #1$
(. Iiring of audio visual e<uipment
where risB is of the owner
No transfer of right to use goods as effective control and
possession is not transferred
*his is only an illustrative list to demonstrate how courts have interpreted terms and conditions of
various types of contracts to see if a transaction involve transfer of right to use goods. *he nature of
each transaction has to be examined in totality Beeping in view all the terms and conditions of an
agreement relating to such transaction.

:/;
4&reein& to t5e o0li&ation to refrain from an act- or to tolerate an act or a situation- or to do an act
#nder this entry, any of the following activities if carried out by a person for another for consideration
would be treated as provision of service ++
Agreeing to the obligation to refrain from an act.
Agreeing to the obligation to tolerate an act or a situation.
Agreeing to the obligation to do an act.
%on-compete a&reements
#nder a non+compete agreement one party agrees, for consideration, not to compete with the other in any
specified products, services, geographical location or in any other manner. %uch action on the part of one
person is also an activity for consideration and it is covered by the declared services.
:1;
Service portion in execution of a 8or7s contract
Aor7s contract [Section +(:($;]
2:
-6or7s contract- means a contract wherein transfer of property in goods involved in the execution of
such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out
construction, erection, commissioning, installation, completion, fitting out, repair, maintenance,
renovation, alteration of any moveable or immovable property or for carrying out any other similar
activity or a part thereof in relation to such property+
!n >%N?s case D2,,'"2$ %*C 1'1 "%C$F, the apex court declared that a worBs contract can be
segregated into a contract of sale of goods and contract of provision of service. !t means every worBs
contract involves an element of sale of goods and provision of service.
!n terms of Article -'' "29A$ of the Constitution of !ndia transfer of property in goods involved
in execution of worBs contract is deemed to be a sale of such goods.
%ervice tax is attracted only the value of service, determined in accordance with Cule 2A of the
/aluation Cules.
1ure labour contracts are not worBs contracts and would be leviable to service tax liBe any other
service and on full value.
0ollowing are the examples of worBs contract in which service portion of the gross value is chargeable to
service tax provided property in goods is transferred in the course of execution of such a contract 5
Contracts for repair or maintenance of moveable properties
Contracts for construction of a pipe line or conduit
Contracts for erection commissioning or installation of plant, machinery, e<uipment or structures,
whether prefabricated or otherwise,
Contracts for painting of a building, repair of a building, renovation of a building, wall tiling,
flooring etc.

:3;
Service portion in an activity 85erein &oods- 0ein& food or any ot5er article of 5uman consumption
or any drin7 :85et5er or not intoxicatin&; is supplied in any manner as part of t5e activity
4ctivities covered in t5is declared entry
*he following activities are illustration of activities covered in this entry+
%upply of food or drinBs in a restaurant6
%upply of foods and drinBs by an outdoor caterer.
Taxa0ility
!n terms of article -''"29A$ of the Constitution of !ndia supply of any goods, being food or any other
article of human consumption or any drinB "whether or not intoxicating$ in any manner as part of a
service for cash, deferred payment or other valuable consideration is deemed to be a sale of such goods.
%uch a service therefore cannot be treated as service to the extent of the value of goods so supplied. *he
remaining portion however constitutes a service.
2aluation of Service
2;
/alue of service on which service tax is to be paid shall be determined in accordance with Cule 2C of the
/aluation Cules.
,estaurants not covered 5ere
>elow the threshold exemption limit of Cs. 1, lacs
%ervices provided in relation to serving of food or beverages by a restaurant, eating Joint or a
mess, other than those having the facility of air+conditioning or central airheating in any part of the
establishment, at any time during the year,

29
$
%e&ative 'ist
[Section ++#]

!n terms of %ection ''> of the Act, service tax will be leviable on all services provided in the taxable
territory by a person to another for a consideration other than the seventeen services specified in the
negative list.
1
Section 668. "egative list of services.
The negative list shall comprise of the following services, namely6**
&a( services by 2overnment or a local authority excluding the following services to the extent they are
not covered elsewhere)
(i) services by the 1epartment of .osts by way of speed post, express parcel post, life insurance
and agency services provided to a person other than 2overnment+
(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an
airport+
(iii) transport of goods or passengers+ or
(iv) support services, other than services covered under clauses (i) to (iii) above, provided to
business entities+
&( services by the Ceserve (an, of 7ndia+
&c( services by a foreign diplomatic mission located in 7ndia+
&d( services relating to agriculture or agricultural produce by way of)
(i) agricultural operations directly related to production of any agricultural produce including
cultivation, harvesting, threshing, plant protection or seed testing+
(ii) supply of farm labour+
(iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting,
drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bul,
pac,aging and such li,e operations which do not alter the essential characteristics of
agricultural produce but ma,e it only mar,etable for the primary mar,et+
(iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to
its use+
(v) loading, unloading, pac,ing, storage or warehousing of agricultural produce+
(vi) agricultural extension services+
(vii) services by any "gricultural .roduce -ar,eting ommittee or (oard or services provided by
a commission agent for sale or purchase of agricultural produce+
&e( trading of goods+
1
Inserted vide Finance Act, 2012 w.e.f. 1.7.2012
-,
&f( any process amounting to manufacture or production of goods+
&g( selling of space or time slots for advertisements other than advertisements broadcast by radio or
television+
&h( service by way of access to a road or a bridge on payment of toll charges+
&i( betting, gambling or lottery+
&9( admission to entertainment events or access to amusement facilities+
&7( transmission or distribution of electricity by an electricity transmission or distribution utility+
&l( services by way of)
(i) pre-school education and education up to higher secondary school or e:uivalent+
(ii) education as a part of a curriculum for obtaining a :ualification recognised by any law for the
time being in force+
(iii) education as a part of an approved vocational education course+
&3( services by way of renting of residential dwelling for use as residence+
&n( services by way of)
(i) extending deposits, loans or advances in so far as the consideration is represented by way of
interest or discount+
(ii) inter se sale or purchase of foreign currency amongst ban,s or authorised dealers of foreign
exchange or amongst ban,s and such dealers+
&o( service of transportation of passengers, with or without accompanied belongings, by)
(i) a stage carriage+
(ii) railways in a class other than)
(") first class+ or
(() an airconditioned coach+
(iii) metro, monorail or tramway+
(iv) inland waterways+
(v) public transport, other than predominantly for tourism purpose, in a vessel, between places
located in 7ndia+ and
(vi) metered cabs, radio taxis or auto ric,shaws+
&p( services by way of transportation of goods)
(i) by road except the services of)
(") a goods transportation agency+ or
(() a courier agency+
(ii) by an aircraft or a vessel from a place outside 7ndia upto the customs station of clearance in
7ndia + or
(iii) by inland waterways+
&:( funeral, burial, crematorium or mortuary services including transportation of the deceased.D

-1
:1;
Services provided 0y =overnment or local aut5ority
Taxa0ility of t5e services provided 0y =overnment or local aut5ority
9ost services provided by the Central or %tate Aovernment or local authorities are in the negative list
except the following)
a$ services provided by the .epartment of 1osts by way of speed post, express parcel post, life
insurance, and agency services carried out on payment of commission on non government
business6
b$ services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport6
c$ transport of goods andEor passengers6
d$ support services, other than those covered by clauses "a$ to "c$ above, to business entities.
!n addition to these, any other service covered in the negative list and provided by the Aovernment or
local authority will also not be liable to service tax.

Taxa0ility of t5e services provided 0y post office
*axable services Non *axable services
a. %peed post,
b. (xpress parcel post,
c. ife insurance, and
d. Agency services carried out on payment
of commission on non govern3ent
business e.g. distribution of mutual
funds, bonds, collection of bills etc
a. >asic mail services Bnown as postal
services such as post card, inland letter,
booB post, registered post provided
exclusively by the .epartment of 1osts to
meet the universal postal obligations.
b. *ransfer of money through money
orders,
c. operation of savings accounts,
d. issue of postal orders,
e. pension payments and other such
services.
A5o s5all 0e lia0le to pay service tax>
,eceiver of Service =overnment #epartment
All s+pport services except renting of immovable
property to business entities. *herefore,
.epartment providing service need not be
registered.
Centing of immovable property to business
entities. *herefore, .epartment providing service
shall be registered.
-s+pport services- means infrastructural, operational, administrative, logistic, mar,eting or any
-2
other support of any ,ind comprising functions that entities carry out in ordinary course of
operations themselves but may obtain as services by outsourcing from others for any reason
whatsoever and shall include advertisement and promotion, construction or wor,s contract, renting
of immovable property, security, testing and analysis+ B/ection 6H((%$)D
*hus services which are provided by government in terms of their sovereign right to business entities,
and which are not substitutable in any manner by any private entity, are not support services e.g. grant
of mining or licensing rights or audit of government entities established by a special law, which are
re<uired to be audited by CAA under section 1; of the Comptroller and Auditor+Aeneral@s ".uties,
1owers and Conditions of %ervice$ Act, 19:1 "such services are performed by CAA under the statue
and cannot be performed by the business entity themselves and thus do not constitute support
services.$
Sec+rit! Services # %ervices provided by police or government security agencies are covered within
the definition of support service as similar services can be provided by private entities.
:!;
Services provided 0y ,eserve an7 of India
All services provided by the Ceserve >anB of !ndia are in the negative list. >ut there is no such exemption
in relation to services provided to C>!. !t means even services provided by the >anBs to C>! are taxable
unless exempted otherwise.
:";
Services 0y a forei&n diplomatic mission located in India
Any service that is provided by a diplomatic mission of any country located in !ndia is in the negative list.
*his entry covers only foreign diplomatic missions and not every multinational organi7ation.
:$;
Services relatin& to a&riculture or a&ricultural produce.
)eanin& of <a&riculture
?Agriculture@ has been defined in the Act as cultivation of plants and rearing or breeding of animals and
other species of life forms for foods, fibre, fuel, raw materials or other similar products but does not
include rearing of horses. D%ection '=>"-$F
Activities liBe breeding of fish "pisciculture$, rearing of silB worms "sericulture$, cultivation of
ornamental flowers "floriculture$ and horticulture, forestry are also covered in the definition of
agricultureM
4&ricultural produce [Section +(:(;]
--
4&ricultural produce Processed Food
NAgricultural produceN means any produce of
agriculture on which either no further processing
is done or such processing is done as is usually
done by a cultivator or producer which does not
alter its essential characteristics but maBes it
marBetable for primary marBet6
!t also includes specified processes in the
definition liBe tending, pruning, grading, sorting
etc. which may be carried out at the farm or
elsewhere as long as they do not alter the
essential characteristics.
1lantation crops liBe rubber, tea or coffee be also
covered under agricultural produce.
!n terms of the definition of agricultural produce,
only such processing should be carried out as is
usually done by cultivator producers which does
not alter its essential characteristics but maBes it
marBetable for primary marBet. 1otato chips of
tomato Betchup are manufactured through
processes which alter the essential characteristic
of farm produce "potatoes and tomatoes in this
case$. *herefore, such products cannot be
considered to be agricultural produce
S5ellin& of paddy or cleanin& of 85eat carried out outside t5e farm
%ub+clause "iii$ of (ntry & in Negative list includes ?such liBe operations which do not alter the essential
characteristic of agricultural produce@. *herefore, activities liBe the processes carried out in agricultural
farm would also be covered if the same are performed outside the agricultural farm provided such
processes do not alter the essential characteristics of agricultural produce but only maBe it marBetable in
the primary marBet. Cleaning of wheat would be covered in the negative list entry even if the same is
done outside the farm.
%helling of paddy would not be covered in the negative list entry relating to agriculture as this process is
never done on a farm but in a rice sheller normally located away from the farm. Iowever, if shelling is
done by way of a service i.e. on Job worB then the same would be covered under the exemption relating to
?carrying out of intermediate production process as Job worB in relation to agriculture@.
*he processes of grinding, sterili7ing, extraction pacBaging in retail pacBs of agricultural products, which
maBe the agricultural products marBetable in retail marBet, are not covered in the negative list
4&ricultural extension services
Agricultural extension services have been defined in section '=> of the Act as application of scientific
research and Bnowledge to agricultural practices through farmer education or training. D%ection '=>"&$F
Services of 4&ricultural Produce )ar7etin& Committee or oard
Agricultural 1roduce 9arBeting Committees or >oards are set up under a %tate aw for purpose of
regulating the marBeting of agricultural produce. D%ection '=>"'$F
%uch marBeting committees or boards have been set up in most of the %tates and provide a variety of
support services for facilitating the marBeting of agricultural produce by provision of facilities and
amenities liBe, sheds, water, light, electricity, grading facilities etc. *hey also taBe measures for
prevention of sale or purchase of agricultural produce below the minimum support price. A19Cs collect
marBet fees, license fees, rents etc. %ervices provided by such Agricultural 1roduce 9arBeting Committee
or >oard are covered in the negative list. Iowever any service provided by such bodies which is not
-&
directly related to agriculture or agricultural produce will be liable to tax e.g. renting of shops or other
property.
:(;
Tradin& of &oods
9=oods9 means every Bind of movable property other than actionable claim and money6 and includes
securities, growing crops, grass, and things attached to or forming part of the land which are agreed to
be severed before sale or under the contract of sale6 Dsection '=>"2=$F
*he services provided by commission agent or a clearing and forwarding agent are not in the
nature of trading of goods. *hese are auxiliary for trading of goods. !n accordance with the provision
of clause "1$ of section ''0 reference to a service does not include reference to a service used for
providing such service. *herefore, such services are taxable.
0orward contracts would be covered under trading of goods as these are contracts which involve
transfer of title in goods on a future date at a pre+determined price.
Auxiliary services relating to future contracts or commodity futures are not covered in the
negative list
:+;
Processes amountin& to manufacture or production of &oods
!t means a process on which duties of excise are leviable under section - of the Central (xcise Act, 19&&
"1 of 19&&.$ or any process amounting to manufacture of alcoholic li<uors for human consumption,
opium, !ndian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under
any %tate Act for the time being in force6 [Section +(:$.;]
*his entry, therefore, covers manufacturing activity carried out on contract or Job worB basis, which does
not involve transfer of title in goods, provided duties of excise are leviable on such processes under the
Central (xcise Act, 19&& or any of the %tate Acts.
Process A5et5er lia0le to service tax
!f any process is carried out by a person for another for consideration, it is liable to service tax unless it
amount to manufacture. 0ollowing process are covered in 9ega (xemption Notification i.e. not liable to
service tax 5
".. Carrying out an intermediate production process as Job worB in relation to +
"a$ agriculture, printing or textile processing6
"b$ cut and polished diamonds and gemstones6 or plain and studded Jewellery of gold and
other precious metals, falling under Chapter :1 of the Central (xcise *ariff Act ,19;=
"= of 19;'$6
-=
"c$ any goods on which appropriate duty is payable by the principal manufacturer6 or
"d$ processes of electroplating, 7inc plating, anodi7ing, heat treatment, powder coating,
painting including spray painting or auto blacB, during the course of manufacture
of parts of cycles or sewing machines upto an aggregate value of taxable service of the
specified processes of one hundred and fifty laBh rupees in a financial year subJect to
the condition that such aggregate value had not exceeded one hundred and fifty laBh
rupees during the preceding financial year6

:/;
Sellin& of space or time slots for advertisements ot5er t5an
advertisements 0roadcast 0y radio or television
<4dvertisement
!t means any form of presentation for promotion of, or bringing awareness about, any event, idea,
immovable property, person, service, goods or actionable claim through newspaper, television, radio or
any other means but does not include any presentation made in person. D%ection '=>"2$F
1lease note that the advertising agency may provide variety of services to its clients such as designing,
preparation of advertisement, organising road shows, public relations etc. Lut of various services
exemption is available only for sale of space and time slot, other than radio and television. Cest all
services of advertising agency are taxable.
!f any agency is engaged purely in canvassing the advertisement on commission basis, it will also be
subJect to tax.
Taxa0ility of composite services e.&. sale of space and preparation of material
!t will be a case of bundled services. !n such cases, taxability is to be determined in accordance with the
provisions of %ection ''0. >undled services means provision of one type of service with another type or
types of services. According to ++
!f such services are bundled in the ordinary course of business then the bundle of services will be
treated as consisting entirely of such service which determines the dominant nature of such a bundle.
!f such services are not bundled in the ordinary course of business then the bundle of services will
be treated as consisting entirely of such service which attracts the highest liability of service tax.

Sale of space or time Taxa0ility

Taxa0le %on-taxa0le
%ale of space or time for advertisement to be
broadcast on radio or television media
%ale of space for advertisement in print
%ale of time slot by a broadcasting organi7ation. %ale of space for advertisement in bill boards,
public places "including stadia$, buildings,
conveyances, cell phones, automated teller
-'
machines, internet
Aerial advertising
:1;
4ccess to a road or a 0rid&e on payment of toll c5ar&es
*his exemption is applicable all roads and bridges on which toll charges are payable.
1lease note that service tax is not attracted on the toll charges collected but where an agency is engaged
for collecting the toll charges, then services of such agency are liable to service tax. !t is because of the
fact that section ''0 provides that reference to service does not include reference to services which are
re<uired for providing such services.

:3;
ettin&- &am0lin& or lottery
>etting or gambling means putting on staBe something of value, particularly money, with consciousness
of risB and hope of gain on the outcome of a game or a contest, whose result may be determined by
chance or accident, or on the liBelihood of anything occurring or not occurring. D%ection '=>"1=$F
1lease note that the auxiliary services that are used for organi7ing or promoting betting or gambling
events are not covered in this entry. *herefore, by virtue of section ''0, reference to service does not
include services re<uired for providing these services

-:
:1.;
*ntry to *ntertainment *vents and 4ccess to 4musement Facilities
A3+se3ent facilit! means a facility where fun or recreation is provided by means of rides, gaming
devices or bowling alleys in amusement parBs, amusement arcades, water parBs, theme parBs or such
other places but does not include a place within such facility where other services are provided@. D%ection
'=>"9$F
Entertain3ent event is an event or a performance which is intended to provide recreation, pastime, fun or
enJoyment, such as exhibition of cinematographic films, circus, concerts, sporting events, fairs, pageants,
award functions, dance performances, musical performances, theatrical performances including cultural
programs, drama, ballets or any such event or programme@. D%ection '=>"2&$F
*he words used in the definition are ?theatrical performances@ and not ?performances in theatres@. A
cultural programme, drama or a ballet preformed in the open does not cease to be a theatrical performance
provided it is performed in the manner it is performed in a theatre, i.e. before an audience.
A standalone amusement ride in a mall is also a facility in which fun or recreation is provided by means
of a ride. Access to such amusement ride on payment of charges would be covered in the negative list.
*his entry includes entry for cinematographic films including a video parlors.
Any club is not covered within the definition of amusement facility or entertainment facility.
%ervices of event management company for organi7ing such events are not covered in negative list
because of section ''0 which states that reference to service does not include reference to services
re<uired for providing such services.

:11;
Transmission or distri0ution of electricity
*lectricity transmission or distri0ution utility
An ?electricity transmission or distribution utility@ includes the following 5
the Central (lectricity Authority
a %tate (lectricity >oard
the Central *ransmission #tility "C*#$
a %tate *ransmission #tility "%*#$ notified under the (lectricity Act, 2,,- "-' of 2,,-$
a distribution or transmission licensee licensed under the said Act
any other entity entrusted with such function by the Central or %tate Aovernment

*he developer or the housing society would be covered under this entry only if it is entrusted with such
function by the Central or a %tate government or if it is, for such distribution, a distribution licensee
licensed under the (lectricity Act, 2,,-.
-;
:1!;
Specified services relatin& to education
*he following services relating to education are specified in the negative list 5
pre+school education and education up to higher secondary school or e<uivalent
education as a part of a prescribed curriculum for obtaining a <ualification recogni7ed by law for
the time being in force6
education as a part of an approved vocational education course
)eanin& of <education as a part of curriculum for o0tainin& a Gualification reco&ni6ed 0y la8
!t means that only such educational services are in the negative list as are related to delivery of education
as ?a part@ of the curriculum that has been prescribed for obtaining a <ualification prescribed by law. !t is
important to understand that to be in the negative list the service should be delivered as part of
curriculum. Conduct of degree courses by colleges, universities or institutions which lead grant of
<ualifications recogni7ed by law would be covered. *raining given by private coaching institutes would
not be covered as such training does not lead to grant of a recogni7ed <ualification.
4pproved vocational education courses
Approved vocational education courses have been specified in section '=> of the Act. *hese are 5
a course run by an industrial training institute or an industrial training centre affiliated to the
National Council for /ocational *raining, offering courses in designated trades as notified under
the Apprentices Act, 19'1"=2 of 19'1$
a 9odular (mployable %Bill Course, approved by the National Council of /ocational *raining,
run by a person registered with the .irectorate Aeneral of (mployment and *raining, 9inistry of
abour and (mployment, Aovernment of !ndia6
a course run by an institute affiliated to the National %Bill .evelopment Corporation set up by the
Aovernment of !ndia.
oardin& sc5ools
>oarding schools provide service of education coupled with other services liBe providing dwelling units
for residence and food. *his may be a case of bundled services if the charges for education and lodging
and boarding are inseparable. *heir taxability will be determined in terms of the principles laid down in
section ''0 of the Act. %uch services in the case of boarding schools are bundled in the ordinary course of
business. *herefore the bundle of services will be treated as consisting entirely of such service which
determines the dominant nature of such a bundle. !n this case since dominant nature is determined by the
service of education other dominant service of providing residential dwelling is also covered in a separate
entry of the negative list, the entire bundle would be treated as a negative list service.
Service to educational institutions
0ollowing auxiliary services provided to an educational institution which is providing exempt education
services, shall also be exempt from service tax ++
-9
"a$ auxiliary educational services6 or
"b$ renting of immovable property
!n other words, except for two specified services referred above, all other services provided to educational
institutions are also chargeable to service even if educational services provided by the institution are
exempt.
4uxiliary educational services
<Auxiliary educational services@ are defined in the mega notification. !n term of the definition, the
following activities are auxiliary educational services)
any services relating to imparting any sBill, Bnowledge or education, or
development of course content, or
any other Bnowledge 5 enhancement activity, whether for the students or the faculty, or
any other services which educational institutions ordinarily carry out themselves but may obtain
as outsourced services from any other person, including following services relating to)
O admission to such institution
O conduct of examination
O catering for the students under any mid+day meals scheme sponsored by Aovernment
O transportation of students, faculty or staff of such institution.
Auxiliary services offered in relation to educational services which are not exempt are also liable to
service tax.
Courses offered 0y forei&n institutions
*o be covered in the negative list a course should be recogni7ed by an !ndian law. *herefore, courses
offered by foreign institutions are subJect to service tax. >ut education upto higher secondary level, even
if provided by foreign educational body, shall be exempt.
Private tuitions
1rivate tuitions are not covered in negative list but private tutors can avail the benefit of threshold
exemption.
*ducation leadin& to dual Gualification
1rovision of dual <ualifications is in the nature of two separate services as the curriculum and fees for
each of such <ualifications are prescribed separately. %ervice in respect of each <ualification would,
therefore, be assessed separately. !f an artificial bundle of service is created by clubbing two courses
together, only one of which leads to a <ualification recogni7ed by law, then by application of the rule of
determination of taxability of a service which is not bundled in the ordinary course of business contained
in section ''0 of the Act it is liable to be treated as a course which attracts the highest liability of service
tax. Iowever incidental auxiliary courses provided by way of hobby classes or extra+curricular activities
in furtherance of overall well being will be an example of naturally bundled course. Lne relevant
consideration in such cases will be the amount of extra billing being done for the unrecogni7ed
component vi7+a+vi7 the recogni7ed course.
&,
Placement fee
%ervice tax is liable on services provided by !!*s and !!9s and such other institutions in relation to
campus recruitment services.

:1";
Services 0y 8ay of rentin& of residential d8ellin& for use as residence
*he word 4residential d;elling5 has not been defined in the Act. !t has therefore to be interpreted in terms
of the normal trade parlance as per which it is any residential accommodation, but does not include hotel,
motel, inn, guest house, camp5site, lodge, house boat, or liBe places meant for temporary stay.
4*enting5 means ??allowing, permitting or granting access, entry, occupation, usage or any such facility,
wholly or partly, in an immovable property, with or without the transfer of possession or control of the
said immovable property and includes letting, leasing, licensing or other similar arrangements in respect
of immovable property@.

!f a residential unit is rented out which is for use partly as a residence and partly for non residential
purpose liBe an office of a lawyer or the clinic of a doctor then it will become a case of bundled services
and taxability shall be determined in accordance with the provisions of section ''0.

&1
Fe8 *xamples for understandin&
!f *hen
"i$ A residential house taBen on rent is used only
or predominantly for commercial or non+
residential use.
*he renting transaction is not covered in this
negative list entry.
"ii$ !f a house is given on rent and the same is
used as a hotel or a lodge
negative list entry because the person taBing it on
rent is using it for a commercial purpose.
"iii$ Cooms in a hotel or a lodge are let
out whether or not for temporary stay
negative list entry because a hotel or a lodge is
not a residential dwelling.
"iv$ Aovernment department allots houses to its
employees and charges a license fee
%uch service would be covered in the negative list
entry relating to services provided by government
and hence non+ taxable.
"v$ 0urnished flats given on rent for temporary
stay "a few days$
%uch renting as residential dwelling for the
bonafide use of a person or his family for a
reasonable period shall be residential use6 but if
the same is given for a short stay for different
persons over a period of time the same would be
liable to tax.
:1$;
Financial sector
Services provided 0y 0an7s and ot5er financial institutions
>anBs and financial institutions provide a bou<uet of financial services relating to lending or borrowing
of money or investments in money. 0or such services invariably a variety of instruments, often complex
in nature, are used in the financial marBets. *ransactions in such instruments have to be examined on the
touchstone of definition of ?service@ given in clause "&&$ of section '=> and the list of services specified
in the negative list to see whether such transactions would be chargeable to service tax. >roadly, the
following legal provisions would have a bearing on determining the taxability of such transactions.
*he definition of ?service@ excludes activities that constitute only transactions in money or
actionable claims. ?9oney@ has been defined in clause "--$ of section '=> to include instruments
liBe che<ues, drafts, pay orders, promissory notes, letters of credit etc. *herefore activities that
are only transactions in such instruments would be outside the definition of service. *his would
include transactions in Commercial 1aper "?C1@$ and Certificate of .eposit "?C.@$ "on the
understanding of being in the nature of promissory notes$, issuance of drafts or letters of credit
etc.
(xplanation 2 to clause "&&$ of section '=> has to be Bept in mind which clarifies that transaction
in money does not include any activity in relation to money by way of its use or conversion by
&2
cash or by any other mode, from one form, currency or denomination to another form, currency
or denomination for which a separate consideration is charged. *he implications of this
explanation are that while mere transactions in money are outside the ambit of service, any
activity related to a transaction in money by way of its use or conversion by cash or by any other
mode, from one form, currency or denomination to another form, currency or denomination
would not be treated as a transaction in money if a separate consideration is charged for such an
activity. 4hile the transaction in money, per+se, would be outside the ambit of service the related
activity, for which a separate consideration is charged, would not be treated as a transaction of
money and would be chargeable to service tax if other elements of taxability are present therefore
service tax would be levied on service charges normally charged for various transactions in
money including charges for maBing drafts, letter of credit issuance charges, service charges
relating to issuance of C.sEC1s etc.
Activities that constitute only transactions in ?goods@ are also excluded from the definition of
service. ?Aoods@ have been defined in clause "2=$ of section '= > to include ?securities@.
.efinition of ?securities include ?derivatives@. *ransactions in instruments liBe interest rate swaps
and foreign exchange swaps would be excluded from the definition of ?service@ as such
instruments are derivatives, being securities, based on contracts of difference. %ince only transfer
of title in securities is excluded from the definition of ?service@ any attendant service charges or
fees would be chargeable to service tax.
0urther services by way of extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount.
Services 0y 8ay of extendin& deposits- loans or advances in so far as t5e consideration is
represented 0y 8ay of interest or discount
*he negative list entry covers any such service wherein moneys due are allowed to be used or retained on
payment of interest or on a discount. *he words used are ?deposits, loans or advances and have to be
taBen in the generic sense. *hey would cover any facility by which an amount of money is lent or allowed
to be used or retained on payment of what is commonly called the time value of money which could be in
the form of an interest or a discount. *his entry would not cover investments by way of e<uity or any
other manner where the investor is entitled to a share of profit. !llustrations of such services are +
0ixed deposits or saving deposits or any other such deposits in a banB or a financial institution for
which return is received by way of interest.
1roviding a loan or overdraft facility or a credit limit facility in consideration for payment of
interest.
9ortgages or loans with a collateral security to the extent that the consideration for advancing
such loans or advances are represented by way of interest.
Corporate deposits to the extent that the consideration for advancing such loans or advances are
represented by way of interest or discount.
>ill discounting or discounting of che<ues is covered in the negative list only to the extent
consideration is represented by way of discount because discounting is nothing else but a manner
of extending a credit facility or a loan.
!t is to be noted that the services of loans, advances or deposits are exempt in so far as the consideration is
represented by way of interest or discount. Any charges or amounts collected over and above the interest
or discount amounts would represent taxable consideration.
&-
Transactions entered into 0y 0an7s in instruments li7e repos and reverse repos
%ection &=#"c$ of the C>! Act, 19-& defines ?repos@ as an instrument for borrowing funds by selling
securities with an agreement to repurchase the securities on a mutually agreed future date at an agreed
price which includes interest for the funds borrowed@.
%ection &=# "d$ of the C>! Act, 19-& defines ?reverse repos@ as an instrument for lending funds by
buying securities with an agreement to resell the securities on a mutually agreed future date at an agreed
price which includes interest for the funds lent@.
Cepos and reverse repos are financial instruments of short term call money marBet that are normally used
by banBs to borrow from or lend money to C>!. *he margins, called the repo rate or reverse repo rate in
such transactions are nothing but interest charged for lending or borrowing of money. *hus they have the
characteristics of loans and deposits for interest.
Iowever they are more appropriately excluded from the definition of service itself being the sale and
purchase of securities, which are goods.
Service tax on su0scription to or tradin& in Commercial Paper :CP; or Certificates of #eposit :C#;
Commercial 1aper "?C1@$ and Certificate of .eposit "?C.@$ are understood as unsecured money marBet
instruments which may be issued in the form of a promissory note or in a demateriali7ed form through
any of the depositories approved by and registered with %(>!.
C1s are normally issued by highly rated companies, primary dealers and financial institutions at a
discount to the face value. C.s can be issued by %cheduled Commercial >anBs "excluding CC>s and
ocal Area >anBs$ and All 5 !ndia 0inancial !nstitutions "0!s$ permitted by C>!.
%ince these are instruments for lending or borrowing money where in consideration is represented by way
of a discount issue or subscription to C1s or C.s would be covered in the negative list entry relating to
?serivces by way of extending deposits, loans or advances in so far as consideration is represented by way
of interest or discount@. !t may also be borne in mind that promissory note is included in the definition of
money in the Act as given in clause "--$ of section '=>.
Iowever if some service charges or service fees or documentation fees or broBing charges or such liBe
fees or charges are charged, the same would be considerations for provision of service and chargeable to
service tax.
For8ard contracts in commodities or currencies and service tax
A forward contract is an agreement, executed, to purchase or sell a pre+determined amount of a
commodity or currency at a pre+determined future date at a pre+determined price. *he settlement could be
by way of actual delivery of underlying commodityEcurrency or by way of
net settlement of differential of the forward rate over the prevailing marBet rate on the settlement date.
!n a forward contract effectively two contracts are entered into, one for purchase and other for sale at a
future date at a pre+determined price. *hese contracts would be in the nature of transfer in title in goods
"in case the forward contract relates to a commodity$ or transaction only money "in case the forward
contract relates to transaction and money$. *herefore, forward contracts in commodities or currencies
would not fall in the ambit of definition of ?service@. 0or transactions in money (xplanation 2 to clause
"&&$ of section '=> should also be Bept in mind.
Iowever if some service charges or service fees or documentation fees or broBing charges or such liBe
fees or charges are charged, the same would be considerations for provision of service and chargeable to
service tax.
&&
<Future contracts and Service tax
0uture contracts are in the nature of financial derivatives and its price depends on the value of underlying
stocBs or index of stocBs or certain approved currencies and the settlement happens normally by way of
net settlement with no actual delivery.
%ince future contracts are in the nature of contracts of difference based on the prices of underlying stocBs
or index of stocBs or approved currencies, they would be outside to the ambit of definition of ?service@ as
being transactions only in transfer of title in derivatives.
'ate payment of dues on credit card dues and service tax
!n case of a credit card, issuing entity allows the facility of payment of the purchases made by the card
holder within a specified period failing which some charges are levied. *he <uestion that arises is whether
the credit so extended for this payment is in the nature of a loan or advance for interest.
!nterest for delayed payment of any consideration for the sale of goods or provision of service has been
specifically excluded from value by rule ' of valuation rules. *hus ordinarily any interest charged for
delayed payment of consideration would have been outside the gambit of service tax. Iowever in the case
of credit cards the credit extended is not for the delayed payment of consideration for the provision of
services. *he services in the case of the credit card are by way of levy of issuing charges or the
commission charged from merchants etc.
*he interest in this case is not for the consideration for the use of the card. *hus the benefit under the
valuation rules will not be available to credit card companies.
*he other <uestion is whether such credit extended will amount to loans or advances. oans and advances
are meant to signify amounts contractually negotiated as such "loan or advance$ and not merely failure to
pay an amount at the due date. *he exorbitant charges have also no relationship with the prevailing
interest for the same class of creditworthiness and are in the nature of consideration for the services
rendered for using the convenience of using the services by way of a credit card and hence taxable.
:1(;
Services relatin& to transportation of passen&ers
*he following services relating to transportation of passengers- with or without accompanied belongings,
have been specified in the negative list. %ervices by)
a stage carriage6
railways in a class other than "i$ first class6 or "ii$ an AC coach6
metro, monorail or tramway6
inland waterways6
public transport, other than predominantly for tourism purpose, in a vessel, between places
located in !ndia6 and
metered cabs, radio taxis or auto ricBshaws.
9Sta&e carria&e9 shall have the meaning assigned to it in clause "&,$ of section 2 of the 9otor /ehicles
Act, 19;;6 "=9 of 19;;.$. D%ection '=>"&'$F
&=
9Inland 8ater8ay9 means national waterways as defined in clause "h$ of section 2 of the !nland
4aterways Authority of !ndia Act, 19;= ";2 of 19;=.$ or other waterway on any inland water, as defined
in clause "b$ of section 2 of the !nland /essels Act, 191:6 "1 of 191:.$ D%ection '=>"29$F
9)etered ca09 means any contract carriage on which an automatic device, of the type and maBe
approved under the relevant rules by the %tate *ransport Authority, is fitted which indicates reading of
the fare chargeable at any moment and that is charged accordingly under the conditions of its permit
issued under the 9otor /ehicles Act, 19;; "=9 of 19;;$ and the rules made thereunder6 D%ection
'=>"-2$F
*his entry does not cover giving motor vehicles on hire. *hose transaction are covered, upto a
certain extent under entry No. 22 of mega exemption notification.
*ransportation of passengers through inland waterways is covered in the negative list but services
provided by leisure or charter vessels or a cruise ship, predominant purpose of which is tourism,
would not be covered in the negative list even if some of the passengers in such vessels are not
tourists.
:1+;
Service relatin& to transportation of &oods
*he following services provided in relation to transportation of goods are specified in the negative list of
services)+
by road except the services of "i$ a goods transportation agency6 or "ii$ a courier
agency
by aircraft or vessel from a place outside !ndia up to the customs station of clearance in !ndia6 or
by inland waterways.
<Co+rier= has been defined in section '=> as any person engaged in door+to+door delivery of time
sensitive documents, goods or articles utili7ing the services of a person, either directly or indirectly, to
carry or accompany such documents, goods or articles. *he nature of service provided by ?(xpress Cargo
%ervice@ as well as 4angadia5 falls within the scope and definition of the courier agency.
Ience, the said service is excluded from the negative list entry relating to transportation of goods by road.

Services of =oods Transport 4&ency
1rimarily all services provided by a goods transport agency are liable to service tax. Iowever,
exemptions are available in connection with transportation ++
fruits, vegetables, eggs, milB, food grains or pulses in a goods carriage6
goods where gross amount charged on a consignment transported in a single goods carriage does
not exceed one thousand five hundred rupees6 or
goods where gross amount charged for transportation of all such goods for a single consignee in
the goods carriage does not exceed rupees seven hundred fifty.
(xcept in few specified cases, where service tax is payable on reverse charge basis, the goods transport
agency is liable to pay service tax.
&'

%ature of service relatin& to transportation A5et5er covered in t5e ne&ative of &oods list
entry>
>y railways No
>y air within the country or abroad No
>y a vessel in the coastal waters No
>y a vessel on a national waterway Pes
%ervices provided by a A*A No

:1/;
Funeral- 0urial- crematorium or mortuary services includin& transportation of t5e deceased
*his negative list entry is self+explanatory.
&:
(
)e&a *xemption %otification
%otification %o. !(B!.1!-Service Tax
#ated !.
t5
Hune- !.1!

=.S.,??:*;.- !n exercise of the powers conferred by sub+section "1$ of section 9- of the 0inance
Act, 199& "-2 of 199&$ "hereinafter referred to as the said Act$ and in supersession of notification
number 12E2,12+ %ervice *ax, dated the 1:
th
9arch, 2,12, published in the Aa7ette of !ndia,
(xtraordinary, 1art !!, %ection -, %ub+section "i$ vide number A.%.C. 21, "($, dated the 1:
th
9arch,
2,12, the Central Aovernment, being satisfied that it is necessary in the public interest so to do,
hereby exempts the following taxable services from the whole of the service tax leviable thereon
under section ''> of the said Act, namely)+
1. Services provided to t5e Inited %ations or a specified international or&ani6ationJ
%ervices provided to all the international organi7ations are not exempt. (xemption is available
only of services are provided to specified international organi7ations.
&>f( -specified international organi>ation- means an international organi7ation declared by the
Central Aovernment in pursuance of section - of the #nited Nations "1rivileges and
!mmunities$ Act, 19&: "&' of 19&:$, to which the provisions of the %chedule to the said Act
apply6
%ome of the specified international organi7ations are 5
a. !nternational Civil Aviation Lrganisation
b. 4orld Iealth Lrganisation
c. !nternational abor Lrganisation
d. 0ood and Agriculture Lrganisation of the #nited Nations
e. #N (ducational, %cientific and Cultural Lrganisation "#N(%CL$
f. !nternational 9onetary 0und "!90$
g. !nternational >anB for Ceconstruction and .evelopment
h. #niversal 1ostal #nion
i. !nternational *elecommunication #nion
J. 4orld 9eteorological Lrganisation
B. 1ermanent Central Lpium >oard
l. !nternational Iydrographic >ureau
m. Commissioner of !ndus 4aters, Aovernment of 1aBistan and his advisors and assistants
n. Asian African egal Consultative Committee
o. Commonwealth Asia 1acific Pouth .evelopment Center, Chandigarh
p. .elegation of Commission of (uropean Community
&;
<. Customs Co+operation Council
r. Asia 1acific *elecommunity
s. !nternational Center of 1ublic (nterprise in .eveloping Countries
t. !nternational Center for Aenetic (ngineering and >iotechnology
u. Asian .evelopment >anB
v. %outh Asian Association for Cegional Co+operation
w. !nternational 2ute Lrganisation, >angladesh
!. Eealt5 care services 0y a clinical esta0lis5ment- an aut5orised medical practitioner
or para-medicsJ
&t( <health care services= means any service by way of diagnosis or treatment or care for
illness, inJury, deformity, abnormality or pregnancy in any recognised system of medicines in
!ndia and includes services by way of transportation of the patient to and from a clinical
establishment, but does not include hair transplant or cosmetic or plastic surgery, except when
undertaBen to restore or to reconstruct anatomy or functions of body affected due to congenital
defects, developmental abnormalities, inJury or trauma6
&9( -clinical estalish3ent- means a hospital, nursing home, clinic, sanatorium or any
other institution by, whatever name called, that offers services or facilities re<uiring diagnosis
or treatment or care for illness, inJury, deformity, abnormality or pregnancy in any recognised
system of medicines in !ndia, or a place established as an independent entity or a part of an
establishment to carry out diagnostic or investigative services of diseases6
&d( <a+thorised 3edical practitioner= means a medical practitioner registered with any of
the councils of the recognised system of medicines established or recogni7ed by law in !ndia
and includes a medical professional having the re<uisite <ualification to practice in any
recognised system of medicines in !ndia as per any law for the time being in force6
Lnly following systems of medicine are recogni7ed systems of medicine in !ndia, which are
covered under the health care services 5
a. Allopathy
b. Poga
c. Naturopathy
d. Ayurveda
e. Iomeopathy
f. %iddha
g. #nani
h. Any other system of medicine that may be recogni7ed by the Central Aovernment
?ara3edics
1aramedics are the trained health care professionals e.g. nursing staff, physiotherapist,
technicians, lab assistants. %ervices of trained paramedics are exempt even in independent
capacity. !n any case their services as an employee are already exempt.
&9
". Services 0y a veterinary clinic in relation to 5ealt5 care of animals or 0irdsJ
$. Services 0y an entity re&istered under section 1!44 of t5e Income tax 4ct- 13+1 :$" of
13+1; 0y 8ay of c5arita0le activitiesJ
:7; <charitale activities= means activities relating to +
"i$ public health by way of +
"a$ care or counseling of+
"i$ terminally ill persons or persons with severe physical or mental
disability,
"ii$ persons afflicted with I!/ or A!.%, or
"iii$ persons addicted to a dependence+forming substance such as narcotics
drugs or alcohol6 or
"b$ public awareness of preventive health, family planning or prevention of I!/
infection6
"ii$ advancement of religion or spirituality6
"iii$ advancement of educational programmes or sBill development relating to,+
"a$ abandoned, orphaned or homeless children6
"b$ physically or mentally abused and traumati7ed persons6
"c$ prisoners6 or
"d$ persons over the age of '= years residing in a rural area6
"iv$ preservation of environment including watershed, forests and wildlife6 or
"v$ advancement of any other obJect of general public utility up to a value of,+
"a$ eighteen laBh and seventy five thousand rupees for the year 2,12+1- subJect to the
condition that total value of such activities had not exceeded twenty five laBhs
rupees during 2,11+126
"b$ twenty five laBh rupees in any other financial year subJect to the condition that
total value of such activities had not exceeded twenty five laBhs rupees during the
preceding financial year6
Tax lia0ility of a re&istered c5arity
!f a registered charity is doing any activity falling in negative list of services or is otherwise
exempt, it is not re<uired to pay service tax on that activity. !n case, where its activity is covered
explicitly in any of the specified charitable activities referred under clause "i$ to "iv$, it is exempt
from service tax without any value limit. 0or charitable activities mentioned in clause "vE$ it is
exempt up to a value of twenty five laBh rupees in a financial year if the total value of such
services had not exceeded twenty five laBh rupees during the preceding financial year. !t is to be
noted that this exemption is available only if the activities are meant for general public. Aeneral
public means ?body of people at large sufficiently defined by some common <uality of public or
impersonal nature@.
(. Services 0y a person 0y 8ay of-
:a; rentin& of precincts of a reli&ious place meant for &eneral pu0licJ or
=,
:0; conduct of any reli&ious ceremonyJ
&>( <religio+s place= means a place which is primarily meant for conduct of prayers or
worship pertaining to a religion, meditation, or spirituality6
,eli&ious ceremonies
Celigious ceremonies are life+cycle rituals including special religious pooJas conducted in terms
of religious texts by a person so authori7ed by such religious texts. Lccasions liBe birth, marriage,
and death involve elaborate religious ceremonies. Conduct of all religious ceremonies has been
exempted from service tax liability under mega exemption.
+. %ervices provided by-
"a$ an arbitral tribunal to +
"i$ any person other than a business entity6 or
"ii$ a business entity with a turnover up to rupees ten laBh in the preceding financial
year6
"b$ an individual as an advocate or a partnership firm of advocates by way of legal services
to,+
"i$ an advocate or partnership firm of advocates providing legal services 6
"ii$ any person other than a business entity6 or
"iii$ a business entity with a turnover up to rupees ten laBh in the preceding financial
year6 or
"c$ a person represented on an arbitral tribunal to an arbitral tribunal6
&;( <legal service= means any service provided in relation to advice, consultancy or
assistance in any branch of law, in any manner and includes representational services before
any court, tribunal or authority6
Advocates can provide legal services either as individual or as a firm. egal services are exempt
if provided to the following 5
"a$ an advocate or a partnership firm of advocates providing legal services
"b$ any person other than a business entity
"c$ a business entity having turnover not exceeding Cs. 1,.,, lacs during the preceding
financial year.
egal services provided to any business entity whose turnover during the preceding financial
year exceeded Cs. 1,.,, lacs are chargeable on reverse charge basis.
Services provided as individual or a firm
%o service tax if services provided to Service Tax is applica0le if services provided to
an advocate or partnership firm of
advocates providing legal services "same
class of persons$
%ervices provided to any business entity having
turnover exceeding Cs. 1, lacs during preceding
financial year.
=1
any person other than a business entity
a business entity with a turnover up to
rupees ten laBh in the preceding financial
year
%ervice tax is payable on reverse charge basis.
>usiness entity means ?any person ordinarily
carrying out any activity relating to industry,
commerce or any other business or profession@.
/. %ervices by way of technical testing or analysis of newly developed drugs, including vaccines
and herbal remedies, on human participants by a clinical research organisation approved to
conduct clinical trials by the .rug Controller Aeneral of !ndia6
1. Services 0y 8ay of trainin& or coac5in& in recreational activities relatin& to arts- culture
or sportsJ
*here is exemption from service tax to training or coaching in recreational activities relating to
arts, culture or sports. *he benefit is available to coaching or training relating to all forms of
dance, music, painting, sculpture maBing, theatre and sports etc.
3. %ervices provided to or by an educational institution in respect of education exempted from
service tax, by way of,+
"a$ auxiliary educational services6 or
"b$ renting of immovable property6
&f( <a+xiliar! ed+cational services= means any services relating to imparting any sBill,
Bnowledge, education or development of course content or any other Bnowledge 5 enhancement
activity, whether for the students or the faculty, or any other services which educational
institutions ordinarily carry out themselves but may obtain as outsourced services from any
other person, including services relating to admission to such institution, conduct of
examination, catering for the students under any mid+day meals scheme sponsored by
Aovernment, or transportation of students, faculty or staff of such institution6
1.. Services provided to a reco&nised sports 0ody 0y-
:a; an individual as a player- referee- umpire- coac5 or team mana&er for participation in
a sportin& event or&ani6ed 0y a reco&ni6ed sports 0odyJ
:0; anot5er reco&nised sports 0odyJ
&>a( <recogni>ed sports od!= means 5
"i$ the !ndian Llympic Association,
"ii$ %ports Authority of !ndia,
"iii$ a national sports federation recognised by the 9inistry of %ports and Pouth Affairs of
the Central Aovernment, and its affiliate federations,
"iv$ national sports promotion organisations recognised by the 9inistry of %ports and Pouth
Affairs of the Central Aovernment,
"v$ the !nternational Llympic Association or a federation recognised by the !nternational
Llympic Association or
"vi$ a federation or a body which regulates a sport at international level and its affiliated
federations or bodies regulating a sport in !ndia6
=2
*xempt Taxa0le
%ervices as a player, referee, umpire, coach or
team manager for participation in a sporting event
organi7ed by a recogni7ed sports body are
exempt from service tax.
%ervices by a recogni7ed sports body to another
are also exempt.
%ervices provided to a recogni7ed sports body by
an individual %ervices by individuals such as
selectors, commentators, curators, technical
experts are taxable.
Services of an individual as a player- umpire in a premier lea&ue
*he service of a player to a franchisee which is not a recogni7ed sports body is taxable. Iowever,
services of an individual as umpire, referee when provided directly to a recogni7ed sports body shall
be exempt.
11. Services 0y 8ay of sponsors5ip of sportin& events or&anised--
:a; 0y a national sports federation- or its affiliated federations- 85ere t5e
participatin& teams or individuals represent any district- state or 6oneJ
:0; 0y 4ssociation of Indian Iniversities- Inter-Iniversity Sports oard- Sc5ool
=ames Federation of India- 4ll India Sports Council for t5e #eaf- Paralympic
Committee of India or Special Clympics 5aratJ
:c; 0y Central Civil Services Cultural and Sports oardJ
:d; as part of national &ames- 0y Indian Clympic 4ssociationJ or
:e; under Panc5ayat Kuva Lreeda 4ur L5el 405iyaan :PKLL4; Sc5emeJ
1!. Services provided to t5e =overnment- a local aut5ority or a &overnmental aut5ority 0y
8ay of construction- erection- commissionin&- installation- completion- fittin& out- repair-
maintenance- renovation- or alteration of -
:a; a civil structure or any ot5er ori&inal 8or7s meant predominantly for use ot5er
t5an for commerce- industry- or any ot5er 0usiness or professionJ
:0; a 5istorical monument- arc5aeolo&ical site or remains of national importance-
arc5aeolo&ical excavation- or antiGuity specified under t5e 4ncient )onuments
and 4rc5aeolo&ical Sites and ,emains 4ct- 13(1 :!$ of 13(1;J
:c; a structure meant predominantly for use as :i; an educational- :ii; a clinical- or
:iii; an art or cultural esta0lis5mentJ
:d; canal- dam or ot5er irri&ation 8or7sJ
:e; pipeline- conduit or plant for :i; 8ater supply :ii; 8ater treatment- or :iii; se8era&e
treatment or disposalJ or
:f; a residential complex predominantly meant for self-use or t5e use of t5eir
employees or ot5er persons specified in t5e *xplanation 1 to clause $$ of section +(
of t5e said 4ctJ
Comments
=-

Predominantly for use ot5er t5an for commerce- industry- or any ot5er 0usiness or profession>
*hese words indicate that the benefit of exemption will not be denied if the building is also incidentally
used for some other purposes if it is used primarily for commerce, industry, or any other business or
profession.

Taxa0ility of various types of constructions
Construction of roads for use by general public is exempt from service tax. Construction of roads which
are not for general public use e.g. construction of roads in a factory, residential complex would be
taxable.
Construction of hospitals and educational institutions for the government, a local authority or a
governmental authority, are exempt. %ame construction for any other person will be taxable.

Construction of a building owned by an entity registered under section 12 AA of the !ncome tax Act,
19'1 and meant predominantly for religious use by general public shall be exempt from service tax.
Construction of residential complex predominantly for self use or use by employees or members of
parliament or egislative assembly shall be exempt from service tax.
Construction of residential unit
Construction of a single residential unit is exempt from service tax. Iowever, if there are two floors
constituting two residential units then service tax becomes applicable.
,epair- maintenance of airports- ports and rail8ays
%uch services are liable to service tax and the same will be available as input tax credit to railways, port
or airport authority, if other conditions are met.
*rection and installation of mac5ine
*here is no service tax liability on erection or installation of machineries or e<uipments for units
processing agricultural produce as food stuff excluding alcoholic beverages. %imilarly erection or
installation of machineries or e<uipment for dal mills, rice mills, milB dairies or cotton ginning mills
would be exempt.
1". %ervices provided by way of construction- erection, commissioning, installation, completion,
fitting out, repair, maintenance, renovation, or alteration of,+
"a$ a road, bridge, tunnel, or terminal for road transportation for use by general public6
"b$ a civil structure or any other original worBs pertaining to a scheme under 2awaharlal
Nehru National #rban Cenewal 9ission or CaJiv Awaas PoJana6
"c$ a building owned by an entity registered under section 12 AA of the !ncome tax Act,
19'1"&- of 19'1$ and meant predominantly for religious use by general public6
"d$ a pollution control or effluent treatment plant, except located as a part of a factory6 or
"e$ a structure meant for funeral, burial or cremation of deceased6
=&
1$. %ervices by way of construction, erection, commissioning, or installation of original worBs
pertaining to,+
"a$ an airport, port or railways, including monorail or metro6
"b$ a single residential unit otherwise than as a part of a residential complex6
"c$ low+ cost houses up to a carpet area of ', s<uare metres per house in a housing proJect
approved by competent authority empowered under the ?%cheme of Affordable Iousing
in 1artnership@ framed by the 9inistry of Iousing and #rban 1overty Alleviation,
Aovernment of !ndia6
"d$ post+ harvest storage infrastructure for agricultural produce including a cold storages
for such purposes6 or
"e$ mechanised food grain handling system, machinery or e<uipment for units processing
agricultural produce as food stuff excluding alcoholic beverages6
1(. *emporary transfer or permitting the use or enJoyment of a copyright covered under clauses "a$
or "b$ of sub+section "1$ of section 1- of the !ndian Copyright Act, 19=: "1& of 19=:$, relating
to original literary, dramatic, musical, artistic worBs or cinematograph films6
Comments
*emporary transfer of a copyright relating to original literary, dramatic, musical, artistic worB
or cinematographic film falling under clause "a$ and "b$ of sub+section "1$ of section 1- of the
!ndian Copyright Act, 19=: is exempt.
A music company would be re<uired to pay service tax as the copyright relating to sound
recording falls under clause "c$ of sub+section "1$ of section 1- of the !ndian Copyright Act,
19=:.
*he copyright relating to original worB of composing song falls under clause "a$ of
subsection "1$ of section 1- of the !ndian Copyright Act, 19=: which is exempt from service
tax.
%imilarly an author having copy right of a booB written by him would not be re<uired to pay
service tax on royalty amount received from the publisher for publishing the booB. A person
having the copyright of a cinematographic film would also not be re<uired to pay service tax
on the amount received from the film exhibitors for exhibiting the cinematographic film in
cinema theatres.
No service tax is payable on temporary transfer of copyright in relation to cinematographic
films as the same is exempt under the mega+notification 2=E2,12.
1+. Services 0y a performin& artist in fol7 or classical art forms of :i; music- or :ii; dance- or
:iii; t5eatre- excludin& services provided 0y suc5 artist as a 0rand am0assadorJ
Comments-
*he activities by a performing artist in folB or classical art forms of music, dance, or theatre
are not subJected to service tax. All other activities by an artist in other art forms e.g. western
music or dance, modern theatres, performance of actors in films or television serials would be
==
taxable. %imilarly activities of artists in still art forms e.g. painting, sculpture maBing etc. are
taxable.
%ervices provided by an artist as brand ambassador is taxable. >rand ambassador is defined
in the mega notification and means a person engaged for promotion or marBeting of a brand
of goods, service, property or actionable claim, event or endorsement of name, including a
trade name, logo or house marB of any person.
1/. %ervices by way of collecting or providing news by an independent Journalist, 1ress *rust of
!ndia or #nited News of !ndia6
11. %ervices 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
accommodation below rupees one thousand per day or e<uivalent6
Co33ents #
&n( <declared tariff= includes charges for all amenities provided in the unit of
accommodation "given on rent for stay$ liBe furniture, air+conditioner, refrigerators or any other
amenities, but without excluding any discount offered on the published charges for such unit6
Celevance of the term ?declared tariff@ is in determining the liability to pay service tax on
renting of a hotel, inn, guest house, club, campsite or other commercial places meant for
residential or lodging purposes as exemption is available where declared tariff of a unit of
accommodation is below rupees one thousand per day or e<uivalent. Iowever, the tax will be
liable to be paid on the amount actually charged i.e. declared tariff minus any discount
offered.
*hus if the declared tariff is Cs 11,,E+, but actual room rent charged is Cs ;,,E+, tax will be
re<uired to be paid on Cs ;,,E+. 4hen the declared tariff is revised as per the tourist season,
the liability to pay tax shall be only on the declared tariff for the accommodation where the
publishedEprinted tariff is above Cupees 1,,,E+. Iowever, the revision in tariff should be
made uniformly applicable to all customers and declared when such change taBes place.
13. %ervices provided in relation to serving of food or beverages by a restaurant, eating Joint or a
mess, other than those having "i$ the facility of air+conditioning or central air+heating in any part
of the establishment, at any time during the year, and "ii$ a licence to serve alcoholic beverages6
!.. %ervices by way of transportation by rail or a vessel from one place in !ndia to another of the
following goods +
"a$ petroleum and petroleum products falling under Chapter heading 2:1, and 2:11 of the
0irst %chedule to the Central (xcise *ariff Act, 19;= "= of 19;'$6
"b$ relief materials meant for victims of natural or man+made disasters, calamities, accidents
or mishap6
"c$ defence or military e<uipments6
"d$ postal mail or mail bags6
"e$ household effects6
"f$ newspaper or maga7ines registered with the Cegistrar of Newspapers6
='
"g$ railway e<uipments or materials6
"h$ agricultural produce6
"i$ foodstuff including flours, tea, coffee, Jaggery, sugar, milB products, salt and edible oil,
excluding alcoholic beverages6 or
"J$ chemical fertili7er and oilcaBes6
!1. %ervices provided by a goods transport agency by way of transportation of +
"a$ fruits, vegetables, eggs, milB, food grains or pulses in a goods carriage6
"b$ goods where gross amount charged for the transportation of goods on a consignment
transported in a single goods carriage does not exceed one thousand five hundred
rupees6 or
"c$ goods, where gross amount charged for transportation of all such goods for a single
consignee in the goods carriage does not exceed rupees seven hundred fifty6
!!. %ervices by way of giving on hire +
"a$ to a state transport undertaBing, a motor vehicle meant to carry more than twelve
passengers6 or
"b$ to a goods transport agency, a means of transportation of goods6
!". *ransport of passengers, with or without accompanied belongings, by +
"a$ air, embarBing from or terminating in an airport located in the state of Arunachal
1radesh, Assam, 9anipur, 9eghalaya, 9i7oram, Nagaland, %iBBim, or *ripura or at
>agdogra located in 4est >engal6
"b$ a contract carriage for the transportation of passengers, excluding tourism, conducted
tour, charter or hire6 or
"c$ ropeway, cable car or aerial tramway6
!$. %ervices by way of vehicle parBing to general public excluding leasing of space to an entity for
providing such parBing facility6
!(. %ervices provided to Aovernment, a local authority or a governmental authority by way of +
"a$ carrying out any activity in relation to any function ordinarily entrusted to a
municipality in relation to water supply, public health, sanitation conservancy, solid
waste management or slum improvement and upgradation6 or
"b$ repair or maintenance of a vessel or an aircraft6
!+. %ervices of general insurance business provided under following schemes +
"a$ Iut !nsurance %cheme6
"b$ Cattle !nsurance under %warnaJaynti Aram %waro7gar PoJna "earlier Bnown as
!ntegrated Cural .evelopment 1rogramme$6
"c$ %cheme for !nsurance of *ribals6
"d$ 2anata 1ersonal Accident 1olicy and Aramin Accident 1olicy6
"e$ Aroup 1ersonal Accident 1olicy for %elf+(mployed 4omen6
"f$ Agricultural 1umpset and 0ailed 4ell !nsurance6
"g$ premia collected on export credit insurance6
=:
"h$ 4eather >ased Crop !nsurance %cheme or the 9odified National Agricultural
!nsurance %cheme, approved by the Aovernment of !ndia and implemented by the
9inistry of Agriculture6
"i$ 2an Arogya >ima 1olicy6
"J$ National Agricultural !nsurance %cheme "Cashtriya 3rishi >ima PoJana$6
"B$ 1ilot %cheme on %eed Crop !nsurance6
"l$ Central %ector %cheme on Cattle !nsurance6
"m$ #niversal Iealth !nsurance %cheme6
"n$ Cashtriya %wasthya >ima PoJana6 or
"o$ Coconut 1alm !nsurance %cheme6
!+4. %ervices of life insurance business provided under following schemes +
"a$ 2anashree >ima PoJana "2>P$6 or
"b$ Aam Aadmi >ima PoJana "AA>P$6.
!/. %ervices provided by an incubatee up to a total turnover of fifty laBh rupees in a financial year
subJect to the following conditions, namely)+
"a$ the total turnover had not exceeded fifty laBh rupees during the preceding financial
year6 and
"b$ a period of three years has not been elapsed from the date of entering into an
agreement as an incubatee6
&+( <inc+atee= means an entrepreneur located within the premises of a *echnology
>usiness !ncubator "*>!$ or %cience and *echnology (ntrepreneurship 1arB "%*(1$ recognised
by the National %cience and *echnology (ntrepreneurship .evelopment >oard "N%*(.>$ of
the .epartment of %cience and *echnology, Aovernment of !ndia and who has entered into an
agreement with the *>! or the %*(1 to enable himself to develop and produce hi+tech and
innovative products6
!1. %ervice by an unincorporated body or a non+ profit entity registered under any law for the time
being in force, to its own members by way of reimbursement of charges or share of contribution
+
"a$ as a trade union6
"b$ for the provision of carrying out any activity which is exempt from the levy of service
tax6 or
"c$ up to an amount of five thousand rupees per month per member for sourcing of goods
or services from a third person for the common use of its members in a housing society
or a residential complex6
!3. %ervices by the following persons in respective capacities +
"a$ sub+broBer or an authorised person to a stocB broBer6
"b$ authorised person to a member of a commodity exchange6
"c$ mutual fund agent to a mutual fund or asset management company6
"d$ distributor to a mutual fund or asset management company6
"e$ selling or marBeting agent of lottery ticBets to a distributer or a selling agent6
=;
"f$ selling agent or a distributer of %!9 cards or recharge coupon vouchers6
"g$ business facilitator or a business correspondent to a banBing company or an insurance
company, in a rural area6 or
"h$ sub+contractor providing services by way of worBs contract to another contractor
providing worBs contract services which are exempt6
".. Carrying out an intermediate production process as Job worB in relation to +
"a$ agriculture, printing or textile processing6
"b$ cut and polished diamonds and gemstones6 or plain and studded Jewellery of gold and
other precious metals, falling under Chapter :1 of the Central (xcise *ariff Act ,19;=
"= of 19;'$6
"c$ any goods on which appropriate duty is payable by the principal manufacturer6 or
"d$ processes of electroplating, 7inc plating, anodi7ing, heat treatment, powder coating,
painting including spray painting or auto blacB, during the course of manufacture
of parts of cycles or sewing machines upto an aggregate value of taxable service of the
specified processes of one hundred and fifty laBh rupees in a financial year subJect to
the condition that such aggregate value had not exceeded one hundred and fifty laBh
rupees during the preceding financial year6
Co33ents #
Any process amounting to manufacture or production of goods is in the negative list. !f process
does not amount to manufacture or production of goods, and is further not covered in this clause,
the same is liable to service tax.
"1. %ervices by an organiser to any person in respect of a business exhibition held outside !ndia6
"!. %ervices by way of maBing telephone calls from +
"a$ departmentally run public telephone6
"b$ guaranteed public telephone operating only for local calls6 or
"c$ free telephone at airport and hospital where no bills are being issued6
Co33ents # *here is exemption for ?Auaranteed 1ublic *elephone operating only for local
calls@ also. /illage 1ublic *elephones "/1*s$ with facility of local calls "without 9 dialing
facility or %*. facility$ run by >%N would fall under the category of ?Auaranteed 1ublic
*elephone operating only for local calls@ and thus exempt from service tax.
"". %ervices by way of slaughtering of animals6
"$. %ervices received from a provider of service located in a non+ taxable territory by +
"a$ Aovernment, a local authority, a governmental authority or an individual in relation to
any purpose other than commerce, industry or any other business or profession6
"b$ an entity registered under section 12AA of the !ncome tax Act, 19'1 "&- of 19'1$ for
the purposes of providing charitable activities6 or
"c$ a person located in a non+taxable territory6
=9
"(. %ervices of public libraries by way of lending of booBs, publications or any other Bnowledge+
enhancing content or material6
"+. %ervices by (mployees@ %tate !nsurance Corporation to persons governed under the
(mployees@ !nsurance Act, 19&; "-& of 19&;$6
"/. Services 0y 8ay of transfer of a &oin& concern- as a 85ole or an independent part t5ereofJ
Co33ents # *ransfer of business as a going concern means sale of business as a whole will
comprise comprehensive sale of immovable property, goods and transfer of unexecuted orders,
employees, goodwill etc. *he buyer is in a position to carry on business. %ervices by way of
transfer of a going concern, as a whole or an independent part thereof, are exempt from service
tax.
%ale of assets of a business that has closed will be outside the definition of GserviceH
"1. %ervices by way of public conveniences such as provision of facilities of bathroom, washrooms,
lavatories, urinal or toilets6
"3. %ervices by a governmental authority by way of any activity in relation to any function
entrusted to a municipality under article 2&- 4 of the Constitution.
&s( <govern3ental a+thorit!55 means a board, or an authority or any other body
established with 9,K or more participation by way of e<uity or control by Aovernment and set
up by an Act of the 1arliament or a %tate egislature to carry out any function entrusted to a
municipality under article 2&-4 of the Constitution6
All the services provided by or to the government or governmental authorities are not exempt
but the services entrusted to a municipality under article 2&- 4 of the Constitution are exempt.
*he functions are entrusted to municipality are ++
a. #rban planning including town planning
b. Cegulation of land use and construction of building
c. 1lanning of economic and social development
d. Coads and >ridges
e. 4ater supply for domestic, industrial and commercial purposes
f. 1ublic health, sanitation conservancy and solid waste management
g. 0ire %ervices
h. #rban forestry, protection of the environment and promotion of ecological aspects
i. %afeguarding the interest of weaBer section of society, including the handicapped and
mentally retarded
J. %lum improvement and upgradation
B. #rban poverty alleviation
l. 1rovisions of urban amenities and facilities such as parBs, gardens, playgrounds
m. 1romotion of cultural, educational and aesthetic aspects
n. >urial and burial grounds, cremations, cremation grounds and electric crematoriums.
o. Cattle pounds, prevention of cruelty to animals
p. /ital statistics including registration of births and deaths
',
<. 1ublic amenities including street lighting, parBing lots, bus stops and public conveniences
r. Cegulation of slaughter houses and tanneries.
!. #efinitions. - 0or the purpose of this notification, unless the context otherwise re<uires, 5
&a( <Advocate= has the meaning assigned to it in clause "a$ of sub+section "1$ of section 2 of the
Advocates Act, 19'1 " 2= of 19'1$6
&( <appropriate d+t!= means duty payable on manufacture or production under a Central Act or a
%tate Act, but shall not include ?Nil@ rate of duty or duty wholly exempt6
&c( <aritral tri+nal= has the meaning assigned to it in clause "d$ of section 2 of the Arbitration
and Conciliation Act, 199' "2' of 199'$6
&e( -a+thorised person= means any person who is appointed as such either by a stocB broBer
"including trading member$ or by a member of a commodity exchange and who provides access
to trading platform of a stocB exchange or a commodity exchange as an agent of such stocB
broBer or member of a commodity exchange6
&g( <an7ing co3pan!= has the meaning assigned to it in clause "a$ of section &=A of the Ceserve
>anB of !ndia Act,19-&"2 of 19-&$6
&h( <rand a3assador= means a person engaged for promotion or marBeting of a brand of goods,
service, property or actionable claim, event or endorsement of name, including a trade name,
logo or house marB of any person6
&i( <+siness facilitator or +siness correspondent= means an intermediary appointed under the
business facilitator model or the business correspondent model by a banBing company or an
insurance company under the guidelines issued by Ceserve >anB of !ndia6
&l( <co33odit! exchange= means an association as defined in section 2 "J$ and recogni7ed under
section ' of the 0orward Contracts "Cegulation$ Act,19=2 ":& of 19=2$6
&3( <contract carriage= has the meaning assigned to it in clause ":$ of section 2 of the 9otor
/ehicles Act, 19;; "=9 of 19;;$6
&o( <distri+tor or selling agent= has the meaning assigned to them in clause "c$ of the rule 2 of the
ottery "Cegulation$ Cules, 2,1, notified by the Aovernment of !ndia in the 9inistry of Iome
Affairs, published in the Aa7ette of !ndia, (xtraordinary, 1art+!!, %ection -, %ub+section "i$, vide
number A.%.C. 2:;"($, dated the 1st April, 2,1, and shall include distributor or selling agent
authorised by the lottery+ organising %tate6
&p( -general ins+rance +siness- has the meaning assigned to it in clause "g$ of section - of
Aeneral !nsurance >usiness "Nationalisation$ Act, 19:2 "=: of 19:2$6
&:( <general p+lic= means the body of people at large sufficiently defined by some common
<uality of public or impersonal nature6
&r( <goods carriage= has the meaning assigned to it in clause "1&$ of section 2 of the 9otor
/ehicles Act, 19;; "=9 of 19;;$6
&v( <ins+rance co3pan!= means a company carrying on life insurance business or general
insurance business6
&x( <life ins+rance +siness= has the meaning assigned to it in clause "11$ of section 2 of the
!nsurance Act, 19-; "& of 19-;$6
'1
&!( <original ;or7s= means has the meaning assigned to it in Cule 2A of the %ervice *ax
".etermination of /alue$ Cules, 2,,'6
&>( <principal 3an+fact+rer= means any person who gets goods manufactured or processed on his
account from another person6
&>( <religio+s place= means a place which is primarily meant for conduct of prayers or worship
pertaining to a religion, meditation, or spirituality6
&>c( <residential co3plex= means any complex comprising of a building or buildings, having more
than one single residential unit6
&>d( <r+ral area= means the area comprised in a village as defined in land revenue records,
excluding+
the area under any municipal committee, municipal corporation, town area committee,
cantonment board or notified area committee6 or
any area that may be notified as an urban area by the Central Aovernment or a %tate
Aovernment6
&>e( <single residential +nit= means a self+contained residential unit which is designed for use,
wholly or principally, for residential purposes for one family6
:6&; 9state transport underta7in&9 has the meaning assigned to it in clause "&2$ of section 2 of the
9otor /ehicles Act, 19;; "=9 of 19;;$6
:65; 9su0-0ro7er9 has the meaning assigned to it in sub+clause "gc$ of clause 2 of the %ecurities and
(xchange >oard of !ndia "%tocB >roBers and %ub+broBers$ Cegulations, 19926
:6i; Mtrade unionN has the meaning assigned to it in clause "h$ of section 2 of the *rade #nions
Act,192' "1' of 192'$.
'2
Exemptions
Under the present system there are 88 exemption notifications. The exemptions
requiring some clarification are explained below:
Services provided to or 0y a &overnmental aut5ority

Functions entrusted to a municipality under article !$"A of t5e Constitution
Article 2&-4 of the Constitution is as under)
?%ubJect to the provisions of this Constitution, the egislature of a %tate may, by law, endowQ
"a$ the 9unicipalities with such powers and authority as may be necessary to enable them to function as
institutions of self+government and such law may contain provisions for the devolution of powers and
responsibilities upon 9unicipalities, subJect to such conditions as may be specified therein, with respect
toQ
"i$ the preparation of plans for economic development and social Justice6
"ii$ the performance of functions and the implementation of schemes as may be entrusted to them
including those in relation to the matters listed in the *welfth %chedule6
"b$ the Committees with such powers and authority as may be necessary to enable them to carry out the
responsibilities conferred upon them including those in relation to the matters listed in the *welfth
%chedule.@
9atters listed in twelfth schedule are)
1. #rban planning including town planning.
2. Cegulation of land+use and construction of buildings.
-. 1lanning for economic and social development.
&. Coads and bridges.
=. 4ater supply for domestic, industrial and commercial purposes.
'. 1ublic health, sanitation conservancy and solid waste management.
:. 0ire services.
;. #rban forestry, protection of the environment and promotion of ecological aspects.
9. %afeguarding the interests of weaBer sections of society, including the handicapped and mentally
retarded.
1,. %lum improvement and upgradation.
11. #rban poverty alleviation.
12. 1rovision of urban amenities and facilities such as parBs, gardens, playgrounds.
1-. 1romotion of cultural, educational and aesthetic aspects.
1&. >urials and burial grounds6 cremations, cremation grounds6 and electric crematoriums.
1=. Cattle pounds6 prevention of cruelty to animals.
1'. /ital statistics including registration of births and deaths.
'-
1:. 1ublic amenities including street lighting, parBing lots, bus stops and public conveniences.
1;. Cegulation of slaughter houses and tanneries.
1lease note that the services are referred above and provided by governmental authority are exempt from
service tax. !f a governmental authority provides services other than those listed above, then service tax is
applicable, unless exempted otherwise.
Taxa0ility of services provided to a &overnmental aut5ority
A governmental authority enJoys same benefits as the Aovernment or a local authority in respect of
receipt of services. *he following services when provided to a governmental authority are exempt)
a$ %pecified services as listed in %r. no. 12 of exemption notification relating to construction.
b$ %ervices in relation to any function ordinarily entrusted to a municipality in relation to water
supply, public health, sanitation conservancy, solid waste management or slum improvement and
upgradation.
c$ %ervices received from a service provider located in a non+ taxable territory by such authorities in
relation to any purpose other than commerce, industry or any other business or profession.

)iscellaneous

Aiving on hire a bus to a state transport undertaBing is exempt from service tax. !f the bus is
given on hire to a person other than a state transport undertaBing, it will be taxed.
,entin& of land for par7in&

%ervice of an unincorporated body or a non+ profit entity registered under any law for the time
being in force to its own members up to an amount of Cs =,,,, per member per month by way of
reimbursement of charges or share of contribution is exempt from service tax. 4here C4A is
worBing as a pure agent of its members for sourcing of goods or services from a third person,
amount collected by C4A from its members may be excluded from the value of taxable service
in terms of Cule ="2$ ,f %ervice *ax ".etermination of /alue$ Cules, 2,,' subJect to compliance
with the specified conditions.
!f members of an association maBe contributions for holding camps to provide health care
services to poor men and women then it is exempt from service tax. !f contribution is for
carrying out an activity which is taxable, you are re<uired to pay service tax.

As per clause "1$ of section ''0 reference to a service by nature or description in the Act will not
include reference to a service used for providing such service. *herefore, if any person is
providing services, in respect of proJects involving construction of roads, airports, railways,
transport terminals, bridges, tunnels, dams etc., such as architect service, consulting engineer
service ., which are used by the contractor in relation to such construction, the benefit of the
'&
specified entries in the mega+exemption would not be available to such persons unless the
activities carried out by the sub+contractor independently and by itself falls in the ambit of the
exemption.
!t has to be appreciated that the wordings used in the exemption are ?services by way of
construction of roads etc@ and not ?services in relation to construction of roads etc@. !t is thus
apparent that Just because the main contractor is providing the service by way of construction of
roads, airports, railways, transport terminals, bridges, tunnels, dams etc., it would not
automatically lead to the classification of services being provided by the sub+contractor to the
contractor as an exempt service.
Iowever, a sub+contractor providing services by way of worBs contract to the main contractor,
providing exempt worBs contract services, has been exempted from service tax under the mega
exemption if the main contractor is engaged in providing exempt services of worBs contracts. !t
may be noted that the exemption is available to sub+contractors engaged in worBs contracts and
not to other outsourced services such as architect or consultants.

4here service provider and receiver of service, both are located in non+taxable territory then
service tax is not attracted e.g. if a resident in 2ammu and 3ashmir plans to construct a property
in .elhi and architectural services are taBen from an architect who is also resident in 2ammu and
3ashmir, then thre will be no service tax.
!f services are received in taxable from a person based in non+taxable territory then service tax
becomes applicable if such services are received in connection with business, on reverse charge
basis unless the receiver of service is otherwise exempt.
!n other words, if services so received do not relate to business then there will be no service tax.
Place of Provision of Service
2
Section 66C. 8eter3ination of place of provision of service.
(#) The entral 2overnment may, having regard to the nature and description of various services, by
rules made in this regard, determine the place where such services are provided or deemed to have been
provided or agreed to be provided or deemed to have been agreed to be provided.
(') "ny rule made under sub-section (#) shall not be invalid merely on the ground that either the service
provider or the service receiver or both are located at a place being outside the taxable territory.
>y virtue of the powers vested under section ''C, the Central government has framed 1lace of 1rovision
of %ervice Cules, 2,12 which helps in determining the place where such services 5
a$ are provided or
b$ deemed to have been provided or
2
Inserted vide Finance Act, 2012 w.e.f. 1.7.2012
'=
c$ agreed to be provided or
d$ deemed to have been agreed to be provided.
*hese Cules replace the (xport of %ervice Cules, 2,,= and the rules related to import of service. *hese
new rules are basically meant for the persons who have cross border operations as well as for those
who have their suppliers or customers based in the %tate of 2ammu and 3ashmir.
%ervice tax is applicable as long as place of provisions of service is in taxable territory and the such
place is to be determined in accordance with these rules.

''
+
Place of Provision of Service ,ules- !.1!

Cule ,1) %hort title, extent and commencement. 5
Cule ,2) .efinitions.+
"a$ GActH
"b$ GaccountH
"c$ GbanBing companyH
"d$ Gcontinuous JourneyH
"e$ Gfinancial institutionH
"f$ GintermediaryH
"g$ Gleg of JourneyH
"h$ Glocation of the service providerH
"i$ Glocation of the service receiverH
"J$ Gmeans of transportH
"B$ Gnon+banBing financial companyH
"l$ Gonline information and database access or retrieval servicesH
"m$ Gperson liable to pay taxH
"n$ GprovidedH
"o$ GreceivedH
"p$ GregistrationH
"<$ Gtelecommunication serviceH
Cule ,-) 1lace of provision generally.+
Cule ,&) 1lace of provision of performance based services.+
Cule ,=) 1lace of provision of services relating to immovable property.+
Cule ,') 1lace of provision of services relating to events.+
Cule ,:) 1lace of provision of services provided at more than one location.+
Cule ,;) 1lace of provision of services where provider and recipient are located in taxable
territory.+
Cule ,9) 1lace of provision of specified services.+
Cule 1,) 1lace of provision of goods transportation services.+
Cule 11) 1lace of provision of passenger transportation service.+
Cule 12) 1lace of provision of services provided on board a conveyance.+
Cule 1-) 1owers to notify description of services or circumstances for certain purposes.+
Cule 1&) Lrder of application of rules
Place of Provision of Services ,ules- !.1!
':
,ule .1O S5ort title- extent and commencement.
"1$ *hese rules may be called the 1lace of 1rovision of %ervices Cules, 2,12.
"2$ *hey shall come into force on 1
st
day of 2uly, 2,12.
,ule .!O #efinitions.-
!n these rules, unless the context otherwise re<uires,+
:a; M4ctN means the 0inance Act, 199& "-2 of 199&$6
:0; MaccountN means an account bearing interest to the depositor, and includes a non+resident external
account and a non+resident ordinary account6
:c; M0an7in& companyN has the meaning assigned to it in clause "a$ of section &=A of the Ceserve
>anB of !ndia Act, 19-& "2 of 19-&$6
:d; Mcontinuous DourneyN means a Journey for which a single or more than one ticBet or invoice is
issued at the same time, either by one service provider or through one agent acting on behalf of more
than one service provider, and which involves no stopover between any of the legs of the Journey for
which one or more separate ticBets or invoices are issued6
:e; Mfinancial institutionN has the meaning assigned to it in clause "c$ of section &=+! of the Ceserve
>anB of !ndia Act,19-& "2 of 19-&$6
:f; MintermediaryN means a broBer, an agent or any other person, by whatever name called, who
arranges or facilitates a provision of a service "hereinafter called the ?main@ service$ between two or
more persons, but does not include a person who provides the main service on his account.6
:&; Mle& of DourneyN means a part of the Journey that begins where passengers embarB or disembarB the
conveyance, or where it is stopped to allow for its servicing or refueling, and ends where it is next
stopped for any of those purposes6
:5; Mlocation of t5e service providerN means+
"a$. where the service provider has obtained a single registration, whether centrali7ed or otherwise,
the premises for which such registration has been obtained6
"b$. where the service provider is not covered under sub+clause "a$)
"i$ the location of his business establishment6 or
"ii$ where the services are provided from a place other than the business establishment,
that is to say, a fixed establishment elsewhere, the location of such establishment6
or
"iii$ where services are provided from more than one establishment, whether business or
fixed, the establishment most directly concerned with the provision of the service6
and
"iv$ in the absence of such places, the usual place of residence of the service provider.
:i; Mlocation of t5e service receiverN means)+
';
"a$. where the recipient of service has obtained a single registration, whether centrali7ed or
otherwise, the premises for which such registration has been obtained6
"b$. where the recipient of service is not covered under sub+clause "a$)
"i$ the location of his business establishment6 or
"ii$ where services are used at a place other than the business establishment, that is to
say, a fixed establishment elsewhere, the location of such establishment6 or
"iii$ where services are used at more than one establishment, whether business or fixed,
the establishment most directly concerned with the use of the service6 and
"iv$ in the absence of such places, the usual place of residence of the recipient of
service.
Explanation)+. 0or the purposes of clauses "h$ and "i$, Gusual place of residenceH in case of a body
corporate means the place where it is incorporated or otherwise legally constituted.
Explanation 2O-. 0or the purpose of clause "i$, in the case of telecommunication service, the usual
place of residence shall be the billing address.
:D; Mmeans of transportN means any conveyance designed to transport goods or persons from one
place to another6
:7; Mnon-0an7in& financial companyN means+
"i$ a financial institution which is a company6 or
"ii$ a non+banBing institution which is a company and which has as its principal business
the receiving of deposits, under any scheme or arrangement or in any other manner, or
lending in any manner6 or
"iii$ such other non+banBing institution or class of such institutions, as the Ceserve >anB of
!ndia may, with the previous approval of the Central Aovernment and by notification in
the Lfficial Aa7ette specify6
:l; Monline information and data0ase access or retrieval servicesN means providing data or
information, retrievable or otherwise, to any person, in electronic form through a computer networB6
:m; Mperson lia0le to pay taxN shall mean the person liable to pay service tax under section '; of
the Act or under sub+clause "d$ of sub+rule "1$ of rule 2 of the %ervice *ax Cules, 199&6
:n; MprovidedN includes the expression Gto be providedH6
:o; MreceivedN includes the expression Gto be receivedH6
:p; Mre&istrationN means the registration under rule & of the %ervice *ax Cules, 199&6
:G; Mtelecommunication serviceN means service of any description "including electronic mail, voice
mail, data services, audio text services, video text services, radio paging and cellular mobile telephone
services$ which is made available to users by means of any transmission or reception of signs, signals,
writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electro+
magnetic means but shall not include broadcasting services.
:r; words and expressions used in these rules and not defined, but defined in the Act, shall have the
meanings respectively assigned to them in the Act.
'9
Si&nificance of M'ocationN of a Service Provider or ,eceiver
According to explanation "2$ to sub+section && of section '=>, an establishment of a person outside the taxable
territory is a person distinct from an establishment in a taxable territory. *herefore, services provided from overseas
are to be carefully examined whether such services are being rendered by the establishment outside the taxable
territory or within.
0rom the point of view of receiver of the service the Jurisdiction which is relevant for compliance with registration
formalities, filing of returns, refund claims etc. by the person liable to pay tax "provider or receiver as the case may
be$, will be the GlocationH as determined in terms of these rules.
Eo8 8ill suc5 MlocationN 0e determined>
*he location of a service provider or receiver "as the case may be$ is to be determined by applying the following
steps se<uentially)
A. where the service provider or receiver has obtained only one registration, whether centrali7ed or otherwise,
the premises for which such registration has been obtained6
>. where the service provider or receiver is not covered by A above)
i. the location of his business establishment6 or
ii. where services are provided or received at a place other than the business establishment i.e. a fixed
establishment elsewhere, the location of such establishment6
iii. where services are provided or received at more than one establishment, whether business or fixed, the
establishment most directly concerned with the provision or use of the service6 and
iv. in the absence of such places, the usual place of residence of the service provider or receiver.
!t is important to note that in the case of a service receiver, the place relevant for determining location is the place
where the service is GusedH or GconsumedH.

Musiness esta0lis5mentN
?>usiness establishment@ is the place where the essential decisions concerning the general management of the
business are adopted, and where the functions of its central administration are carried out. *his could be the head
office, or a factory, or a worBshop, or shopE retail outlet. 9ost significantly, there is only one business establishment
that a service provider or receiver can have.
MFixed esta0lis5mentN
A Gfixed establishmentH is a place "other than the business establishment$ which is characteri7ed by a sufficient
degree of permanence and suitable structure in terms of human and technical resources to provide the services that
are to be supplied by it, or to enable it to receive and use the services supplied to it for its own needs.
*emporary presence of staff by way of a short visit at a place cannot be called a fixed establishment. Also, the
number of staff at a location is not important. 4hat is relevant is the ade<uacy of the arrangement "of human and
technical resources$, to carry out an activity for a consideration, or to receive and use a service supplied. %imilarly, it
will be important to evaluate the permanence of the arrangement i.e. whether it is capable of executing the tasB.

*sta0lis5ment Mmost directly concerned 8it5 t5e supplyN
*his will depend on the facts and supporting documentation, specific to each case. *he documentation will include
the following)+
the contract"s$ between the service provider and receiver6
where there are no written contracts, any written account "documents, correspondenceE e+mail etc$ between
parties which sets out in detail their understanding of the oral contract6
in particular, for suppliers, from which establishment the services are actually provided6
in particular, for receivers, at which establishment the services are actually consumed, effectively used or
enJoyed6
details of how the business fits into any larger corporate structure6
:,
the establishment whose staff is actually involved in the execution of the Job6
performance agreements "which may be indicative both of the substance and actual nature of worB
performed at a particular establishment$6
*hus , normally in the case of multiple establishments of a person, it will be the establishment that actually provides,
or receives "i. e. uses or consumes$, a service that would be treated as ?directly concerned@ with the provision of
service, notwithstanding the contractual position, or invoicing or payment.
Illustrations
1. A business has its head<uarters in !ndia, and branches in ondon, .ubai, %ingapore and New PorB. !ts
business establishment is in !ndia.
2. An overseas business house sets up offices with staff in !ndia to provide services to !ndian customers. !ts
fixed establishment is in !ndia.
-. A company with a business establishment abroad buys a property in !ndia which it leases to a tenant. *he
property by itself does not create a fixed establishment. !f the company sets up an office in !ndia to carry on its
business by managing the property, this will create a fixed establishment in !ndia.
&. A company is incorporated in !ndia, but provides its services entirely from %ingapore.
*he location of this service provider is %ingapore, being the place where the establishment most directly concerned
with the supply is located.
MIsual place of residenceN
*he usual place of residence, in case of a body corporate, has been specified as the place where it is incorporated or
otherwise legally constituted.
*he usual place of residence of an individual is the place "country, state etc$ where the individual spends most of his
time for the period in <uestion. !t is liBely to be the place where the individual has set up his home, or where he lives
with his family or is in full time employment. !ndividuals are not treated as belonging in a country if they are short
term, transitory visitors "for example if they are visiting as tourists, or to receive medical treatment or for a short
term educational course$. An individual cannot have more than one usual place of residence.
!n addition, in the case of telecommunication services, it has been prescribed that the usual place of residence of the
receiver shall be the billing address. *his in effect means the address that is available in the records of the service
provider for billing the receiver of the telecommunication service. *his provision will be applicable to individual
customers "generally referred to as subscribers$ of a telecommunication service, who are provided a subscriber
identification module "commonly referred to as %!9 card, which may be post+paid or prepaid$ and a uni<ue
identification number "1,+digit or ;+digit, as the case may be$ by the service provider.
,ule ."O Place of provision &enerally.-
The place of provision of a service shall be the location of the recipient of service6
?rovided that in case the location of the service receiver is not available in the ordinary course of
business, the place of provision shall be the location of the provider of service.
Implication of t5is ,ule
*his main rule is applicable where none of the other later rules are applicable. !t provides that a service shall be
deemed to be provided where the receiver is located. !mplication of this Cule can be understood as under ++
a. 4here the location of receiver of a service is in the taxable territory, such service will be deemed to be
provided in the taxable territory and service tax will be payable.
b. Iowever if the receiver is located outside the taxable territory, no service tax will be payable on the said
service.
85o is t5e person lia0le to pay tax on t5e transaction 85en t5e place of provision of a taxa0le service is t5e
location of service receiver>
:1
%ervice tax is normally re<uired to be paid by the provider of a service, except where he is located outside the
taxable territory and the place of provision of service is in the taxable territory.
4here the provider of a service is located outside the taxable territory, the person liable to pay service tax is the
receiver of the service in the taxable territory, unless of course, the service is otherwise exempted.
0ollowing illustration will maBe this clear)+
A company A>C provides a service to a receiver 1RC, both located in the taxable territory.
%ince the location of the receiver is in the taxable territory, the service is taxable. %ervice tax liability will be
discharged by A>C, being the service provider and being located in taxable territory.
Iowever, if A>C were to supply the same service to a recipient .(0 located in non+taxable territory, the provision
of such service is not taxable, since the receiver is located outside the taxable territory.
!f the same service were to be provided to 1RC "located in taxable territory$ by an overseas provider SP8 "located
in non+taxable territory$, the service would be taxable, since the recipient is located in the taxable territory.
Iowever, since the service provider is located in a nontaxable territory, the tax liability would be discharged by the
receiver, under the reverse charge principle
(."." A5o is t5e service receiver>
Normally, the person who is legally entitled to receive a service and, therefore, obliged to maBe payment, is the
receiver of a service, whether or not he actually maBes the payment or someone else maBes the payment on his
behalf.
Illustration
A lady leaves her car at a service station for the purpose of servicing. %he asBs her chauffer to collect the car from
the service station later in the day, after the servicing is over. *he chauffer maBes the payment on behalf of the lady
owner and collects the car.
Iere the lady is the ?person obliged to maBe the payment@ towards servicing charges, and therefore, she is the
receiver of the service.
A5at 8ould 0e t5e situation 85ere t5e payment for a service is made at one location :say 0y t5e 5eadGuarters
of a 0usiness; 0ut t5e actual renderin& of t5e service is else85ere :i.e. a fixed esta0lis5ment;>
Lccasionally, a person may be the person liable to maBe payment for the service provided on his behalf to another
person. 0or instance, the provision of a service may be negotiated at the head<uarters of an entity by way of
centrali7ed sourcing of services whereas the actual provision is made at various locations in different taxing
Jurisdictions "in the case of what is commonly referred to as a multi+locational entity or 9($. Iere, the central
office may act only as a facilitator to negotiate the contract on behalf of various geographical establishments.
(ach of the geographical establishments receives the service and is obligated to maBe the payment either through
head<uarters or sometimes directly. 4hen the payment is made directly, there is no confusion. !n other situations,
where the payment is settled either by cash or through debit and credit note between the business and fixed
establishments, it is clear that the payment is being made by a geographical location. 4herever a fixed establishment
bears the cost of ac<uiring, or using or consuming a service through any internal arrangement "normally referred to
as a GrechargeH, GreallocationH, or a GsettlementH$, these are generally made in accordance with corporate tax or
other statutory re<uirements. *hese accounting arrangements also invariably aid the 9(@s management in
budgeting and financial performance measurement.
/arious accounting and business management systems are generally employed to manage, monitor and document
the entire purchasing cycle of goods and services "such as the (C1 (nterprise Cesource 1lanning %ystem$. *hese
systems support and document the company processes, including the financial and accounting process, and
purchasing process. Normally, these systems will provide the re<uired information and audit trail to identify the
establishment that uses or consumes a service.
!t should be noted that in terms of proviso to section ''>, the establishments in a taxable and non+taxable territory
are to be treated as distinct persons. 9oreover, the definition of Glocation of the receiverH clearly states that Gwhere
the services are GusedH at more than one establishment, whether business or fixed, the establishment most directly
concerned with the use of the serviceH will be the location. *hus, the taxing Jurisdiction of service, which is
provided under a ?global frameworB agreement@ between two multinational companies with the business
:2
establishment located outside the taxable territory, but which is used or consumed by a fixed establishment located
in the taxable territory, will be the taxable territory.
Illustration
*he following example illustrates the above, by comparing the place of provision of services rendered under a
Alobal Agreement1 vis+T+vis a Alobal 0rameworB Agreements.
AAA is a firm with its manufacturing unit and business establishment located in the taxable territory A. !t has got
two other manufacturing plants located in countries S and P "say, AAA+S and AAA+P respectively$. AAA wishes
to obtain !* services for a new production process for its three manufacturing plants in the region.
>>> is an !* firm located in the taxable territory "location of business establishment$. >>> td also has fixed
establishments "subsidiaries$ located in country S "say >>>+S$ and in country P "say, >>>+ P$.
AAA engages >>> for meeting its !* service re<uirement.
Scenario 1
AAA enters into a =lo0al :centrali6ed purc5asin&; a&reement with >>> for provision of !* services for the
whole group. 0ollowing are the different transactions under which services are provided)+
a$ #nder the global agreement, some component of !* service is provided by >>> to
AAA in country A "say, *ransaction 1$.
b$ *o meet the re<uirements of providing !* solutions specific to the plants AAA+S and AAA+P in countries S and
P, >>> enters into agreements with its subsidiaries >>>S "in country S$ and >>>+P "in country P$, under which
they provide !* services to
1 A ?Alobal Contract or Agreement@ is between two parent companies for provision of services from one to the
other, where actual provision of services is to be made to subordinate offices of the recipient company in different
tax Jurisdictions.
2 A ?Alobal 0rameworB Agreement@ is between two parent companies for provision of services, but here, the
?frameworB agreement@ only specifies the broad terms of the agreement i.e. fees, terms and conditions, the list of
recipient branchesEoffices or even the details of provision of services to be made. *he subsidiaries in different
locations then enter into separate and independent business agreements, for provision of services and payments.
>>> "say, *ransaction 2 and *ransaction -$. *hough these services are provided by >>>+S and >>>+P to >>>,
these are rendered as under)+
UV>y >>>+S to AAA+S "in country S$+ under transaction 2, and
UV>y >>>+P to AAA+P "in country+P$ 5 under transaction -.
c$ AAA enters into separate agreements with AAA+S and AAA+P, under which AAA
td provides !* services to them "transaction & and transaction =$.
*he transactions and provision of service under each are illustrated in the 0low diagram 02 titled ?%cenario1@ at the
end of this section.
Scenario ! [See Flo8 #ia&ram F " at t5e end of t5is section]
AAA enters into a Frame8or7 4&reement with >>> for provision of !* services for the whole group. *he
0rameworB agreement covers the broad contours of supply between the two parties, payment milestones, obligations
relating to confidentiality, penalty for default, limitations of liability and warranties etc, which would apply as and
when group companies enter into separate agreements, in accordance with the terms envisaged in the frameworB
agreement. >>>+S and >>>+P could then enter into separate and independent business agreements with AAA+S
and AAA+P, in countries S and P respectively, for provision of !* services. *here are four agreements, but only
three transactions involving provision of services, as indicated in the 0low diagram 0-+ %cenario 2 at the end of this
section.
A5at is t5e place of provision 85ere t5e location of receiver is not ascertaina0le in t5e ordinary course of
0usiness>
Aenerally, in case of a service provided to a person who is in business, the provider of the service will have the
location of the recipient@s registered location, or his business establishment, or his fixed establishment etc, as the
case may be. Iowever, in case of certain services "which are not covered by the exceptions to the main rule$, the
service provider may not have the location of the service receiver, in the ordinary course of his business. *his will
also be the case where a service is provided to an individual customer who comes to the premises of the service
provider for availing the service and the provider has to, more often than not, rely on the declared location of the
customer. !n such cases the place of provision will be the location of the service provider. !t may be noted that the
:-
service provider is not re<uired to maBe any extraordinary efforts to trace the address of the service receiver. *he
address should be available in the ordinary course of business.
!n case of certain specified categories of services, the place of provision shall be the place where the services are
actually performed. *hese are discussed in the following paragraphs.
,ule .$O Place of provision of performance 0ased services.-
The place of provision of following services shall be the location where the services are actually
performed, namely6-
(a) services provided in respect of goods that are re:uired to be made physically available by
the recipient of service to the provider of service, or to a person acting on behalf of the provider of
service, in order to provide the service6
?rovided that when such services are provided from a remote location by way of electronic means
the place of provision shall be the location where goods are situated at the time of provision of service6
?rovided f+rther that this sub-rule shall not apply in the case of a service provided in respect of
goods that are temporarily imported into 7ndia for repairs, reconditioning or reengineering for re-
export, sub>ect to conditions as may be specified in this regard.
(b) services provided to an individual, represented either as the recipient of service or a person
acting on behalf of the recipient, which re:uire the physical presence of the receiver or the person
acting on behalf of the receiver, with the provider for the provision of the service.
Services that are provided <in respect of goods that are 3ade ph!sicall! availale, ! the receiver to the service
provider, in order to provide the service=# s+#r+le &1(@
%ervices that are related to goods, and which re<uire such goods to be made available to the service provider or a
person acting on behalf of the service provider so that the service can be rendered, are covered here. *he essential
characteristic of a service to be covered under this rule is that the goods temporarily come into the physical
possession or control of the service provider, and without this happening, the service cannot be rendered. *hus, the
service involves movable obJects or things that can be touched, felt or possessed. (xamples of such services are
repair, reconditioning, or any other worB on goods "not amounting to manufacture$, storage and warehousing,
courier service, cargo handling service "loading, unloading, pacBing or unpacBing of cargo$, technical
testingEinspectionEcertificationE analysis of goods, dry cleaning etc. !t will not cover services where the supply of
goods by the receiver is not material to the rendering of the service e.g. where a consultancy report commissioned
by a person is given on a pen drive belonging to the customer. %imilarly, provision of a marBet research service to a
manufacturing firm for a consumer product "say, a new detergent$ will not fall in this category, even if the marBet
research firm is given say, 1,,, nos. of 1 Bilogram pacBets of the product by the manufacturer, to carry for door+to+
door surveys.
?roviso to s+#r+le &1(
*he proviso to this rule states as follows)+
G1rovided further that where such services are provided from a remote location by way of electronic means, the
place of provision shall be the location where goods are situated at the time of provision of service.H
!n the field of information technology, it is not uncommon to provide services in relation to tangible goods located
distantly from a remote location. *hus the actual place of performance of the service could be <uite different from
the actual location of the tangible goods. *his proviso re<uires that the place of provision shall be the actual location
of the goods and not the place of performance, which in normal situations is one and the same.
Services that are provided <to an individ+al A ;hich re:+ire the ph!sical presence of the receiver A ;ith the
provider for provision of the service.= S+#r+le &2(
:&
Certain services liBe cosmetic or plastic surgery, beauty treatment services, personal security service, health and
fitness services, photography service "to individuals$, internet cafW service, classroom teaching, are examples of
services that re<uire the presence of the individual receiver for their provision. As would be evident from these
examples, the nature of services covered here is such as are rendered in person and in the receiver@s physical
presence.
*hough these are generally rendered at the service provider@s premises "at a cosmetic or plastic surgery clinic, or
beauty parlor, or health and fitness centre, or internet cafW$, they could also be provided at the customer@s premises,
or occasionally while the receiver is on the move "say, a personal security service6 or a beauty treatment on board an
aircraft$.
Significance of <..in the ph!sical presence of an individ+al, ;hether represented either as the service receiver or
a person acting on ehalf of the receiver=
*his implies that while a service in this category is capable of being rendered only in the presence of an individual,
it will not matter if, in terms of the contractual arrangement between the provider and the receiver "formal or
informal, written or oral$, the service is actually rendered by the provider to a person other than the receiver, who is
acting on behalf of the receiver.

2ll+stration
A modelling agency contracts with a beauty parlour for beauty treatment of say, 2, models. Iere again is a situation
where the modelling agency is the receiver of the service, but the service is rendered to the models, who are
receiving the beauty treatment service on behalf of the modelling agency. Ience, notwithstanding that the modelling
agency does not <ualify as the individual receiver in whose presence the service is rendered, the nature of the service
is such as can be rendered only to an individual, thereby <ualifying to be covered under this rule.
,ule .(O Place of provision of services relatin& to immova0le property.-
The place of provision of services provided directly in relation to an immovable property, including
services provided in this regard by experts and estate agents, provision of hotel accommodation by a
hotel, inn, guest house, club or campsite, by whatever, name called, grant of rights to use immovable
property, services for carrying out or co-ordination of construction wor,, including architects or
interior decorators, shall be the place where the immovable property is located or intended to be
located.
MImmova0le propertyN
G!mmovable 1ropertyH has not been defined in the 0inance Act, 199&. Iowever, in terms of section & of the Aeneral
Clauses Act, 1;9:, the definition of immovable property provided in sub+section - "2'$ of the Aeneral Clauses Act
will apply, which states as under)
37mmovable .roperty5 shall include land, benefits to arise out of land, and things attached to the earth, or
permanently fastened to anything attached to the earth.5
!t may be noted that the definition is inclusive and thus properties such as buildings and fixed structures on land
would be covered by the definition of immovable property. *he property must be attached to some part of earth even
if underwater.
Criteria to determine if a service is <directly in relation to immova0le property located in taxa0le territory
Aenerally, the following criteria will be used to determine if a service is in respect of immovable property located in
the taxable territory)
i) *he service consists of lease, or a right of use, occupation, enJoyment or exploitation of an immovable
property6
ii$ the service is physically performed or agreed to be performed on an immovable property "e.g. maintenance$ or
property to come into existence "e.g. construction$6
iii$ the direct obJect of the service is the immovable property in the sense that the service enhances the value of
the property, affects the nature of the property, relates to preparing the property for development or
:=
redevelopment or the environment within the limits of the property "e.g. engineering, architectural services,
surveying and sub+dividing, management services, security services etc$6
iv$ the purpose of the service is)
a$ the transfer or conveyance of the property or the proposed transfer or conveyance of the property "e.g.,
real estate services in relation to the actual or proposed ac<uisition, lease or rental of property, legal
services rendered to the owner or beneficiary or potential owner or beneficiary of property as a result
of a will or testament$6
b$ the determination of the title to the property.
*here must be more than a mere indirect or incidental connection between a service provided in relation to an
immovable property, and the underlying immovable property. 0or example, a legal firm@s general opinion with
respect to the capital gains tax liability arising from the sale of a commercial property in !ndia is basically advice on
taxation legislation in general even though it relates to the subJect of an immovable property. *his will not be treated
as a service in respect of the immovable property.
*xamples of land-related services
i$ %ervices supplied in the course of construction, reconstruction, alteration, demolition, repair or maintenance
"including painting and decorating$ of any building or civil engineering worB6
ii$ Centing of immovable property6
iii$ %ervices of real estate agents, auctioneers, architects, engineers and similar experts or professional people,
relating to land, buildings or civil engineering worBs. *his includes the management, survey or valuation of
property by a solicitor, surveyor or loss adJuster.
iv$ %ervices connected with oilEgasEmineral exploration or exploitation relating to specific sites of land or the
seabed.
v$ *he surveying "such as seismic, geological or geomagnetic$ of land or seabed.
vi$ egal services such as dealing with applications for planning permission.
vii$ 1acBages of property management services which may include rent collection, arranging repairs and the
maintenance of financial accounts.
viii$ *he supply of hotel accommodation or warehouse space.
Service is not directly related to immova0le property
*he place of provision of services rule applies only to services which relate directly to specific sites of land or
property. !n other words, the immovable property must be clearly identifiable to be the one from where, or in respect
of which, a service is being provided. *hus, there needs to be a very close linB or association between the service
and the immovable property. Needless to say, this rule does not apply if a provision of service has only an indirect
connection with the immovable property, or if the service is only an incidental component of a more comprehensive
supply of services.

0or example, the services of an architect contracted to design the landscaping of a particular resort hotel in Aoa
would be land+related. Iowever, if an interior decorator is engaged by a retail chain to design a common dWcor for
all its stores in !ndia, this service would not be landrelated. *he default rule i.e. Cule - will apply in this case.
Services 85ic5 are not land-related - examples
i$ Cepair and maintenance of machinery which is not permanently installed. *his is a service related to goods.
ii$ Advice or information relating to land prices or property marBets because they do not relate to specific sites.
iii$ and or Ceal (state 0easibility studies, say in respect of the investment potential of a developing suburb,
since this service does not relate to a specific property or site.
iv$ %ervices of a *ax Ceturn 1reparer in simply calculating a tax return from figures provided by a business in
respect of rental income from commercial property.
v$ %ervices of an agent who arranges finance for the purchase of a property.
,ule .+O Place of provision of services relatin& to events.-
:'
The place of provision of services provided by way of admission to, or organi9ation of, a cultural,
artistic, sporting, scientific, educational, or entertainment event, or a celebration, conference, fair,
exhibition, or similar events, and of services ancillary to such admission, shall be the place where the
event is actually held.
Services covered in this categor!
%ervices in relation to admission as well as organi7ation of events such as conventions, conferences, exhibitions,
fairs, seminars, worBshops, weddings, sports and cultural events are covered under this Cule.
2ll+stration 1
A management school located in #%A intends to organi7e a road show in 9umbai and New .elhi for prospective
students. Any service provided by an event manager, or the right to entry "participation fee for prospective students,
say$ will be taxable in !ndia.
2ll+stration 2
An !ndian fashion design firm hosts a show at *oronto, Canada. *he firm receives the services of a Canadian event
organi7er. *he place of provision of this service is the location of the event, which is outside the taxable territory.
Any service provided in relation to this event, including the right to entry, will be non+taxable.
Ancillar! services related to organi>ation or ad3ission to an event
1rovision of sound engineering for an artistic event is a prere<uisite for staging of that event and should be regarded
as a service ancillary to its organi7ation. A service of hiring a specific e<uipment to enJoy the event at the venue
"against a charge that is not included in the price of entry ticBet$ is an example of a service that is ancillary to
admission.
"ot the ancillar! service in connection ;ith ad3ission to an event
A service of courier agency used for distribution of entry ticBets for an event is a service that is not ancillary to
admission to the event.
,ule ./O Place of provision of services provided at more t5an one location.-
4here any service referred to in rules %, H, or 6 is provided at more than one location, including a
location in the taxable territory, its place of provision shall be the location in the taxale territor!
where the greatest proportion of the service is provided.

Illustration 1
An !ndian firm provides a ?technical inspection and certification service@ for a newly developed product of an
overseas firm "say, for a newly launched motorbiBe which has to meet emission standards in different states or
countries$. %ay, the testing is carried out in 9aharashtra "2,K$, 3erala "2=K$, and an international location "say,
Colombo ==K$.
Notwithstanding the fact that the greatest proportion of service is outside the taxable territory, the place of provision
will be the place in the taxable territory where the greatest proportion of service is provided, in this case 3erala.
*his rule is, however, not intended to capture insignificant portion of a service rendered in any part of the taxable
territory liBe mere issue of invoice, processing of purchase order or recovery, which are not by way of service
actually performed on goods.
!t is clarified that this rule is applicable in performance+based services or location+specific services "immovable
property related or event+linBed$. Normally, such services when provided in a non+taxable territory would re<uire
the presence of separate establishments in such territories. >y virtue of an explanation of sub+clause "&&$ of section
'=>, they would constitute distinct persons and thus it would be legitimate to invoice the services rendered
individually in the two territories.
,ule .1O Place of provision of services 85ere provider and recipient are located in taxa0le
territory.-
::
.lace of provision of a service, where the location of the provider of service as well as that of
the recipient of service is in the taxable territory, shall be the location of the recipient of
service.
*his Cule covers situations where the place of provision of a service provided in the taxable territory may be
determinable to be outside the taxable territory, in terms of the application of one of the earlier Cules i.e. Cule & to ',
but the service provider, as well as the service receiver, are located in the taxable territory.
*he implication of this Cule is that in all such cases, the place of provision will be deemed to be in the taxable
territory, notwithstanding the earlier rules. *he presence of both the service provider and the service receiver in the
taxable territory indicates that the place of consumption of the service is in the taxable territory. %ervices rendered,
where both the provider and receiver of the service are located outside the taxable territory, are now covered by the
mega exemption.
Illustration
1. A helicopter of 1awan Ians td "!ndia based$ develops a technical snag in Nepal. %ay, engineers are
deputed by Iindustan Aeronautics td, >angalore, to undertaBe repairs at the site in Nepal. >ut for this rule, Cule &,
sub+rule "1$ would apply in this case, and the place of provision would be Nepal i.e. outside the taxable territory.
Iowever, by application of this Cule, since the service provider, as well as the receiver, are located in the taxable
territory, the place of provision of this service will be within the taxable territory.
2. *our operator in taxable territory providing overseas tours, including hotel accommodation and travel, to
his customers based in taxable territory.

,ule .3O Place of provision of specified services.-
The place of provision of following services shall be the location of the service provider6-
(a) /ervices provided by a ban,ing company, or a financial institution, or a non-ban,ing
financial company, to account holders+
(b) ?nline information and database access or retrieval services+
(c) 7ntermediary services+
(d) /ervice consisting of hiring of means of transport, upto a period of one month.
<Acco+nt holder= and acco+nts not covered ! this r+le
GAccountH has been defined in the rules to mean an account which bears an interest to the depositor. %ervices
provided to holders of demand deposits, term deposits, NC( "non+resident external$ accounts and NCL "non+
resident ordinary$ accounts will be covered under this rule.
>anBing services provided to persons other than account holders will be covered under the main rule "Cule -+
location of receiver$.
Exa3ples of services provided ! a an7ing co3pan! to an acco+nt holder
0ollowing are examples of services that are provided by a banBing company or financial institution to an Gaccount
holderH, in the ordinary course of business)+
i$ services linBed to or re<uiring opening and operation of banB accounts such as lending, deposits, safe deposit
locBer etc6
ii$ transfer of money including telegraphic transfer, mail transfer, electronic transfer etc.
Services not provided ! a an7ing co3pan! or financial instit+tion to an acco+nt holder, in the ordinar! co+rse
of +siness
0ollowing are examples of services that are generally NL* provided by a banBing company or financial institution
to an account holder "holder of a deposit account bearing interest$, in the ordinary course of business)+
:;
i$ financial leasing services including e<uipment leasing and hire+purchase6
ii$ merchant banBing services6
iii$ %ecurities and foreign exchange "forex$ broBing, and purchase or sale of foreign currency, including money
changing6
iv$ asset management including portfolio management, all forms of fund management, pension fund
management, custodial, depository and trust services6
v$ advisory and other auxiliary financial services including investment and portfolio research and advice, advice
on mergers and ac<uisitions and advice on corporate restructuring and strategy6
vi$ banBer to an issue service.
!n the case of any service which does not <ualify as a service provided to an account holder, the place of provision
will be determined under the default rule i.e. the 9ain Cule -. *hus, it will be the location of the service receiver
where it is Bnown "ascertainable in the ordinary course of business$, and the location of the service provider
otherwise.
<Bnline infor3ation and dataase access or retrieval services=
GLnline information and database access or retrieval servicesH are services in relation to online information and
database access or retrieval or both, in electronic form through computer networB, in any manner. *hus, these
services are essentially delivered over the internet or an electronic networB which relies on the internet or similar
networB for their provision. *he other important feature of these services is that they are completely automated, and
re<uire minimal human intervention.
(xamples of such services are)+
i$ online information generated automatically by software from specific data input by the customer, such as
web+based services providing trade statistics, legal and financial data, matrimonial services, social networBing
sites6
ii$ digiti7ed content of booBs and other electronic publications, subscription of online newspapers and Journals,
online news, flight information and weather reports6
iii$ 4eb+based services providing access or download of digital content.
*he following services will not be treated as Gonline information and database access or retrieval servicesH)+
i$ %ale or purchase of goods, articles etc over the internet6
ii$ *elecommunication services provided over the internet, including fax, telephony, audio conferencing, and
videoconferencing6
iii$ A service which is rendered over the internet, such as an architectural drawing, or management consultancy
through e+mail6
iv$ Cepair of software, or of hardware, through the internet, from a remote location6
v$ !nternet bacBbone services and internet access services.
MIntermediary ServicesN
Aenerally, an GintermediaryH is a person who arranges or facilitates a supply of goods, or a provision of service, or
both, between two persons, without material alteration or further processing. *hus, an intermediary is involved with
two supplies at any one time)
i$ the supply between the principal and the third party6 and
ii$ the supply of his own service "agency service$ to his principal, for which a fee or commission is usually
charged.
0or the purpose of this rule, an intermediary in respect of goods "such as a commission agent i.e. a buying or selling
agent, or a stocBbroBer$ is excluded by definition. Also excluded from this sub+rule is a person who arranges or
facilitates a provision of a service "referred to in the rules as Gthe main serviceH$, but provides the main service on
his own account.

!n order to determine whether a person is acting as an intermediary or not, the following factors need to be
considered)+
"at+re and val+e6 An intermediary cannot alter the nature or value of the service, the supply of which he facilitates
on behalf of his principal, although the principal may authori7e the intermediary to negotiate a different price. Also,
:9
the principal must Bnow the exact value at which the service is supplied "or obtained$ on his behalf, and any
discounts that the intermediary obtains must be passed bacB to the principal.
Separation of val+e6 *he value of an intermediary@s service is invariably identifiable from the main supply of
service that he is arranging. !t can be based on an agreed percentage of the sale or purchase price. Aenerally, the
amount charged by an agent from his principal is referred to as GcommissionH.
2dentit! and title6 *he service provided by the intermediary on behalf of the principal is clearly identifiable.
!n accordance with the above guiding principles, services provided by the following persons will <ualify as
?intermediary services@)+
i$ *ravel Agent "any mode of travel$
ii$ *our Lperator
iii$ Commission agent for a service Dan agent for buying or selling of goods is excludedF
iv$ Cecovery Agent
(ven in other cases, wherever a provider of any service acts as an intermediary for another person, as identified by
the guiding principles outlined above, this rule will apply. Normally, it is expected that the intermediary or agent
would have documentary evidence authori7ing him to act on behalf of the provider of the ?main service@.
Illustration
A freight forwarder arranges for export and import shipments. *here could be two possible situations here+ one
when he acts on his own account, and the other, when he acts as an intermediary.
A5en t5e frei&5t for8arder acts on 5is o8n account :say- for an export s5ipment;
A freight forwarder provides domestic transportation within taxable territory "say, from the exporter@s factory
located in 1une to 9umbai port$ as well as international freight service "say, from 9umbai port to the international
destination$, under a single contract, on his own account "i.e. he buys+in and sells fright transport as a principal$, and
charges a consolidated amount to the exporter. *his is a service of transportation of goods for which the place of
supply is the destination of goods. %ince the destination of goods is outside taxable territory, this service will not
attract service tax. Iere, it is presumed that ancillary freight services "i.e. services ancillary to transportation+
loading, unloading, handling etc$ are GbundledH with the principal service owing to a single contract or a single price
"consideration$.
Ln an import shipment with similar conditions, the place of supply will be in the taxable territory, and so the service
tax will be attracted.
A5en t5e frei&5t for8arder acts as an intermediary
4here the freight forwarder acts as an intermediary, the place of provision will be his location.
%ervice tax will be payable on the services provided by him. Iowever, when he provides a service to an exporter of
goods, the exporter can claim refund of service tax paid under notification for this purpose.
%imilarly, persons such as call centres, who provide services to their clients by dealing with the customers of the
client on the client@s behalf, but actually provided these services on their own account, will not be categori7ed as
intermediaries.
MEirin& of means of transportN
*he services of providing a hire or lease, without the transfer of right to use is covered by this rule. Normally the
following will constitute means of transport)+
i$ and vehicles such as motorcars, buses, trucBs6
ii$ /essels6
iii$ Aircraft6
iv$ /ehicles designed specifically for the transport of sicB or inJured persons6
v$ 9echanically or electronically propelled invalid carriages6
vi$ *railers, semi+trailers and railway wagons.
;,
*he following are not ?means of transport@)+
i$ Cacing cars6
ii$ Containers used to store or carry goods while being transported6
iii$ .redgers, or the liBe.
@uestion - A5at if I provide a service of 5irin& of a fleet of cars to a company on an annual contract> A5at
8ill 0e place of provision of my service if my 0usiness esta0lis5ment is located in %e8 #el5i- and t5e company
is located in Farida0ad :Earyana;>
*his Cule covers situations where the hiring is for a period of upto one month. %ince hiring period is more than one
month, this sub+rule cannot be applied to the situation. *he place of provision of your service will be determined in
terms of Cule - i.e. receiver location, which in this case is 0aridabad "Iaryana$.

,ule 1.O Place of provision of &oods transportation services.-
The place of provision of services of transportation of goods, other than by way of mail or courier, shall
be the place of destination of the goods6
.rovided that the place of provision of services of goods transportation agency shall be the location of
the person liable to pay tax.
Scope of this *+le
Any service of transportation of goods, by any mode of transport "air, vessel, rail or by a goods transportation
agency$, is covered here. Iowever, transportation of goods by courier or mail is not covered here.
?lace of provision of a service
1lace of provision of a service of transportation of goods is the place of destination of goods, except in the case of
services provided by a Aoods *ransportation Agency in respect of transportation of goods by road, in which case the
place of provision is the location of the person liable to pay tax "as determined in terms of rule 2"1$"d$ of %ervice
*ax Cules, 199& "since amended$.
2ll+stration
A consignment of cut flowers is consigned from Chennai to Amsterdam. *he place of provision of goods
transportation service will be Amsterdam "outside !ndia, hence not liable to service tax$. Conversely, if a
consignment of crystal ware is consigned from 1aris to New .elhi, the place of provision will be New .elhi.
)eanin& of t5e proviso
*he proviso to this Cule states as under)+
3.rovided that the place of provision of services of transportation of goods by goods transportation agency shall be
the location of the person liable to pay tax.5
%ub+rule 2"1$"d$ of %ervice *ax Cules, 199& provides that where a service of transportation of goods is provided by
a ?goods transportation agency@, and the consignor or consignee is covered under any of the specified categories
prescribed therein , the person liable to tax is the person who pays, or is liable to pay freight "either himself or
through his agent$ for the transportation of goods by road in a goods carriage. !f such person is located in non+
taxable territory, then the person liable to pay tax shall be the service provider.
2ll+stration 1
A goods transportation agency A>C located in .elhi transports a consignment of new motorcycles from the factory
of SP8 in Aurgaon "Iaryana$, to the premises of a dealer in >hopal, 9adhya 1radesh. %ay, SP8 is a registered
assessee and is also the person liable to pay freight and hence person liable to pay tax, in this case. Iere, the place of
provision of the service of transportation of goods will be the location of SP8 i.e. Iaryana.
2ll+stration 2
A goods transportation agency A>C located in .elhi transports a consignment of new motorcycles from the factory
of SP8 in Aurgaon "Iaryana$, to the premises of a dealer in 2ammu "non+taxable territory$. %ay, as per mutually
;1
agreed terms between A>C and SP8, the dealer in 2ammu is the person liable to pay freight. Iere, in terms of
amended provisions of rule 2"1$"d$, since the person liable to pay freight is located in non+taxable territory, the
person liable to pay tax will be A>C. Accordingly, the place of provision of the service of transportation of goods
will be the location of A>C i.e. .elhi.
,ule 11O Place of provision of passen&er transportation service.-
*he place of provision in respect of a passenger transportation service shall be the place where the
passenger embarBs on the conveyance for a continuous Journey.
Contin+o+s 9o+rne!
A Gcontinuous JourneyH means a Journey for which)+
"i$ a single ticBet has been issued for the entire Journey6 or
"ii$ more than one ticBet or invoice has been issued for the Journey, by one service provider, or by an agent on behalf
of more than one service providers, at the same time, and there is no scheduled stopover in the Journey
Stopover
G%topoverH means a place where a passenger can disembarB either to transfer to another conveyance or breaB his
Journey for a certain period in order to resume it at a later point of time. All stopovers do not cause a breaB in
continuous Journey. Lnly such stopovers will be relevant for which one or more separate ticBets are issued. *hus a
travel on .elhi+ondon+New PorB+ondon+.elhi on a single ticBet with a halt at ondon on either side, or even
both,will be covered by the definition of continuous Journey. Iowever if a separate ticBet is issued, say New PorB+
>oston+New PorB, the same will be outside the scope of a continuous Journey.
,ule 1!O Place of provision of services provided on 0oard a conveyance.-
.lace of provision of services provided on board a conveyance during the course of a passenger
transport operation, including services intended to be wholly or substantially consumed while on board,
shall be the first scheduled point of departure of that conveyance for the >ourney.
Services provided on oard
Any service provided on board a conveyance "aircraft, vessel, rail, or roadways bus$ will be covered here e.g. on+
board service of moviesEmusicEvideoE software games on demand, beauty treatment etc, albeit only when provided
against a specific charge, and not supplied as part of the fare.
?lace of provision of services provided on oard conve!ances
*he place of provision of services provided on board a conveyance during the course of a passenger transport
operation is the first scheduled point of departure of that conveyance for the Journey.
2ll+stration
A video game or a movie+on+demand is provided as on+board entertainment during the 3olBata+.elhi leg of a
>angBoB+3olBata+.elhi flight. *he place of provision of this service will be >angBoB "outside taxable territory,
hence not liable to tax$.
!f the above service is provided on a .elhi+3olBata+>angBoB+2aBarta flight during the >angBoB+2aBarta leg, then the
place of provision will be .elhi "in the taxable territory, hence liable to tax$.
,ule 1"O Po8ers to notify description of services or circumstances for certain purposes.-
7n order to prevent double taxation or non-taxation of the provision of a service, or for the uniform
application of rules, the entral 2overnment shall have the power to notify any description of service
or circumstances in which the place of provision shall be the place of effective use and en>oyment of a
service.
;2
*he rule is an enabling power to correct any inJustice being met due to the applicability of rules in a foreign territory
in a manner which is inconsistent with these rules leading to double taxation. .ue to the cross border nature of many
services it is also possible in certain situations to set up businesses in a non+taxable territory while the effective
enJoyment, or in other words consumption, may be in taxable territory. *his rule is also meant as an anti+avoidance
measure where the intent of the law is sought to be defeated through ingenious practices unBnown to the ordinary
ways of conducting business.
,ule 1$O Crder of application of rules.-
Eotwithstanding anything stated in any rule, where the provision of a service is, prima facie,
determinable in terms of more than one rule, it shall be determined in accordance with the rule that
occurs later among the rules that merit e:ual consideration.
*his Cule provides that where the provision of a service is, prima facie, determinable in terms of more than one rule,
it shall be determined in accordance with the rule that occurs later among the rules that merit e<ual consideration.
*his Cule covers situations where the nature of a service, or the business activities of the service provider, may be
such that two or more rules may appear e<ually applicable.
0ollowing illustrations will maBe the implications of this Cule clear)+
Illustration 1
An architect based in 9umbai provides his service to an !ndian Iotel Chain "which has business establishment in
New .elhi$ for its newly ac<uired property in .ubai. !f Cule = "1roperty rule$ were to be applied, the place of
provision would be the location of the property i.e. .ubai "outside the taxable territory$. 4ith this result, the service
would not be taxable in !ndia.
4hereas, by application of Cule ;, since both the provider and the receiver are located in taxable territory, the place
of provision would be the location of the service receiver i.e. New .elhi. 1lace of provision being in the taxable
territory, the service would be taxable in !ndia.
>y application of Cule 1&, the later of the Cules i.e. Cule ; would be applied to determine the place of provision.
Illustration !
0or the 9s #niverse Contest planned to be held in %outh Africa, the !ndian pageant "say, located in 9umbai$ avails
the services of !ndian beauticians, fashion designers, videographers, and photographers. *he service providers travel
as part of the !ndian pageant@s entourage to %outh Africa. %ome of these services are in the nature of personali7ed
services, for which the place of provision would normally be the location where performed "1erformance rule+Cule
&$, while for others, under the main rule "Ceceiver location$ the place of provision would be the location of receiver.
4hereas, by application of Cule ;, since both the provider and the receiver are located in taxable territory, the place
of provision would be the location of the service receiver i.e. New .elhi. 1lace of provision being in the taxable
territory, the service would be taxable in !ndia.
>y application of Cule 1=, the later of the Cules i.e. Cule ; would be applied to determine the place of provision.

;-
/
Classification of Taxa0le Services

0
Section 66F. ?rinciples of interpretation of specified descriptions of services or +ndled services.
(#) Anless otherwise specified, reference to a service (herein referred to as main service) shall not
include reference to a service which is used for providing main service.
(') 4here a service is capable of differential treatment for any purpose based on its description, the
most specific description shall be preferred over a more general description.
(&) /ub>ect to the provisions of sub-section ('), the taxability of a bundled service shall be determined in
the following manner, namely6**
(a) if various elements of such service are naturally bundled in the ordinary course of business, it
shall be treated as provision of the single service which gives such bundle its essential character+
(b) if various elements of such service are not naturally bundled in the ordinary course of
business, it shall be treated as provision of the single service which results in highest liability of service
tax.
Explanation.) For the purposes of sub-section (&), the expression 8bundled service8 means a bundle of
provision of various services wherein an element of provision of one service is combined with an
element or elements of provision of any other service or services.
)eanin& of undled Service !t means a bundle of provision of various services wherein an element of
provision of one service is combined with an element or elements of provision of any other service or
services.
*he services may be bundled naturally or intentionally e.g.
"at+rall! +ndled / A = star hotel provides a pacBage deal having lodging, boarding, entertainment and
sightseeing etc.
Artificiall! +ndled / An immovable property rented out. *his is to be used partially for residential
purpose and partly for commercial purpose. !n this case, it has to be understood that the renting of
immovable property for residential purpose is covered in the negative list. *herefore, renting for
commercial purpose attracts highest amount of service tax. !n this case, entire service will become subJect
to service tax.
*here is no standard formula to determine whether services have been bundled naturally or artificially.
4hether services are bundled naturally or artificially, that will depend on prevailing practice of maJority
of the service providers in a particular business or terms of contract etc.

,ules of Interpretation
-
Inserted vide Finance Act, 202 !"e"#" "$"202
;&
%ection ''0 lays down the principles of interpretation of specified descriptions of services and bundled
services. *hese are explained in paras below 5
Principles for interpretation of specified descriptions of services
Although the negative list approach largely obviates the need for descriptions of services, such
descriptions continue to exist in the following areas 5
+ !n the negative list of services.
+ !n the declared list of services.
+ !n exemption notifications.
+ !n the 1lace of 1rovision of %ervice Cules, 2,12
+ !n a few other rules and notifications e.g. Cenvat Credit Cules, 2,,&.
*here are two principles laid down which are contained in clauses "1$ and "2$ of section ''0 of the Act.
Clause :1; <Inless ot5er8ise specified- reference to a service :5ereinafter referred to as t5e Mmain
serviceN; s5all not include reference to a service 85ic5 is used for providin& t5e main service
0ollowing examples help to understand the meaning of this clause 5
?1rovision of access to any road or bridge on payment of toll@ is a specified entry in the negative
list in section ''. of the Act. Any service provided in relation to collection of tolls or for security of
a toll road would be in the nature of service used for providing such specified service and will not be
entitled to the benefit of the negative list entry.
*ransportation of goods on an inland waterway is a specified entry in the negative list in section
''. of the Act. %ervices provided by an agent to booB such transportation of goods on inland
waterways or to facilitate such transportation would not be entitled to the negative list entry.
Clause :!; <85ere a service is capa0le of differential treatment for any purpose 0ased on its
description- t5e most specific description s5all 0e preferred over a more &eneral description.
0ollowing examples help to understand the meaning of this clause 5
*he services provided by a real estate agent are in the nature of intermediary services relating to
immovable property. As per the 1lace of 1rovision of %ervice Cule, 2,12, the place of provision of
services provided in relation to immovable property is the location of the immovable property.
Iowever in terms of the rule = pertaining to services provided by an intermediary the place of
provision of service is where the intermediary is located. %ince Cule = provides a specific description
of ?estate agent@, the same shall prevail.
1andal and %hamiana is an existing service and will remain a subJect of taxation. iBewise
service provided by way of catering is a taxable service and entitled to abatement. *here is abatement
when the two are provided in combination. %ince the combination is more a specific entry than the
two provided individually, there is no need to apply the later rule of bundled services, where the
character could be Judged by the service which provides it the essential character.
Taxa0ility of <0undled services.
?>undled service@ means a bundle of provision of various services wherein an element of provision of one
service is combined with an element or elements of provision of any other service or services e.g. air
transport services provided by airlines wherein an element of transportation of passenger by air is
;=
combined with an element of provision of catering service on board. (ach service involves differential
treatment as a manner of determination of value of two services for the purpose of charging service tax is
different.
*wo rules have been prescribed for determining the taxability of such services in clause "-$ of section ''0
of the Act. *hese rules, which are explained below, are subJect to the provisions of the rule contained in
sub section "2$ of section ''0 i.e. a specific description will be preferred over a general description.
Services ;hich are nat+rall! +ndled in the ordinar! co+rse of +siness
*he rule is 5 ?!f various elements of a bundled service are naturally bundled in the ordinary course of
business, it shall be treated as provision of a single service which gives such bundle its essential
character@
2ll+strations #
A hotel provides a &+.E-+N pacBage with the facility of breaBfast. *his is a natural bundling of
services in the ordinary course of business. *he service of hotel accommodation gives the bundle the
essential character and would, therefore, be treated as service of providing hotel accommodation.
A = star hotel is booBed for a conference of 1,, delegates on a lump sum pacBage with the
following facilities)
+ Accommodation for the delegates
+ >reaBfast for the delegates,
+ *ea and coffee during conference
+ Access to fitness room for the delegates
+ Availability of conference room
+ >usiness centre
As is evident a bou<uet of services is being provided, many of them chargeable to different effective rates
of tax. None of the individual constituents are able to provide the essential character of the service.
Iowever, if the service is described as convention service it is able to capture the entire essence of the
pacBage. *hus the service may be Judged as convention service and chargeable to full rate. Iowever it
will be fully Justifiable for the hotel to charge individually for the services as long as there is no attempt
to offload the value of one service on to another service that is chargeable at a concessional rate.
Services ;hich are not nat+rall! +ndled in the ordinar! co+rse of +siness
*he rule is 5 ?!f various elements of a bundled service are not naturally bundled in the ordinary course of
business, it shall be treated as provision of a service which attracts the highest amount of service tax.@
2ll+strations #
A house is given on rent one floor of which is to be used as residence and the other for housing a printing
press. %uch renting for two different purposes is not naturally bundled in the ordinary course of business.
*herefore, if a single rent deed is executed it will be treated as a service comprising entirely of such
service which attracts highest liability of service tax. !n this case renting for use as residence is a negative
list service while renting for non+residence use is chargeable to tax. %ince the latter category attracts
highest liability of service tax amongst the two services bundled together, the entire bundle would be
treated as renting of commercial property.
;'
Significance of the condition that the r+le relating to 4+ndled service5 is s+9ect to the provisions of
s+#section &2( of section 66F.
%ub+section "2$ of section '' lays down O ?where a service is capable of differential treatment for any
purpose based on its description, the most specific description shall be preferred over a more general
description@. *his rule predominates over the rule laid down in sub+section "-$ relating to ?bundled
services@. !n other words, if a bundled service falls under a service specified by way of a description then
such service would be covered by the description so specified. (xample relating to a bundled service
wherein a pandal and shamiana is provided in combination with catering service explains the operation of
this rule.
Canner of deter3ining if the services are +ndled in the ordinar! co+rse of +siness
4hether services are bundled in the ordinary course of business would depend upon the normal or
fre<uent practices followed in the area of business to which services relate. %uch normal and fre<uent
practices adopted in a business can be ascertained from several indicators some of which are listed below
5
*he perception of the consumer or the service receiver. !f large number of service receivers of
such bundle of services reasonably expect such services to be provided as a pacBage then such a
pacBage could be treated as naturally bundled in the ordinary course of business.
9aJority of service providers in a particular area of business provide similar bundle of services.
0or example, bundle of catering on board and transport by air is a bundle offered by a maJority of
airlines.
*he nature of the various services in a bundle of services will also help in determining whether
the services are bundled in the ordinary course of business. !f the nature of services is such that one of
the services is the main service and the other services combined with such service are in the nature of
incidental or ancillary services which help in better enJoyment of a main service. 0or example service
of stay in a hotel is often combined with a service or laundering of -+& items of clothing free of cost
per day. %uch service is an ancillary service to the provision of hotel accommodation and the resultant
pacBage would be treated as services naturally bundled in the ordinary course of business.
Lther illustrative indicators, not determinative but indicative of bundling of services
in ordinary course of business are +
O *here is a single price or the customer pays the same amount, no matter how much of the
pacBage they actually receive or use.
O *he elements are normally advertised as a pacBage.
O *he different elements are not available separately.
O *he different elements are integral to one overall supply 5 if one or more is removed, the nature
of the supply would be affected.
No direct formula can be laid down to determine whether a service is naturally bundled in the ordinary
course of business. (ach case has to be decided on case to case basis.
PPPPPPPPPPPP
;:
1
2aluation of Taxa0le Services
[Section +/ read 8it5 Service Tax 2aluation ,ules]

4. =eneral Provisions - Sec. +/:1;
a. A5en t5e &ross amount c5ar&ed in money s5all 0e ta7en - *he gross amount charged on the invoice shall be
the value of taxable services provided the consideration is charged in money and no other consideration is being
received in lieu of such money for such services.
0. A5en t5e value of consideration is included in t5e money value - 4here the consideration is not charged
wholly or partly in money then the value of taxable services shall be G9oney value plus money value of
consideration other than moneyH e.g. receiver of service provided some services or goods in lieu of services
received by him.
c. A5en t5e value s5all 0e determined 8it5 reference to valuation rules - As per section ':, the value shall be
determined in accordance with the provisions of this section only. Iowever in following cases the value shall be
determined with reference to valuation rules) +
+ 4here the consideration is received other than money and the value of such consideration is not ascertainable.
+ Any other cases, as may be prescribed in the valuation rules
)eanin& of <=ross 4mount - %ection ':"-$ provides that, the gross amount charged for the taxable service shall
include any amount received towards the taxable service before, during or after provision of such service.
0urther, it includes payment by che<ue, credit card, deduction from account and any form of payment by issue of
credit notes or debit notes and booB adJustment, and any amount credited or debited, as the case may be, to any
account, whether called G%uspense accountH or by any other name, in the booBs of account of a person liable to pay
service tax, where the transaction of taxable service is with any associated enterprise. B=xplanation (c) of /ection
6;D
)eanin& of 9Consideration9 - (xplanation "a$ to the %ection ': states that, NconsiderationN includes any amount
that is payable for the taxable services provided or to be provided6
)eanin& of 9)oney9 - (xplanation "b$ to the %ection ': states that, NmoneyN includes any currency, che<ue,
promissory note, letter of credit, draft, pay order, travellers che<ue, money order, postal remittance and other
similar instruments but does not include currency that is held for its numismatic value6
. 2aluation 85ere &ross amount includes service tax [Sec. +/:!;] - 4here the gross amount charged by a
service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such
taxable service shall be such amount as, with the addition of tax payable, is e<ual to the gross amount charged e.g.
if 9r. A receive gross amount Cs. 1, ,,,,,, for the services rendered by him, than the value of taxable service
shall be 1,,,,,,, S 1,,E112.-'

2aluation of service portion in execution of a 8or7s contract [,ule !4]
*he manner for determining the value of service portion of a worBs contract from the total worBs contract is given in
Cule 2A of the %ervice *ax ".etermination of /alue$ Cules, 2,,'.
;;
As per sub+rule "i$ of the said Cule 2A the value of the service portion in the execution of a worBs contract is the
gross amount charged for the worBs contract less the value of transfer of property in goods involved in the execution
of the said worBs contract.
=ross amount includes =ross amount does not include
"i$ labour charges for execution of the worBs6
"ii$ amount paid to a sub+contractor for labour
and services6
"iii$ charges for planning, designing and
architectXs fees6
"iv$ charges for obtaining on hire or otherwise,
machinery and tools used for the execution
of the worBs contract6
"v$ cost of consumables such as water,
electricity, fuel used in the execution of the
worBs contract6
"vi$ cost of establishment of the contractor
relatable to supply of labour and services6
"vii$ other similar expenses relatable to supply of
labour and services6 and
"viii$ profit earned by the service provider
relatable to supply of labour and services6
"a$ gross amount charged for the worBs contract
shall not include value added tax or sales tax,
as the case may be, paid or payable, if any, on
transfer of property in goods involved in the
execution of the said worBs contract6
"b$ 4here value added tax or sales tax has been
paid or payable on the actual value of
property in goods transferred in the execution
of the worBs contract, then, such value
adopted for the purposes of payment of value
added tax or sales tax, shall be taBen as the
value of property in goods transferred in the
execution of the said worBs contract for
determination of the value of service portion
in the execution of worBs contract under this
clause.
;9
Simplified sc5eme for determinin& t5e value of service portion in a 8or7s contract
According to Clause "ii$ of rule 2A of the %ervice *ax ".etermination of /alue$ Cules, 2,,' where value has not
been determined in the manner as provided in clause "i$ of rule 2A "explained above$, then it shall be determined in
the manner explained in the table below +
6here ;or7s contract is forA Dal+e of the service portion shall eA
(xecution of original worBs,
%ervice tax shall be payable on forty per cent of the
total amount charged for the worBs contract6
9aintenance or repair or reconditioning or restoration
or servicing of any goods,
%ervice tax shall be payable on seventy percent of the
Lther worBs contracts, not covered under sub+clauses
"A$ and ">$, including maintenance, repair,
completion and finishing services such as gla7ing,
plastering, floor and wall tiling, installation of
electrical fittings of an immovable property ,
%ervice tax shall be payable on sixty per cent of the
"a$ 9ori&inal 8or7s9 means+
"i$ all new constructions6
"ii$ all types of additions and alterations to abandoned or damaged structures on land that are
re<uired to maBe them worBable6
"iii$ erection, commissioning or installation of plant, machinery or e<uipment or structures, whether
pre+fabricated or otherwise6
Ceaning of the ;ord 4total a3o+nt5
Ntotal amountN means the sum total of the gross amount charged for the worBs contract and the fair marBet value of
all goods and services supplied in or in relation to the execution of the worBs contract, whether or not supplied
under the same contract or any other contract, after deducting+
"i$ the amount charged for such goods or services, if any6 and
"ii$ the value added tax or sales tax, if any, levied thereon)
Provided that the fair marBet value of goods and services so supplied may be determined in accordance
with the generally accepted accounting principles.
#etermination of value of service in relation to money c5an&in& [,ule !]
%ubJect to the provisions of section ':, the value of taxable service provided for the services, so far as it pertains to
purchase or sale of foreign currency, including money changing, shall be determined by the service provider in the
following manner)+
0or a currency, when exchanged from, or to, !ndian Cupees "!NC$, the value shall be e<ual to the difference in the
buying rate or the selling rate, as the case may be, and the Ceserve >anB of !ndia "C>!$ reference rate for that
currency at that time, multiplied by the total units of currency.
*xample IO #%Y1,,, are sold by a customer at the rate of Cupees &= per #%Y.
C>! reference rate for #%Y is Cupees &=.=, for that day.
*he taxable value shall be Cupees =,,.
9,
*xample IIO !NC :,,,, is changed into Areat >ritain 1ound "A>1$ and the exchange rate offered is Cupees
:,, thereby giving A>1 1,,,.
C>! reference rate for that day for A>1 is Cupees '9.
*he taxable value shall be Cupees 1,,,.
Provided t5at in case where the C>! reference rate for a currency is not available, the value shall be 1K of the
gross amount of !ndian Cupees provided or received, by the person changing the money)
Provided furt5er that in case where neither of the currencies exchanged is !ndian Cupee, the value shall be e<ual
to 1K of the lesser of the two amounts the person changing the money would have received by converting any of
the two currencies into !ndian Cupee on that day at the reference rate provided by C>!
Iere it is to be noted that as per (xplanation 2 to clause "&&$ of %ection '=>, which defines ?service@, activity of
conversion of one currency into another for which a separate consideration is charged would not get tantamount to a
transaction only in money. !n transactions of sale and purchase of foreign currency or money changing since a
separate consideration is charged these would not be excluded from the definition of ?service@.
2aluation of service portion involved in supply of food or any ot5er article of 5uman consumption
or any drin7 in a restaurant or as outdoor caterin&. ,ule !C
Sl.%o. #escription
Percenta&e of t5e
total amount
:1; :!; :";
1.
%ervice portion in an activity wherein goods, being food or any other article
of human consumption or any drinB "whether or not intoxicating$ is supplied
in any manner as a part of the activity, at a restaurant
&,
2.
%ervice portion in outdoor catering wherein goods, being food or any other
article of human consumption or any drinB"whether or not intoxicating$ is
supplied in any manner as a part of such outdoor catering
',
Explanation 1.# 0or the purposes of this rule, Ntotal amountN means the sum total of the gross amount charged and
the fair marBet value of all goods and services supplied in or in relation to the supply of food or any other article of
human consumption or any drinB"whether or not intoxicating$, whether or not supplied under the same contract or
any other contract, after deducting+
"i$ the amount charged for such goods or services, if any6 and
Provided that the fair marBet value of goods and services so supplied may be determined in accordance
with the generally accepted accounting principles.
Explanation 2.- 0or the removal of doubts, it is clarified that the provider of taxable service shall not taBe
C(N/A* credit of duties or cess paid on any goods classifiable under Chapters 1 to 22 of the Central (xcise *ariff
Act, 19;= "= of 19;'$.]
91
"ote # !t is to be noted that Cule 2C applies only in cases of restaurants and outdoor catering. 0or valuation of
service portion where such supplies are made in any other premises liBe hotel, convention center, club, pandal,
shamiana or any place specially arranged for organi7ing a function an abatement of -,K has been provided for in
exemption notification no 2'E2,12+%* dated 2,E'E12.
2alue of Similar Services - ,ule ":a;
Cule -"a$ of %ervice *ax ".etermination of /alue$ Cules, 2,,' is applicable where) +
+ the additional consideration is received other than money
+ value of such consideration is not ascertainable
+ value of similar service is available
!n such case the value of such taxable service shall be e<uivalent to the gross amount charged by the service
provider to provide similar service to any other person in the ordinary course of his business and the gross
amount charged is the sole consideration.
*he word NsimilarN does not mean identical but it means corresponding to or resembling to in many respects6
somewhat liBe6 or having a general liBeness. *he statute does not contemplate that goods classed under the words
of Xsimilar descriptionX shall be in all respects the same. !f it did these words would be unnecessary. *hese were
intended to embrace goods but not identical with those goodsZ.N
*Guivalent 2alue - ,ule ":0;
Cule -"b$ of %ervice *ax ".etermination of /alue$ Cules, 2,,' is applicable where) +
+ the additional consideration is received other than money
+ value of such consideration is not ascertainable
+ value of similar service is not ascertainable under rule -"a$
Accordingly, where the value cannot be determined in accordance with clause "a$, the service provider shall
determine the e<uivalent money value of such consideration which shall, in no case be less than the cost of
provision of such taxable service. !n other words, the value shall be determined by the assessee himself and such
value must not be less that cost of such services.
*his Cule is silent as to how to calculate the value of serviceM CA%+& "Cost Accounting %tandard &$ of the
!C4A! provides the method and procedure for calculating the cost of manufactured E produced goods. *his
standard CA%+& may be applied for the purpose of determination of Cost of %ervices 1rovided for the purpose of
rule -"b$.
,eDection of 2alue - ,ule $
*he primary responsibility to determine the correct value of the taxable services lies upon the assessee. Iowever,
in certain cases the Central (xcise Lfficer has the power to reJect the value and determine the same in accordance
with the valuation rules. >efore, reJecting the value determined by the assessee the Central (xcise Lfficer has to
follow the prescribed procedure as follows)
+ A show cause notice shall be issued.
+ %how cause notice must specify the value of taxable services.
+ Lpportunity of being heard must be granted.
+ Correct /alue shall be determined.
92
Inclusions B *xclusions of certain expenditures or costs [,ule (]
1eneral ?rovisions # all cost or expendit+re shall e incl+ded # r+le %&1(
Cule ="1$ provides that all the expenses and costs incurred in connection with the service provided shall be shall be
included in the value for the purpose of charging service tax on the said service. (xplanation 2 of the rule = states
that, for the removal of doubts it is clarified that the value of the taxable service is the total amount of
consideration consisting of all components of the taxable service and it is immaterial that the details of individual
components of the total consideration is indicated separately in the invoice.
*e#i3+rse3ent of expenses $*+le %&2()
!f any expenditure has been incurred by the service provider in connection with the service but in the capacity of
?pure agent@ then all such expenses are not includible in the assessable value of the service at the time of
reimbursement thereof by the principal.
Any expenditure is said to have been incurred in the capacity of ?pure agent@ only if 5
1. *he recipient of service is liable to maBe payment to the third party6
2. *he recipient of service authorises the service provider to maBe payment on his behalf6
-. *he service provider maBes payment to third party for the goods or services procured6
&. *he recipient of service receives and uses the goods or services so procured by the service provider in his
capacity as pure agent of the recipient of service6
=. *he recipient of service Bnows that the goods and services for which payment has been made by the
service provider shall be provided by the third party6
'. *he payment made by the service provider on behalf of the recipient of service has been separately
indicated in the invoice issued by the service provider to the recipient of service6
:. *he service provider recovers from the recipient of service only such amount as has been paid by him to
the third party6 and
;. *he goods or services procured by the service provider from the third party as a pure agent of the recipient
of service are in addition to the services he provides on his own account.
Ceaning of ?+re Agent $Explanation 1 to *+le %)# 1ure agent is a person who) +
1 enters into a contractual agreement with the recipient of service to act as his pure agent to incur expenditure
or costs in the course of providing taxable service6
2 neither intends to hold nor holds any title to the goods or services so procured or provided as pure agent of
the recipient of service6
- does not use such goods or services so procured6 and
& receives only the actual amount incurred to procure such goods or services.
Contractual agreement need not be in writing. A contractual agreement may be an oral agreement also.

2ll+stration 1.- S contracts with P, a real estate agent to sell his house and thereupon P gives an advertisement in
television. P billed S including charges for *elevision advertisement and paid service tax on the total
consideration billed. !n such a case, consideration for the service provided is what S pays to P. P does not act as
an agent behalf of S when obtaining the television advertisement even if the cost of television advertisement is
mentioned separately in the invoice issued by S. Advertising service is an input service for the estate agent in
order to enable or facilitate him to perform his services as an estate agent
2ll+stration 2. - !n the course of providing a taxable service, a service provider incurs costs such as traveling
expenses, postage, telephone, etc., and may indicate these items separately on the invoice issued to the recipient
of service. !n such a case, the service provider is not acting as an agent of the recipient of service but procures
such inputs or input service on his own account for providing the taxable service. %uch expenses do not become
9-
reimbursable expenditure merely because they are indicated separately in the invoice issued by the service
provider to the recipient of service.
2ll+stration 0.-A contracts with >, an architect for building a house. .uring the course of providing the taxable
service, > incurs expenses such as telephone charges, air travel ticBets, hotel accommodation, etc., to enable him
to effectively perform the provision of services to A. !n such a case, in whatever form > recovers such
expenditure from A, whether as a separately itemised expense or as part of an inclusive overall fee, service tax is
payable on the total amount charged by >. /alue of the taxable service for charging service tax is what A pays to
>.
#epartmental Clarification a0out ,e-im0ursement of *xpenditureO - Circular E etter No. 0.No. >1E &E 2,,'+
*C# dated 19+&+2,,'
,eim0ursa0le expenditure
&.1.: /alue for the purpose of charging service tax is the gross amount received as consideration for provision of
service. All expenditures or costs incurred by the service provider in the course of providing a taxable service
forms integral part of the taxable value and are includable in the value. !t is not relevant that various expenditure
or costs are separately indicated in the invoice or bill issued by the service provider to his client.
&.1.; *he service provider in the course of providing any taxable service may incur certain expenditure or cost as
a pure agent of the client. *he service provider seeBs to exclude such expenditure or cost incurred by him as a
pure agent of his client "generally Bnown as reimbursable expenditure$ from the value of the taxable services.
&.1.9 *here could be situations where the client of the service provider specifically engages the service provider,
as his agent, to contract with the third party for supply of any goods or services on his behalf. !n those cases such
goods or services so procured are treated as supplied to the client rather than to the contracting agent. *he service
provider in such cases incurs the expenditure purely on behalf of his client in his capacity as agent of the client.
Amounts paid to the third party by the service provider as a pure agent of his client can be treated as reimbursable
expenditure and not includible in the taxable value. Iowever, if the service provider acts as an undisclosed agent
i.e. acting in his own name without disclosing that he is actually acting as an agent of his client, he cannot claim
the expenditure incurred by him as reimbursable expenditure. 4hether the expenditure or cost incurred by the
service provider in his capacity as a pure agent of the client or incurred on his own account is a <uestion of fact
and law and is to be determined carefully.
&.1.1, !ndication of different elements of the transaction in the invoice or bill could often be misleading. Lne has
to carefully examine the exact legal nature of the transactions and other material facts before taBing a view as to
whether or not the expenditure sought to be excluded from the value is reimbursable expenditure. Not only the
form, but also the substance of the transaction should be duly taBen into account.
&.1.11 Cule = pertains to reimbursable expenditure incurred by the service provider as a pure agent of his client.
(xplanation "1$ to rule ="2$ clearly specifies the criteria to decide whether the service provider acts as a pure
agent or not in a given situation. !n the case of agency function, the agent neither intends to hold nor holds any
title to the goods or services and also never uses such goods or services so procured. !t is also important to note
that the service provider only receives the actual amount incurred to procure such goods or services.
Inclusions B *xclusions of certain service-specific items - ,ule +
Specific incl+sions $*+le 6&1()
the commission or broBerage charged by a broBer on the sale or purchase of securities including the
commission or broBerage paid by the stocB+broBer to any sub+broBer6
the adJustments made by the telegraph authority from any deposits made by the subscriber at the time of
application for telephone connection or pager or facsimile or telegraph or telex or for leased circuit6
the amount of premium charged by the insurer from the policy holder6
the commission received by the air travel agent from the airline6
9&
the commission, fee or any other sum received by an actuary, or intermediary or insurance intermediary or
insurance agent from the insurer6
the reimbursement received by the authorised service station, from manufacturer for carrying out any
service of any motor car, light motor vehicle or two wheeled motor vehicle manufactured by such
manufacturer6
the commission or any amount received by the rail travel agent from the Cailways or the customer6
the remuneration or commission, by whatever name called, paid to such agent by the client engaging such
agent for the services provided by a clearing and forwarding agent to a client rendering services of clearing
and forwarding operations in any manner6
the commission, fee or any other sum, by whatever name called, paid to such agent by the insurer
appointing such agent in relation to insurance auxiliary services provided by an insurance agent6 and
the amount reali7ed as demurrage or by any other name whatever called for the provision of service beyond
the period originally contracted or in any other manner relatable to the provision of service.
All the expenses incurred by the service provider in the ordinary course of business are treated as consideration for
taxable service provided or agreed to be provided and shall be included in the value for the purpose of charging
%ervice *ax on the said service.
(xplanation to sub+rule "1$ of Cule = clarifies that for the value of telecommunication services shall be the gross
amount paid by the person to whom the service is actually provided "i.e. the subscriber$ e.g. a shopBeeper sells
recharge voucher of Cs. =,, to the customer. *hat voucher was purchased by him from the service provider for Cs.
&:=E+. !n this case, the service provider will have to pay service tax out of Cs. =,,E+ on reverse calculation basis and
not on Cs. &:=E+.
Specific Excl+sions $*+le 6&2()
!nitial deposit made by the subscriber at the time of application for telephone connection or pager or
facsimile "0AS$ or telegraph or telex or for leased circuit6
Airfare collected by air travel agent in respect of service provided by him6
Cail fare collected by Drail travel agentF in respect of service provided by him6
!nterest on delayed payment of any consideration for the provision of services or sale of property, whether
moveable or immoveable6
*axes levied by any Aovernment on any passenger travelling by air, if shown separately on the ticBet, or
the invoice for such ticBet, issued to the passenger6
Accidental damages due to unforeseen action not relatable to the provision of service6
Exa3ples#
7nsurance ompanies provide insurance services to the clients for which the premium is charged.
The premium charged is a consideration for the insurance service provided. Iowever, in case due to
an unforeseen action ,li,e an accident etc., a compensation is paid by the insurance company to the
client then the money would not be included as part of value of taxable service as it is not relatable to
the provisions of service but is only in the nature of conse:uence of provisions of insurance service.
7n case a landlord who has rented out his office building to a tenant receives compensation from
the tenant for the damage caused to the building by an unforeseen action then such compensation
would not form part of the value of taxable service related to tenant of his building as an unforeseen
damage caused by the tenant is not relatable to provision of service of renting of the office building.
9=
%ubsidies or grants disbursed by the Aovernment, not in the nature of directly influencing
the value of service.
Pure 4&ent + As per sub rule "2$ of Cule = the expenditure or cost incurred by the service provider as a pure agent
of the recipient of the service shall be excluded from the value of taxable service if all the following conditions are
satisfied)
the service provider acts as a pure agent of the recipient of service when he maBes payment to third party
for the goods or services procured6
the recipient of service receives and uses the goods or services so procured by the service provider in his
capacity as pure agent of the recipient of service6
the recipient of service is liable to maBe payment to the third party6
the recipient of service authorises the service provider to maBe payment on his behalf6
the recipient of service Bnows that the goods and services for which payment has been made by the service
provider shall be provided by the third party6
the payment made by the service provider on behalf of the recipient of service has been separately indicated
in the invoice issued by the service provider to the recipient of service6
the service provider recovers from the recipient of service only such amount as has been paid by him to the
third party6 and
the goods or services procured by the service provider from the third party as a pure agent of the recipient
of service are in addition to the services he provides on his own account.

A5ere services are provided free of cost
!t is now well established fact that where services are provided free of cost there is no service tax on the basis of
deemed value of services. %ection '' of the Act provides that services are chargeable at the rate of 1,K on the
value of taxable services. *herefore, if there is no value, there is no service tax. Also see paragraph no. = of the
circular no. '2E11E2,,- %* dated 21E;E2,,-
PPPPPPPPPP
Compoundin& sc5emes for determination of t5e amount of service tax
%ub+Cule ":$, ":A$, ":>$ and ":C$ of Cule ' of the %*C 199& provide an option to the service provider to provide
service tax under simplified mechanism of compounding. *hese sub+rules either specify the service tax payable as a
certain percentage of the gross amount of a specified sum received by the service provider or also provide for
manner of determination of value of taxable service for other specified services. *hese compounding schemes are as
under)

Su0-
,ule
Service Service Tax
:/; oo7ing of
tic7ets for travel
! air
"mount calculated at the rate of <.6J of the basic fare in the case of domestic
boo,ings, and at the rate of #.'J of the basic fare in the case of international
boo,ings, of passage for travel by air, during any calendar month or :uarter,
as the case may be.
The option, once exercised, shall apply uniformly in respect of all the boo,ings
of passage for travel by air made by him and shall not be changed during a
financial year under any circumstances.
-asic fare- means that part of the air fare on which commission is normally
paid to the air travel agent by the airline.
9'
:/4; 'ife Insurance
usiness
"n insurer carrying on life ins+rance +siness shall have the option to pay
tax6
(i) on the gross premium charged from a policy holder reduced by the
amount allocated for investment, or savings on behalf of policy holder, if
such amount is intimated to the policy holder at the time of providing of
service+
(ii) in all other cases, & per cent. of the premium charged from policy
holder in the first year and #.H per cent. of the premium charged from policy
holder in the subse:uent years+
towards the discharge of his service tax liability instead of paying service
tax at the rate specified in section 66( of hapter ! of the said "ct6
?rovided that such option shall not be available in cases where the entire
premium paid by the policy holder is only towards ris, cover in life insurance.
:/; p+rchase or sale
of foreign
c+rrenc!,
incl+ding
3one!
changing
The person liable to pay service tax shall have the option to pay an amount
calculated at the following rate towards discharge of his service tax
liability instead of paying service tax at the rate specified in section 66( of
hapter ! of the "ct, namely 6
(a) <.#' per cent of the gross amount of currency exchanged for an
amount upto rupees #<<,<<<, sub>ect to the minimum amount of rupees
&<+ and
(b) rupees #'< and <.<6 per cent of the gross amount of currency
exchanged for an amount of rupees exceeding rupees #<<,<<< and upto
rupees #<,<<,<<<+ and
(c) rupees 66< and

<.<#' per cent of the gross amount of currency
exchanged for an amount of rupees exceeding #<,<<,<<<, sub>ect to
maximum amount of rupees 6<<<6
?rovided that the person providing the service shall exercise such
option for a financial year and such option shall not be withdrawn during the
remaining part of that financial year.
:/C; The distri+tor
or selling agent,
liale to pa!
service tax for
the taxale
service of
pro3otion,
3ar7eting,
organising or in
an! other
3anner
assisting in
organising
lotter!
:i; 7f the lottery or lottery scheme is one where the guaranteed pri9e payout is
more than K<J - the amount of service tax shalbe Cs. ;<<<G-on every Cs. #<
0a,h (or part of Cs. #< 0a,h) of aggregate face value of lottery tic,ets printed
by the organising /tate for a draw
"ii$ 7f the lottery or lottery scheme is one where the guaranteed pri9e payout is
less than K<J - the amount of servcei tax shall be Cs. ##<<<G-on every Cs. #<
0a,h (or part of Cs. #< 0a,h) of aggregate face value of lottery tic,ets printed
by the organising /tate for a draw
?rovided that in case of online lotter!, the aggregate face value of lottery tic,ets for the purpose
of this sub-rule shall be ta,en as the aggregate value of tic,ets sold, and service tax shall be
calculated in the manner specified in the said Table.
?rovided f+rther that the distributor or selling agent shall exercise such option within a period of
9:
one month of the beginning of each financial year and such option shall not be withdrawn during
the remaining part of the financial year.

2alue of service for financial leasin& services- includin& eGuipment leasin& and 5ire purc5ase
/alue of services in these cases shall be the sum total of the following+
+ 1,K of the amount forming or representing interest6 and
+ Lther charges such as lease management fees, processing fees, documentation charges and administrative
fees.
Person responsi0le for determinin& t5e value of taxa0le service
%ince %ervice *ax has to be paid by the persons responsible to pay %ervice *ax on the basis of self+assessment for
value of taxable service has to be determined by the person responsible for payment of %ervice *ax in accordance
with the provisions of %ection ': of the Act and rules made there under. Iowever, in accordance with the provisions
of %ection :- of the 0inance Act 199& and Cule & of %ervice *ax ".etermination of value$ Cules 2,,' the value
determined by the service provider or any other person responsible for payment of service tax can be reJected by
Central (xcise Lfficer if he is satisfied that the value declared by the assessee is not correct. !n such a situation the
Central (xcise Lfficer shall issue a %how Cause Notice to the serviced provider or any other person responsible for
payment of %ervice *ax to %how Cause as to why the value of such taxable service for the purpose of charging
service tax should not be fixed on the amount specified in the notice. After giving reasonable options and heard, the
Central (xcise Lfficer shall determine the value of such taxable service for the purpose of charging service tax in
accordance with the provisions of the 0inance Act 199& and the /aluation Aoods.

%otified a0atements for determinin& t5e taxa0le value.
All abatements available to services of specified categories have now been merged in one exemption notification no
2'E2,12+%* dated 2,E'E12. !n terms of the said notification, exemption is granted from so much of the service tax
leviable, as is in excess of the service tax calculated on a value which is e<uivalent to a percentage specified in the
corresponding entry in column "-$ of the following *able, of the amount charged "or in some cases of specified
amount$ by such service provider for providing the said taxable service, unless specified otherwise, subJect to the
relevant conditions specified in the corresponding entry in column "&$ of the said *able)
Ta0le
Sl.
%o.
#escription of taxa0le
service
Percent-
a&e
Conditions
:1; :!; :"; :$;
1 %ervices in relation to financial leasing
including hire purchase
1, Nil.
2 *ransport of goods by rail -, Nil.
9;
- *ransport of passengers, with or without
accompanied belongings by rail
-, Nil.
& >undled service by way of supply of food
or any other article of human consumption
or any drinB, in a premises " including
hotel, convention center, club, pandal,
shamiana or any other place, specially
arranged for organi7ing a function$
together with renting of such premises
:, "i$ C(N/A* credit on any goods
classifiable under Chapters 1 to 22 of the
Central (xcise *ariff Act, 19;= "= of
19;'$ used for providing the taxable
service, has not been taBen under the
provisions of the C(N/A* Credit Cules,
2,,&.
= *ransport of passengers by air, with or
without accompanied belongings
&, C(N/A* credit on inputs and capital
goods, used for providing the taxable
service, has not been taBen under the
provisions of the C(N/A* Credit Cules,
2,,&.
' Centing of hotels, inns, guest houses,
clubs, campsites or other commercial
places meant for residential or lodging
purposes.
', %ame as above.
: %ervices of goods transport agency in
relation to transportation of goods.
2= C(N/A* credit on inputs, capital goods
and input services, used for providing the
taxable service, has not been taBen under
the provisions of the C(N/A* Credit
Cules, 2,,&.
; %ervices provided in relation to chit :, %ame as above.
9 Centing of any motor vehicle designed to
carry passengers
&, %ame as above.
1, *ransport of goods in a vessel =, %ame as above.
11

%ervices by a tour operator in relation to,+
"i$ a pacBage tour
2= "i$ C(N/A* credit on inputs, capital
goods and input services, used for
providing the taxable service, has not been
taBen under the provisions of the C(N/A*
Credit Cules, 2,,&.
"ii$ *he bill issued for this purpose
indicates that it is inclusive of charges for
such a tour.
"ii$ a tour, if the tour operator is
providing services solely of arranging or
booBing accommodation for any person in
relation to a tour

1, "i$ C(N/A* credit on inputs, capital
Credit Cules, 2,,&.
"ii$ *he invoice, bill or challan issued
99
indicates that it is towards the charges for
such accommodation.
"iii$ *his exemption shall not apply in such
cases where the invoice, bill or challan
issued by the tour operator, in relation to a
tour, only includes the service charges for
arranging or booBing accommodation for
any person and does not include the cost of
such accommodation.
"iii$ any services other than specified at "i$
and "ii$ above.
&, "i$ C(N/A* credit on inputs, capital
Credit Cules, 2,,&.
"ii$*he bill issued indicates that the amount
charged in the bill is the gross amount
charged for such a tour.
12. Construction of a complex, building, civil
structure or a part thereof, intended for a
sale to a buyer, wholly or partly except
where entire consideration is received
after issuance of completion certificate by
the competent authority
2= "i$ C(N/A* credit on inputs used for
providing the taxable service has not been
Credit Cules, 2,,&.
"ii$*he value of land is included in the
amount charged from the service receiver.

1
D12.

Construction of a complex, building, civil
structure or a part thereof, intended for a
sale to a buyer, wholly or partly except
where entire consideration is received
after issuance of completion certificate by
the competent authority,+

"i$ C(N/A* credit on inputs used for
providing the taxable service has not been
Credit Cules, 2,,&6
"ii$ *he value of land is included in the
amount charged from the service
receiver.F.
"i$ for residential unit having carpet area
upto 2,,, s<uare feet or where the
amount charged is less than rupees one
crore6
2=
"ii$ for other than the "i$ above. -,

Explanation. /
4. 0or the purposes of exemption at %erial number 1 +
"i$ *he amount charged shall be an amount, forming or representing as interest, i.e. the difference between
the installments paid towards repayment of the lease amount and the principal amount contained in such
installments6
1,,
"ii$ *he exemption shall not apply to an amount, other than an amount forming or representing as interest,
charged by the service provider such as lease management fee, processing fee, documentation charges
and administrative fee, which shall be added to the amount calculated in terms of "i$ above.
. 0or the purposes of exemption at %erial number & +
*he amount charged shall be the sum total of the gross amount charged and the fair marBet value of all goods
and services supplied in or in relation to the supply of food or any other article of human consumption or any
drinB "whether or not intoxicating$ and whether or not supplied under the same contract or any other contract,
after deducting+
"i$ the amount charged for such goods or services supplied to the service provider, if any6 and
1rovided that the fair marBet value of goods and services so supplied may be determined in accordance with
the generally accepted accounting principles.
C. 0or the purposes of exemption at %erial number 12 5
*he amount charged shall be the sum total of the amount charged for the service including the fair marBet
value of all goods and services supplied by the recipient"s$ in or in relation to the service, whether or not
supplied under the same contract or any other contract, after deducting+
"i$ the amount charged for such goods or services supplied to the service provider, if any6 and
1rovided that the fair marBet value of goods and services so supplied may be determined in accordance with
the generally accepted accounting principles.
2. 0or the purposes of this notification, unless the context otherwise re<uires,+
a. Mc5itN means a transaction whether called chit, chit fund, chitty, Buri, or by whatever name by or under
which a person enters into an agreement with a specified number of persons that every one of them
shall subscribe a certain sum of money "or a certain <uantity of grain instead$ by way of periodical
installments over a definite period and that each subscriber shall, in his turn, as determined by lot or by
auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to a
pri7e amount,
0. 9pac7a&e tour9 means a tour wherein transportation, accommodation for stay, food, tourist guide, entry
to monuments and other similar services in relation to tour are provided by the tour operator as part of
the pacBage tour to the person undertaBing the tour,
c. Mtour operatorN means any person engaged in the business of planning, scheduling, organi7ing,
arranging tours "which may include arrangements for accommodation, sightseeing or other similar
services$ by any mode of transport, and includes any person engaged in the business of operating tours,

[[[[[[[[[[[[[[[
1,1
1,2
3
Person 'ia0le to Pay Service Tax
[Section +1]
Section 6E. ?a!3ent of service tax
(#) =very person providing taxable service to any person shall pay service tax at the rate specified in section 66(
in such manner and within such period as may be prescribed.
(') Eotwithstanding anything contained in sub-section (#), in respect of

such taxable services as may be notified
by the entral 2overnment in the ?fficial 2a9ette, the service tax thereon shall be paid by such person and in
such manner as may be prescribed at the rate specified in section 66( and all the provisions of this hapter shall
apply to such person as if he is the person liable for paying the service tax in relation to such service.
?rovided that the entral 2overnment may notify the service and the extent of service tax which shall be payable
by such person and the provisions of this hapter shall apply to such person to the extent so specified and the
remaining part of the service tax shall be paid by the service provider.
Payment of service tax on reverse c5ar&e 0asis
4ith effect from 1.:.2,12, by virtue of a new provision added after sub+section "2$, in case of few specified services
whereby the liability of payment of service tax shall be both on the service provider and the service recipient
partially.
*he new clause authorises the government to notify the service and the extent of service tax which shall be payable
by such person and the provisions of Chapter / shall apply to such person to the extent so specified and the
remaining part of the service tax shall be paid by the service provider.
*he Central government has issued notification no. -,E2,12 dated 2,.'.2,12 notifying the description of specified
services. *he extent to which tax liability has to be discharged by the service receiver has also been specified in the
said notification.

Services on partial reverse c5ar&e is applica0le
1artial reverse charge mechanism is applicable in case of services provided or agreed to be provided by way of
"a$ renting of a motor vehicle designed to carry passengers on non+abated value to any person who is not
engaged in a similar business, or
"b$ supply of manpower for any purpose, or
"c$ service portion in execution of a worBs contract6
by any individual, Iindu #ndivided 0amily or partnership firm, whether registered or not, including association of
persons, located in the taxable territory to a business entity registered as a body corporate located in the taxable
territory. *hus the nature of the service and the status of both the service provider and service receiver are important
to determine the applicability of partial reverse charge provisions.
Invoice in case of reverse c5ar&e mec5anism
1,-
*he service provider shall issue an invoice complying with Cule &A of the %ervice *ax Cules 199&. *hus the invoice
shall indicate 5
+ the name, address and the registration number of the service provider6
+ the name and address of the person receiving taxable service6
+ the description and value of taxable service provided or agreed to be provided6 and
+ the service tax payable thereon.
As per clause "iv$ of sub+rule "1$ of the said rule &A ?@the service tax payable thereon@ has to be indicated. *he
service tax payable would include service tax payable by the service provider.
4pplica0ility of exemption to small service providers
*he liability of the service provider and service recipient are independent of each other. *hus in case the service
provider is availing exemption owing to turnover being less than Cs 1, laBhs, he shall not be obliged to pay any tax.
!t is to be noted that the exemption is available to the service provider in respect of his service tax liability. *his
exemption is not available where the recipient of service is liable to pay service tax. !t means the service recipient
shall have to pay service tax which he is obliged to pay under the partial reverse charge mechanism.
C*%24T credit to service provider
%ubJect to provisions of Cule & of the CCC, the service provider is eligible to avail C(N/A* credit on his capital
goods, inputs and input services, irrespective of the fact that the service tax is payable by the receiver of service.
0urther Cule => of the C(N/A* Credit Cules, 2,,& provides that <" provider of service providing services
notified under sub-section (') of section 6Kof the Finance "ct and being unable to utilise the =E!"T credit
availed on inputs and input services for payment of service tax on such output services, shall be allowed refund of
such unutilised =E!"T credit sub>ect to procedure, safeguards, conditions and limitations, as may be specified by
the (oard by notification in the ?fficial 2a9ette.5
Point of Taxation
>oth the service provider and service recipient are governed by the 1oint of *axation Cules 2,11 in respect of the
service provided or received by him. #sually it is the invoice or date of receipt of payment which is the point of
taxation for the service provider.
!n accordance with Cule :, where receiver of service is liable to pay service tax, the point of taxation is when he
pays for the service for example if invoice is issued in say 9arch 2,1- and the service recipient pays for the same in
April 2,1- the point of taxation for the service provider will be the date of issue of invoice in 9arch 2,1-. *he point
of taxation for the service recipient shall be the date of payment in April 2,1-.
!n case of service provider, service tax is payable on month or <uarterly basis, as the case may be, but the receiver of
service is liable to pay on monthly basis.

Calculation of tax lia0ility on reverse c5ar&e 0asis
*he service recipient would need to discharge liability only on the payments made by him. *he invoice raised by the
service provider would normally indicate the abatement taBen or method of valuation used for arriving at the taxable
value. Iowever since the liability of the service provider and service recipient are different and independent of each
other, the service recipient can independently avail or forgo an abatement or choose a valuation option depending
upon the ease, data available and economics.
1,&
%otification %o. ".B!.1!-Service Tax
%e8 #el5i- t5e !.
t5
Hune- !.1!
=S,.?..:*;.Q!n exercise of the powers conferred by sub+section "2$ of section '; of the0inance Act, 199& "-2
of 199&$, and in supersession of "i$ notification of the Aovernment of !ndia in the 9inistry of 0inance
".epartment of Cevenue$, No. 1=E2,12+%ervice *ax , dated the 1:
th
9arch, 2,12, published in the Aa7ette of
!ndia, (xtraordinary, 1art !!, %ection -, %ub+section "i$,vide number A.%.C 21-"($, dated the 1:
th
9arch, 2,12,
and "ii$ notification of the Aovernment of !ndia in the 9inistry of 0inance ".epartment of
Cevenue$, No. -'E2,,&+%ervice *ax , dated the -1
st
.ecember, 2,,&, published in the Aa7ette of
!ndia, (xtraordinary, 1art !!, %ection -, %ub+section "i$, vide number A.%.C ;&9 "($, dated the -1
st
.ecember,
2,,&, except as respects things done or omitted to be done before such supersession, the Central Aovernment
hereby notifies the following taxable services and the extent of service tax payable thereon by the person liable to
pay service tax for the purposes of the said sub+section, namely)Q
I. T5e taxa0le services-Q
:4;
"i$ provided or agreed to be provided by an insurance agent to any person carrying on the insurance business6
"ii$ provided or agreed to be provided by a goods transport agency in respect of transportation of goods by
road, where the person liable to pay freight is,Q
"a$ any factory registered under or governed by the 0actories Act, 19&; "'- of 19&;$6
"b$ any society registered under the %ocieties Cegistration Act, 1;', "21 of 1;',$ or under any other law for
the time being in force in any part of !ndia6
"c$ any co+operative society established by or under any law6
"d$ any dealer of excisable goods, who is registered under the Central (xcise Act, 19&& "1 of 19&&$ or the
rules made thereunder6
"e$ any body corporate established, by or under any law6 or
"f$ any partnership firm whether registered or not under any law including association of persons6
"iii$ provided or agreed to be provided by way of sponsorship to anybody corporate or partnership firm located
in the taxable territory6
"iv$ provided or agreed to be provided by,+
"A$ an arbitral tribunal, or
">$ an individual advocate or a firm of advocates by way of legal services, or
"C$ Aovernment or local authority by way of support services excluding,+
"1$ renting of immovable property, and
"2$ services specified in sub+clauses "i$, "ii$ and "iii$ of clause "a$ of section ''. of the 0inance
Act,199&,
to any business entity located in the taxable territory6
"iva$ provided or agreed to be provided by a director of a company to the said company6
"v$ provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers to any
person who is not in the similar line of business or supply of manpower for any purpose

or security services
or service portion in execution of worBs contract by any individual, Iindu #ndivided 0amily or partnership
firm, whether registered or not, including association of persons, located in the taxable territory to a
business entity registered as body corporate, located in the taxable territory6
1,=
:; provided or agreed to be provided by any person which is located in a non+taxable territory and received by
any person located in the taxable territory6
:II; *he extent of service tax payable thereon by the person who provides the service and the person who
receives the service for the taxable services specified in "!$ shall be as specified in the following *able, namely)+
Ta0le
Sl.%o. #escription of a service Percenta&e
of service tax
paya0le 0y t5e
person providin&
service
Percenta&e of
service tax
paya0le 0y t5e
person receivin&
t5e service
1 in respect of services provided or agreed to be
provided by an insurance agent to any person carrying on
insurance business
Nil 1,,K
2 in respect of services provided or agreed to be
provided by a goods transport agency in respect
of transportation of goods by road
Nil 1,,K
- in respect of services provided or agreed to be
provided by way of sponsorship
Nil 1,,K
& in respect of services provided or agreed to be
provided by an arbitral tribunal
Nil 1,,K
= in respect of services provided or agreed to be
provided by individual advocate or a firm of advocates by
way of legal services
Nil 1,,K
=A in respect of services provided or agreed to be provided by
a director of a company to the said company
Nil 1,,K
' in respect of services provided or agreed to be
provided by Aovernment or local authority by way of
support services excluding,+ "1$ renting of immovable
property, and "2$ services specified in sub+clauses "i$, "ii$
and "iii$ of clause "a$ of section ''. of the 0inance
Act,199&
Nil 1,,K
: "a$ in respect of services provided or agreed to be
provided by way of renting of a motor vehicle designed to
carry passengers on abated value to any person who is not
engaged in the similar line of business
"b$ in respect of services provided or agreed to be
provided by way of renting of a motor vehicle designed to
carry passengers on non abated value to any person who is
not engaged in the similar line of business
Nil

',K
1,, K

&,K
;. in respect of services provided or agreed to be 2=K := K
1,'
provided by way of supply of manpower for any
purpose
$
[or security services]
9. in respect of services provided or agreed to be provided
in service portion in execution of worBs contract
=,K =,K
1, in respect of any taxable services provided or agreed to be
provided by any person who is located in a non+taxable
territory and received by any person located in the taxable
territory
Nil 1,,K
Explanation#2. # *he person who pays or is liable to pay freight for the transportation of goods by road in goods
carriage, located in the taxable territory shall be treated as the person who receives the service for the purpose of
this notification.
Explanation#22. # !n worBs contract services, where both service provider and service recipient is the persons
liable to pay tax, the service recipient has the option of choosing the valuation method as per choice, independent
of valuation method adopted by the provider of service.

==========
1,:
1.
,e&istration
[Section +3]

4. ,e&istration - asic Provisions [Section +3 B ,ule $]
According to section '9 "read with rule &$ every person liable to pay the service tax under this Chapter or the
rules made there under shall, within such time and in such manner and in such form, as maybe prescribed, maBe
an application for registration to the superintendent of Central (xcise under whose Jurisdiction the premises,
wherefrom services are given, is situated
Form for ,e&istration - *he assessee is re<uired to apply for registration in %*+! form. 0orm %*+1 is re<uired to
be submitted in duplicate along with the following documents +
"a$ 1roof of address
"b$Copy of 1AN No.
"c$ ALA \ 9LA in case of Companies or 1artnership .eed in case of 1artnership 0irm.
Additional 8oc+3ent@ + *hough not re<uired as per statutory provisions, the department is generally asBing a
declaration about certain particulars of the business and date of commencement of business. %ome time
department provides the format of declaration or otherwise the person seeBing registration may submit his own
declaration. *he contents of the declaration would be as Name, Address, Nature of >usiness, 1AN, *ype of
%ervices, Number of %ervices 1rovided, .ate of commencement of business, Authori7ed %ignatory etc.
@uestionin& of declaration made in ST-1O As per Circular No. :2E2E2,,& %* dated 2E1E2,,& department is not
allowed to <uestion the declaration made by the person in the %*+1 form.
A5ere to apply for Service Tax ,e&istrationO (very premises of the service provider, wherefrom services are
rendered, re<uires a separate registration. Cegistration application should be submitted to the %uperintended of
the Central (xcise under whose Jurisdiction premises is situated. *he 2urisdiction of Central (xcise .epartment
for the purpose of %ervice *ax 9atters is same as under the Central (xcise Act, 19&&.
>esides, the Central Aovernment has appointed separate %ervice Commissionerate "%ervice *ax Cell$ at select
cities for efficient and effective management of %ervice *ax .epartment. *herefore, where separate %ervice tax
cells has been appointed then application shall be submitted with the %ervice *ax cell.
Time 'imit for su0mittin& application [,ule $]
!n case of new business,
"a$ if service provider is willing to avail exemption available to the small service providers then application
shall be made within -, days after value of taxable services rendered by him during the financial year exceed 9.,,
lacs.
"b$ !f service provider is not willing to avail exemption available to the small service providers then application
shall be made within -, days since commencement of business.
"c$ !f a person is providing services which were not taxable and if such services become taxable then time limit
for application for registration depends on the value of services already rendered during the financial year.
i. !f the value of services has already exceeded 9.,, lacs then application shall be made
within -, days since services become taxable
ii. !f value of services is less than 9.,, lacs then the time limit for maBing application for
registration depends on the fact whether the service provider is willing to avail small service provider
exemption or not.
1,;
!f he is not availing the exemption then application shall be made within -, days since services become
taxable and if is availing exemption then he will have to apply for registration within -, days after his
value of services has exceeded 9.,, lacs.
. Small Service Provider [SSP] - Person availin& exemption upto ,s. 1. la75s
/ide notification No. --E2,1-, the Central Aovernment has offered optional exemption to small service providers.
*his exemption is not available in following two cases ++
"i$ taxable services provided by a person under a brand name or trade name, whether registered or not, of
another person6 or
"ii$ such value of taxable services in respect of which service tax shall be paid by such person and in such
manner as specified under sub+section "2$ of section '; of the said 0inance Act read with %ervice *ax
Cules,199&.
Exe3ption
*he service provider is not liable to pay service tax if the value of taxable services during the financial year does
not exceed Cs. 1,.,, lacs.
*he exemption shall apply subJect to the following conditions, namely)+
"i$ the provider of taxable service has the option not to avail the exemption contained in this notification
and pay service tax on the taxable services provided by him and such option, once exercised in a
financial year, shall not be withdrawn during the remaining part of such financial year6
"ii$ the provider of taxable service shall not avail the C(N/A* credit of service tax paid on any input
services, under rule - or rule 1- of the C(N/A* Credit Cules, 2,,&"herein after referred to as the said
rules$, used for providing the said taxable service, for which exemption from payment of service tax
under this notification is availed of6
"iii$ the provider of taxable service shall not avail the C(N/A* credit under rule - of the said rules, on
capital goods received, during the period in which the service provider avails exemption from payment
of service tax under this notification6
"iv$ the provider of taxable service shall avail the C(N/A* credit only on such inputs or input services
received, on or after the date on which the service provider starts paying service tax, and used for the
provision of taxable services for which service tax is payable6
"v$ the provider of taxable service who starts availing exemption under this notification shall be re<uired to
pay an amount e<uivalent to the C(N/A* credit taBen by him, if any, in respect of such inputs lying in
stocB or in process on the date on which the provider of taxable service starts availing exemption under
this notification6
"vi$ the balance of C(N/A* credit lying unutilised in the account of the taxable service provider after
deducting the amount referred to in sub+paragraph "v$, if any, shall not be utilised in terms of provision
under sub+rule "&$ of rule - of the said rules and shall lapse on the day such service provider starts
availing the exemption under this notification6
"vii$ where a taxable service provider provides one or more taxable services from one or more premises, the
exemption under this notification shall apply to the aggregate value of all such taxable services and
from all such premises and not separately for each premises or each services6 and
"viii$ the aggregate value of taxable services rendered by a provider of taxable service from one or more
premises, does not exceed ten laBh rupees in the preceding financial year.
"ote
0or the purposes of determining aggregate value not exceeding ten laBh rupees, to avail exemption under this
notification, in relation to taxable service provided by a goods transport agency, the payment received towards
the gross amount charged by such goods transport agency under section ': of the said 0inance Act for which the
1,9
person liable for paying service tax is as specified under sub+section "2$ of section '; of the said 0inance Act
read with %ervice *ax Cules, 199&, shall not be taBen into account.
Certain ter3s defined
&A( <rand na3e= or <trade na3e= means a brand name or a trade name, whether registered or not, that is to
say, a name or a marB, such as symbol, monogram, logo, label, signature, or invented word or writing which is
used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the
course of trade between such specified services and some person using such name or marB with or without any
indication of the identity of that person6
&B( <aggregate val+e= means the sum total of value of taxable services charged in the first consecutive invoices
issued during a financial year but does not include value charged in invoices issued towards such services which
are exempt from whole of service tax leviable thereon under section ''> of the said 0inance Act under any other
notification.H

C. ,e&istration for )ore t5an one Service
4here an assessee is providing more than one taxable services, he may seeB a single registration for all such services provided
by him. DCule &"&$F. 0or this purpose he is re<uired to submit a single %*+1 application form. 4hile submitting the application
the applicant should indicate all the taxable services provided by him.

#. Centrali6ed ,e&istration
4here services are provided from more than one premises the following procedure is to be followed)
1 Bption First # *+le ,&1( # Separate *egistration
4here assessee seeBs separate registration for each premise from where services are being provided than he is not re<uired to
follow special procedure and obtain service tax registration. %imple filing %*+1 form alongwith relevant documents before the
%uperintended of Central (xcise is sufficient.
"ote@ + 4here the assessee is having more than one office and does not have either central accounting system or central
billing system, he is re<uired to obtain separate registration for each premise.
Iowever, the assessee can opt for single registration for all the premises if he is following either centrali7ed accounting
system or centrali7ed billing system.
2 Bption Second # *+le ,&2( and *+le ,&0( # Single *egistration &Centrali>ed registration(
Accordingly the centrali7ed registration is being granted by the Commissioner of Central (xcise under whose Jurisdiction the
premises or offices, from where centrali7ed billing or accounting is done, are located. *he facility of centrali7ed registration is
available to the followings persons who)+
"i$ provides such service from more than one premises or offices6 or
"ii$ receives such service in more than one premises or offices6 or,
"iii$ is having more than one premises or offices, which are engaged in relation to such service in any other manner,
maBing such person liable for paying service tax,
*he condition for opting centrali7ed registration is that the person opting for centrali7ed registration should either has
centralised billing system or centralised accounting system in respect of such service, and such centralised billing or
centralised accounting systems are located in one or more premises.

*. Transfera0ility of ,e&istration Certificate ,ule $:+;
%ince registration is based on 1AN allotted under the !ncome *ax Act, it is not transferable under any condition. *herefore,
fresh registration is re<uired even in the following cases ++
+ 4here 1roprietorship concern is changed to 1artnership concern or vice+versa
+ 4here 1roprietorship concern is changed to company
+ 4here business is inherited
11,
+ .ivision of I#0
+ 9erger or .emerger
+ %ale or lease of a business etc.
F. 4mendment in t5e ,e&istration Certificate [,ule (4]
Any change arising in the information furnished while applying for registration is 0orm No. %*+1 shall be
informed to ACE.C within -, days from the date of change. DEotification no. HG'<<6 /T dated #-&-'<<6D
=. Surrender of ,e&istration Certificate -,ule $:/;
4here a registered person ceases to provide taxable services for which he is registered, he should surrender the
registration certificate. All the registration certification shall be surrendered before the %uperintendent of Central
(xcise.
*here is no time limit for surrender of registration certificate. !deally it should be surrendered when all the taxes
have been paid6 all the returns have been filed etc.
*here is no prescribed format of application for surrender of registration certificate. A simple application is
sufficient for surrender of CC.
Surrender of ,e&istration Certificate =enerally
%ome situations are enumerated herein below in which the registrant would liBe to surrender the registration
certificate)
1. /alue of *axable service is less than 9 aBhs.
2. Closer of business Lperation
-. 9erger with another #nitEentity.
&. Any other reason "iBe centrali7ed registration or so$
Cancellation of ,e&istration Certificate - ,ule $:1;
%urrender of registration certificate does not mean that the person is free from all the liability and no further
action would be taBen by the department. Cule &";$ provides that, NLn receipt of the certificate under sub+rule ":$,
the %uperintendent of Central (xcise shall ensure that the assessee has paid all monies due to the Central
Aovernment under the provisions of the Act, and the rules and the notifications issued there under, and thereupon
cancel the registration certificate.
*herefore, till the registration certificate is not cancelled, the concerned person may be re<uired to file or submit
all the information, documents etc. as the case may be, if re<uired by the %uperintendent of Central (xcise.
Iowever, in ordinary course, unless contrary directed by the department, it is presumed that registered certificate
has been canceled by the department concerned on receipt of surrender application.
[[[[[[[[[[

111
11
,ecords and #ocuments
[,ule $4- $- ( and (4]
4. ,ecords [,ule ( of ST,]
No specific records have been provided under the act. Iowever as per Cule ="1$ of %ervice *ax Cules, 199&, the
records maintained by the assessee in accordance with various laws in force from time to time shall be acceptable.
%ub+Cule "2$ provides that every assessee shall furnish to the %uperintendent of Central (xcise at the time of filing
of return for the first time a list in duplicate, of+
"i$ all the records prepared or maintained by the assessee for accounting of transactions in regard to,+
"a$ providing of any service6
"b$ receipt or procurement of input services and payment for such input services6
"c$ receipt, purchase, manufacture, storage, sale, or delivery, as the case may be, in regard of inputs and
capital goods6
"d$ other activities, such as manufacture and sale of goods, if any.
"ii$ all other financial records maintained by him in the normal course of business.
(very assessee shall furnish to the Superintendent of Central *xcise at the time of filing his return for the first
time, a list of all accounts maintained by the assessee in relation to service tax including memoranda received
from his branch offices.
%ub+Cule "-$ provides that all such records shall be preserved at least for a period of five years immediately after
the financial year to which such records pertain.
*+le %A. Access to a registered pre3ises.
(#) "n officer authorised by the ommissioner in this behalf shall have access to any premises registered under
these rules for the purpose of carrying out any scrutiny, verification and chec,s as may be necessary to safeguard
the interest of revenue.
(') =very assessee shall, on demand, ma,e available to the officer authorised under sub-rule (#) or the audit party
deputed by the ommissioner or the omptroller and "uditor 2eneral of 7ndia, within a reasonable time not
exceeding fifteen wor,ing days from the day when such demand is made, or such further period as may be allowed
by such officer or the audit party, as the case may be,-
(i) the records as mentioned in sub-rule (') of rule H+
(ii) trial balance or its e:uivalent+ and
(iii) the income-tax audit report, if any, under section %%"( of the 7ncome-tax "ct, #$6# ( %& of #$6#), for
the scrutiny of the officer or audit party, as the case may be.
. Invoice [,ule $4 of ST,]
According to rule &A the following particulars are re<uired to be mentioned on the invoice)
1. !nvoices should be serial numbered6
2. Name, address and the registration number of such person6
-. Name, address of the person receiving taxable services6
&. .escription, classification and value of taxable service provided or to be provided6 and
112
=. %ervice *ax 1ayable *hereon
!t is worthwhile to note here that !nvoice includes any bill or challan issued by the provider of services for the
services rendered by him.
%ome time, as a matter of practice no invoice, bill or challan is issued by the service provider but the same is raised
by the service receiver and amount is paid to the service provider accordingly. !n such situation also, there is no
option available to the service provider and he has to issue E maintain invoice, bill or challan as the case may be in
accordance with Cule &A.
*he invoice shall be signed by the service provider or a person authori7ed by him

in respect of such taxable
service provided or agreed to be provided and such invoice, bill or, as the case may be, challan shall be serially
numbered.
2n case of an7sFF2sF"BFCs # !n case the provider of taxable service is a banBing company or a financial
institution including a non+banBing financial company providing service to any person, an invoice, a bill or, as the
case may be, challan shall include any document, by whatever name called, whether or not serially numbered, and
whether or not containing address of the person receiving taxable service but containing other information in such
documents as re<uired under this sub+rule)]
2n case of 1TA #

!n case the provider of taxable service is a goods transport agency, providing service
'
Dto any
personF, in relation to transport of goods by road in a goods carriage, an invoice, a bill or, as the case may be, a
challan shall include any document, by whatever name called, which shall contain the details of the consignment
note number and date, gross weight of the consignment and also contain other information as re<uired under this
sub+rule.
2n case of transportation of passengers #

!n case the provider of taxable service is providing the service of
transport of passenger, an invoice, a bill or as the case may be, challan shall include ticBet in any form by whatever
name called and whether or not containing registration number of the provider of service and address of the
recipient of service but containing other information in such documents as re<uired under this sub+ruleF
Ti3e Gi3it for iss+e of invoice
a. *he invoice shall be issued within thirty days from the date of completion of such taxable service or
receipt of any payment towards the value of such taxable service, whichever is earlier.
b. !n case of continuous supply of service, every person providing such taxable service shall issue an
invoice, bill or challan, as the case may be, within thirty days of the date when each event specified in the
contract, which re<uires the service receiver to maBe any payment to service provider, is completed.
c. !n case the provider of taxable service is a banBing company or a financial institution including a non+
banBing financial company providing service to any person, the period within which the invoice, bill or
challan, as the case may be, is to be issued, shall be forty+five days.
Provided also that wherever the provider of taxable service receives an amount upto rupees one thousand in excess
of the amount indicated in the invoice and the provider of taxable service has opted to determine the point of
taxation based on the option as given in 1oint of *axation Cules, 2,11, no invoice is re<uired to be issued to such
extent.F
C. Service tax to 0e s5o8n separately
As per section 12A of Central (xcise Act, 19&& as extended to service tax act by section ;- of the Act, it is
mandatory to indicate prominently service tax element separately on all the invoice, bill or challan as the case may
be.
#. ,ecords for Cenvat Credit
For input and capital &oodsO + Cule 9"=$ of the Cenvat Credit Cules, 2,,&
*he provider of output service shall maintain proper records containing the following details)
1$ Ceceipt6
11-
2$ .isposal6
-$ Consumption6
&$ !nventory of !nput and Capital Aoods6
=$ /alue of input E capital goods6
'$ .uty paid6
:$ Cenvat Credit *aBen6
;$ Cenvat Credit #tili7ed6 and
9$ 1articulars of %uppler of input or capital goods.
For input services) + Cule 9"'$ of the Cenvat Credit Cules, 2,,&
*he provider of output service shall maintain proper records containing the following details6
1$ Ceceipt of input services6
2$ Consumption of input services6
-$ /alue of input services6
&$ *ax 1aid6
=$ Cenvat Credit *aBen6
'$ Cenvat Credit #tili7ed6 and
:$ 1articulars of provider of service
*. Special provision for Transporters
!n case of transporters who are transporting goods by road, re<uired to issue a consignment note before issuing
invoice E bill or challan as the case may be.
Consign3ent "ote@ # *+le ,B
According to Cule &>, a goods transport agency is re<uired to issue a consignment note for each consignment to
the customer unless that the same is exempt. Consignment noteN means a document, issued by a goods transport
agency against the receipt of goods for the purpose of transport of goods by road in a goods carriage. 0ollowing
particulars are re<uired to be shown on the consignment note6
1 !t should be serially numbered6
2 *he name of the consignor and consignee6
- Cegistration number of the goods carriage in which the goods are transported6
& .etails of the goods transported6
= .etails of the place of origin and destination6 and
' 1erson liable for paying service tax whether consignor, consignee or the goods transport agency.
2nvoice, Bill or Challan@ # *+le ,A
According to Cule &A, a goods transport agency is also re<uired to issue an !nvoice, bill or challan as the case may
be containing the following details6
1 !nvoices should be serial numbered6
2 Name, address and the registration number of such person6
- Name, address of the person receiving taxable services6
& .escription, classification and value of taxable service provided or to be provided6
= %ervice *ax 1ayable *hereon6
' .etails of the consignment note number and date6 and
: Aross weight of the consignment6
F. Special Provision for Input Service #istri0utorO - ,ule $4:!;
(very input service distributor distributing credit of taxable services shall, in respect of credit distributed, issue an
invoice, a bill or, as the case may be, a challan signed by such person or a person authori7ed by him, for each of the
11&
recipient of the credit distributed, and such invoice, bill or, as the case may be, challan shall contain the following
details6
1 !t should be serially numbered6
?artic+lars of ?rovider of 2np+t Services
2 Name6
- Address6
& Cegistration6
= %erial number and date of invoice, bill, or as the case may be, challan issued under sub+rule "1$6
?artic+lars of 2np+t Service 8istri+tor
' Name6
: Address6 and
; Cegistration number
?artic+lars of *ecipient of credit distri+ted
9 Name6
1, Address
Dal+e
11 the amount of the credit distributed
[[[[[[[[[[[
11=
1!
Payment of Service Tax
[,ule +]
4. #ue #ates - ,ule +:1;
I. In case of Individual B Proprietary Firm or Partners5ip firms :except Guarter endin& )arc5;
!n case of an individual or proprietary firm or partnership firm, the service tax shall be paid to the credit of
the Central Aovernment by the 'th day of the month if the duty is deposited electronically through internet
banBing, or, in any other case, the =th day of the month, as the case may be, immediately following the
<uarter in which the service is deemed to be provided as per the rules framed in this regard.
?a!3ent of receipt asis # !t is also to be noted that in case of individuals and partnership firms whose
aggregate value of taxable services provided from one or more premises is fifty laBh rupees or less in the
previous financial year, the service provider shall have the option to pay tax on taxable services

provided
or agreed to be provided by him up to a total of rupees fifty laBhs in the current financial year, by the dates
specified in this sub+rule with respect to the month or <uarter, as the case may be, in which payment is
received.
II. In ot5er cases :*xcept mont5 endin& )arc5;
*he service tax on the value of taxable services received during any calendar month shall be paid to the
credit of the Central Aovernment by the =th of the month immediately following the said calendar month.
Iowever, if paid through internet banBing than payment shall be made within ' days after the end of
month.
III. In t5e 0ot5 t5e a0ove cases for t5e mont5 of )arc5 or @uarter endin& )arc5
*he %ervice *ax on the value of taxable services received during the month of 9arch or the <uarter ending
9arch, shall be paid to the credit of the Central Aovernment by the -1
st
day of 9arch of the calendar year.
. #ue #ate :'ast day; is Eoliday
%ervice tax is liable to be deposited by the =
th
E'
th
of the month following the calendar month or <uarter, as the case
may be. *he problem arises, if there is a public holiday on the last due date of payment of service tax. !n these
circumstances, a person can deposit the service tax on the next worBing day immediately following the holiday.
DCircular no. '-E12E2,,- %t dated 1&E1,E2,,-F.
C. Tax s5all 0e deposited on =4,-/ C5allan
Cule '"2$ provides that the service tax shall be paid in form AAC : challan or in any other manner as may be
prescribed by the Central >oard of (xcise and Customs either by cash or by che<ue. All the particulars of AAC+:
challan should be filled carefully and completely. Challan will contain running serial number and such serial
number may start from ,,1 from 1
st
April each year.
%ince the %*1 code number is not mandatory, the banBs has to accept the AAC+: challan containing the
registration number without 1an based. Iowever, the assessee, who opted for e+filing of return is under an
obligation to obtain 1AN bases %*1 code number and to mention on all the AAC : challan.
4here assessee is provider of more than one service, it is also desirable that assessee should pay his Challan
service wise.
#. Payment to 0e made *lectronically
11'
(very assessee who has paid service tax of rupees ten laBh or above in the preceding financial year or has already
paid service tax of rupees ten laBh in the current financial year, shall deposit the service tax liable to be paid by
him electronically, through internet banBing.
Iowever, there is no restriction on other persons for payment of service tax electronically. Any person can choose
to pay service tax electronically, through internet banBing system even if his service tax liability was less than 1,
laBhs.
*. Payment t5rou&5 C5eGue
4hen service tax is paid through account payee che<ue there is always a time gap of -+= days "in normal
circumstances$ between tendering of che<ue in the banB and clearance of the same. According to sub rule "2A$ to
rule ' the date of tendering of che<ue shall be the date on which service tax is deemed to have been paid provided
the che<ue is not dishonoured later on. *herefore, a person depositing the tax in the banB through che<ue is
advised to get the proof on the challan from the banB regarding date of tendering of che<ue followed by date of
reali7ation of che<ue.
F. A5ere to deposit Service Tax
*he assessee is re<uired to deposit AAC+: Challan for payment of the service tax only with the designated banBs
and branches thereof. *he banB and branches thereof are designated by the board and respective commissioner.
*he assessee should ensure that service tax is paid only in the designated branch of the banB authori7ed to accept
the payment of service tax. !f the payment is tendered in the branch, which is not designated, then no credit shall be
given to the assessee for the payment of service tax made by him.
=. ,oundin& off of service tax
%ection ;- of the service tax act provides that certain provisions of Central (xcise Act would be applicable in
relation to service tax as well. Accordingly section -:. of the Central (xcise Act is also applicable. According to
section -:. the amount of duty, interest etc. shall be rounded off to the nearest rupee.
4here the amount contains a part of a rupee consisting of paise then, if such part is fifty paise or more, it shall be
increased to one rupee and if such part is less than fifty paise it shall be ignored.
E. Payment t5rou&5 Cenvat Credit
A person, who is liable to pay service tax, has two options. 0irst either to pay in cash or by che<ue or secondly,
through debiting the Cenvat Credit register.
Cenvat credit is available on inputs E capital goods and input services. Cenvat credit is availed on all these by
crediting into the Cenvat Credit register and it get accumulated for the relevant month or <uarter as the case may
be.
An assessee has an option to pay service tax by utili7ing such accumulated balance in Cenvat Credit register as
stood on the last day of relevant month or <uarter as the case may be.
!t is pertinent to note here that though the service tax can be deposited by =
th
E'
th
of the month following the relevant
calendar month or <uarter, but cenvat credit can be utili7ed only as available on the last day of relevant month or
<uarter as the case may be.
I. Payment of service tax in advance ,ule +:14;
(very person liable to pay service tax, may, on his own volition, pay an amount as service tax in advance, to the
credit of the Central Aovernment and adJust the amount so paid against the service tax which he is liable to pay for
the subse<uent period)
1rovided that the assessee shall,+
"i$ intimate the details of the amount of service tax paid in advance, to the Jurisdictional %uperintendent of
Central (xcise within a period of fifteen days from the date of such payment6 and
11:
"ii$ indicate the details of the advance payment made, and its adJustment, if any in the subse<uent return to be
filed under section :, of the Act.
H. 4dDustment of *xcess Paid - Specific provision ,ule +:";- ,ule +:$-; ,ule +:$4; and ,ule +:$;
,ule +:"; + 4dDustment of Tax 85en paid on advance and later refunded to t5e intended recipient of service
4here an assessee has issued an invoice, or received any payment, against a service to be provided which is not so
provided by him either wholly or partially for any reason or where the amount of invoice is renegotiated due to
deficient provision of service, or any terms contained in a contract, the assessee may taBe the credit of such excess
service tax paid by him, if the assessee.+
"a$ has refunded the payment or part thereof, so received for the service provided to the person from whom it
was received6 or
"b$ has issued a credit note for the value of the service not so provided to the person to whom such an invoice
had been issued.
,ule +:$4; and :$; + Self 4dDustmentO
4here an assessee has paid to the credit of Central Aovernment any amount in excess of the amount re<uired to be
paid towards service tax liability for a month or <uarter, as the case may be, the assessee may adJust such excess
amount paid by him against his service tax liability for the succeeding month or <uarter, as the case may be subJect
to the following conditions) +
+ %elf adJustment is not possible where excess service tax has been paid and the issue of interpretation of
law, taxability, classification, valuation or applicability of any exemption notification is involved.
+ (ach person who adJusts excess amount in the succeeding period, are re<uired to submit an intimation
containing the details and reasons for such adJustment to the Jurisdictional %uperintendent of Central
(xcise within a period of fifteen days from the date of such adJustment.

%ub+Cule "&C$ provides that Eotwithstanding anything contained in sub-rules (%), (%") and (%(), where the person
liable to pay service tax in respect of service of renting of immovable property has paid to the credit of entral
2overnment any amount in excess of the amount re:uired to be paid towards service tax liability for a month or
:uarter, as the case may be, on account of non-availment of deduction of property tax paid in terms of notification
Eo. '$G'<#'-/ervice Tax , dated the '<th Fune, '<#', from the gross amount charged for renting of the immovable
property for the said period at the time of payment of service tax, the assessee may ad>ust such excess amount paid
by him against his service tax liability within one year from the date of payment of such property tax and the
details of such ad>ustment shall be intimated to the /uperintendent of entral =xcise having >urisdiction over the
service provider within a period of fifteen days from the date of such ad>ustment.

L. Interest R Penalty for late deposit or non deposition of service tax - Interest on late payment -
S11T p.a.
(very person, liable to pay the tax in accordance with the provisions of section '; or rules made thereunder, who
fails to credit the tax or any part thereof to the account of the Central Aovernment within the period prescribed,
shall pay simple interest at such rate not below ten percent. and not exceeding thirty+six per cent. per annum, as is
for the time being fixed by the Central Aovernment, by notification in the Lfficial Aa7etteF for the period by which
such crediting of the tax or any part thereof is delayed.
1rovided that in the case of a service provider, whose value of taxable services provided in a financial year does
not exceed sixty laBh rupees during any of the financial years covered by the notice or during the last preceding
financial year, as the case may be, such rate of interest, shall be reduced by three per cent per annum.
'. Penalty - Section /+ - Failure to pay service tax
11;
1enalty + Cs. 1,, per day or 1K per month which ever is higher subJect to the amount of service tax that he failed
to pay.
?enalt! +nder section '6 is in addition to interest +nder section '%.
1enalty under section :' can be imposed if the following conditions are satisfied6
+ Any person is liable to pay service tax in accordance with section '; and rule made thereunder.
+ Ie fails to pay such tax or interest thereon
*herefore as per section :', there must be failure to pay service tax.
4hether, late payment of service tax amounts to failure to pay service tax. As commonly understood that late
payment is not considered as failure of pay service tax provided the same has been paid before issue of show cause
notice.
119
1"
*xport of Service
[,ule +4]

,I'* +4 of Service Tax ,ules
"1$ *he provision of any service provided or agreed to be provided shall be treated as export of service when,+
"a$ the provider of service is located in the taxable territory ,
"b$ the recipient of service is located outside !ndia,
"c$ the service is not a service specified in the section ''. of the Act,
"d$ the place of provision of the service is outside !ndia,
"e$ the payment for such service has been received by the provider of service in convertible foreign
exchange, and
"f$ the provider of service and recipient of service are not merely establishments of a distinct person in
accordance with item "b$ of (xplanation - of clause "&&$ of section '=> of the Act
"2$ 4here any service is exported, the Central Aovernment may, by notification, grant rebate of service tax or duty
paid on input services or inputs, as the case may be, used in providing such service and the rebate shall be allowed
subJect to such safeguards, conditions and limitations, as may be specified, by the Central Aovernment, by
notification.

12,
1$
,eturns
[Section /.- ,ule /- / and /C of ST,]

4. Filin& of Ealf Kearly ,eturn DSection /.]
(very person liable to pay service tax shall submit a half yearly return. *he return shall be furnished in 0orm +
%*-. 0or the half year ending -,
th
%eptember return shall be submitted by 2=
th
Lctober. 0or the half year ending
-1
st
9arch, return shall be submitted by 2=
th
April. *he following documents to be enclosed with the %*+- return)
+ Copy of AAC+: challans
+ Copy of Cenvat Credit Cegister.
+ !nterest calculation worBsheet wherever applicable uEs :=
,eturn in case of provisional assessment - 4here a person is allowed to assessee the service tax on provisional
basis, he has to file a return in 0orm %*+-A alongwith a return in 0orm %*+- and relevant documents.
#etails of t5e account maintained - 4hile filing the first return of service tax, every assessee must furnish a list
of all accounts maintained by the assessee in relation to service tax, including memoranda received from his branch
offices. DCule ="2$F. !t is a one time exercise.
A5ere to file t5e return and details of account - *he return in 0orm %*+- and details of accounts to be filed
before the Jurisdictional %uperintendent of Central (xcise.
*lectronic filin& of ST-" return - 4here an assessee has paid a total service tax of rupees ten laBh or more
including the amount paid by utilisation of C(N/A* credit, in the preceding financial year, he shall file the return
electronically.
*he following steps to be followed to file %*+- return electronically
+ Lbtain 1= digit %*1 code.
+ #se %*1 code on all the AAC 5 : challans
. %il ,eturn
!f a person gets himself registered with the service tax department, he has to follow all the procedures and submit
all the relevant documents which are necessary, even if he is not providing any services during the concerned half
year.
*herefore, even if he is not providing any service or not liable to pay any service during the corresponding Ialf
Pear for which return is due to be submitted, he is re<uired to file return in 0orm %*+- or %*+-A as the case may
be, as a N! return.
Iowever, in various instances, the tribunal has taBen liberal stand for non filing or late filing of N! return and
reJected the penalty proceedings for the same. "Ce. %A22AN 3#9AC 3AC!4AA v. CC( 2,,= +*9! + 11= +
C(AA*, N(4 .(I!.$
C. ,eturn for )ultiple services or )ultiple locations
,eturn in case of )ultiple Services - !t may be possible that an assessee is providing more than one services
which are liable to be taxed. !n such circumstances, he is allowed to taBe a single registration for all the services
and accordingly he is allowed to file a single service tax return in form %*+-. Iowever, he has to furnish the details
of all the services separately in the format of %*+- return.
A5ere a person too7 sin&le re&istration for multiple locations - 4here a single registration has been taBen for
multiple locations, the assessee is re<uired to file single %*+- return. Iowever, for every registered premises under
121
a single registration, information E details of taxable services and tax payable thereon shall be provided separately
in %*+- return.
#. Penalty for %on Filin& or 'ate filin& of ,eturn [Section /. and ,ule /C]
As per the provision of %ection :,, penalty can not be more that Cs. 2,,,,E+.
Cule :C prescribes the amount of penalty under different circumstances. Accordingly, the penalty shall be levied
as under)
Period delayed in furnis5in& ,eturn 4mount of Penalty )aximum Penalty
1= .ays from the .ue .ate Cs. =,,E+ NA
>eyond 1= .ays but #pto -, .ays from the
.ue .ate
Cs. 1,,, NA
>eyond -, .ays from the .ue .ate Cs. 1,,,E+ plus Cs. 1,,E+ per day beyond
-, .ays
Cs. 2,,,,,E+
Cule :C prescribes that where the amount of penalty is paid, any proceeding in respect of such delayed submission
of return shall be deemed to be concluded. 0urther, section ;, has not been amended to include %ection :,. !t
means, even if an assessee has all the reasonable cause for furnishing such delayed return, penalty is still payable
without any relief. *herefore, the provision of %ection ;, is not applicable to penalties levied for late submission of
return.
*. ,evision of Service Tax ,eturn
Cule :> provides that in case there is a mistaBe or omission in the original return, a revised return can be filed with
in a period of 9, days from the date of filing of original return. !t is further provided that the belated return cannot
be revised. 0urther, for the purpose of limitation of time period for raising demand and recovery of dues, the time
limit will commence from the date on which revised return has been filed. %ince the original return can not be
revised beyond 9, days and can not be used to claim the refund.
A5ere service tax 5as 0een paid less t5an due - 4here assessee found that the service tax was payable more
than that he has deposited, he is advised to deposit the difference amount and intimate the service tax department in
the appropriate manner.
Aenerally, it is done by submitted a revised %*+- form along with proof of payment of differential duty.
Iowever, such revised return shall be accepted with in 9, days from the date of original return only, but it does not
mean that assessee can not deposit differential tax voluntarily. >eyond 9, days also, he may deposit the tax and
intimate the service tax in revised %*+- form, though for legal purposes it may not be treated as revised return, but
for the purpose of raising demand under section :-, due weight must be given to such intimation. !n case
department does not accept revised return beyond 9, days, the assessee is advised to submit simple intimation
about differential tax paid voluntarily.
A5en service tax 5as 0een deposited in excess - A person who need to correct the original return for adJustment
of excess tax paid in the previous period, he may revise the return within 9, days subJect to the provision of rule '.
Cule, '"-$, '"&A$ provides circumstances in which excess amount paid during a particular month or <uarter is
allowed to be adJusted in the next month or <uarter. !n case, such person is not in a situation to adJust in
accordance with the provision of rule ', he may file a refund application stating all the facts and circumstances in
which excess amount has been paid.
A5ere any ot5er particular on t5e ST-" found to 0e incorrect - 4hen the assessee as paid the service tax
correctly, but wrongly stated the incorrect particulars in the %*+- return. !n such circumstances, he is advised to
submit a revised %*+- return within 9, days. !f he identifies any irregularity in the original E revised return
thereafter, he may intimate the same through a simple letter.
122
1(
4ssessment

4. Self 4ssessment
%ection :, of the Act provides that, Nevery person liable to pay service tax shall himself assess the tax due on the
services provided by him andZZZZZZZZ..N. 0rom the wording of the section :,, it is clear that every
assessee is duty bound to assess the tax himself in respect of services provided by him in a particular period and
pay the tax on the basis of self+assessment.
. 2erification of return filed under section /.
%ection ;- of the Act extends many provisions of the Central (xcise Act, 19&& to the service tax provisions also.
Accordingly section 1& of the Central (xcise Act, 19&& is extended to this Act. As per section 1&, excise
authorities are empowered to issue summons to any person to attend the office or to produce a document or other
thing in any en<uiry which such officer is maBing for any purpose of this act. *hough the provisions of section 1&
are not expected to be applied on routine basis, but this is very important tool in the hands of central excise
authorities. 0urther, section :- provides for recovery of service tax not levied or short levied or short+levied or
not+paid or erroneously refunded.
0urther, section 12 of the Central (xcise Act, 19&& has been extended to service tax act in accordance with section
;-. %ection 12 of the Central (xcise Act, 19&& extends the provisions of Customs Act, 19'2 to the Central (xcise
Act and conse<uently they are automatically extended to service tax also. !n other words certain provisions of
Customs Act with respect of levy and exemption etc. are extended to service tax. And, conse<uently the central
excise authorities, though in a very rare circumstances, may invoBe those provisions to ascertain the service tax
liability of the person providing services and filed the return under self assessment scheme under section :, of the
Act.

Provisional 4ssessment
Circumstance in 85ic5 provisional assessment may 0e opted
0rom the wording of the section :,, it is clear that every assessee is duty bound to assess the tax himself in respect
of services provided by him in a particular period and pay the tax on the basis of self+assessment. 4here an
assessee is, for any reason, unable to correctly estimate, on the date of deposit, the actual amount payable for any
particular month or <uarter, as the case may be, he may opt for provisional assessment. %ub+rule "&$, "=$ and "'$ of
Cule ' prescribe the procedure and manner of provisional assessment.
Provisional 4ssessment - Procedure
Application to e 3ade # *+le 6&,( # Assessee may maBe a re<uest in writing to the ACE.C of Central (xcise
giving reasons for payment of service tax on provisional basis.
?er3ission for provisional assess3ent # *he ACE.C of Central (xcise on receipt of such re<uest, may allow
payment of service tax on provisional basis on such value of taxable service as may be specified by him.
Applicailit! of ?rovisions of Central Excise *+les, 2002 # *he provisions of the Central (xcise Cules, 2,,2,
relating to provisional assessment, except so far as they relate to execution of bond, shall, so far as may be, apply
to such assessment.
12-
"o "eed to exec+te ond # !t is specifically mentioned that there is no re<uirement of execution of bond "1.
>ond$ for provisional assessment.
S+3ission of ST#0A ret+rn # *+le 6&%( # 4here an assessee re<uests for a provisional assessment under sub+rule
"&$ he shall file a statement giving details of the difference between the service tax deposited and the service lax
liable to be paid for each month in a memorandum in 0orm %*+-A accompanying the <uarterly or half yearly
return, as the case may be.
Provisional 4ssessment - Finali6ation
Finali>ation of ?rovisional Assess3ent # *+le 6&6( # 4here the assessee submits a memorandum in 0orm %*+-A
under sub+rule "=$, it shall be lawful for the ACE.C of Central (xcise to complete the assessment, wherever he
deems it necessary, after calling such further documents or records as he may consider necessary and proper in the
circumstances of the case.
6hether there is an! ti3e li3it for finali>ation of ?rovisional Assess3ent # Cule :"-$ of Central (xcise Cules,
2,,2 as extended to these rules by rule '"&$
*he ACE.C of Central (xcise shall pass order for final assessment as soon as may be, after the relevant
information, as may be re<uired for finali7ing the assessment, is available, but within a period not exceeding six
months from the date of the communication of the order issued. Iowever, this limit of six months can be extended
for a further period upto ' months by the commissioner of Central (xcise. *his period may, further, be extended by
the Chief Commissioner for such further period as he deem fit.
ConseGuences of finali6ation of provisional assessment
?a!3ent of Additional Tax # #pon final assessment, where the assessee is found as liable to pay additional tax,
than he shall pay the same and the provisions of recovery of tax would be applicable from the date of finali7ation
of provisional assessment.
?a!3ent of 2nterest on additional tax # 4here the assessee is liable to deposit additional tax on the basis of
finali7ation of provisional assessment, he shall be liable to pay interest at rate of as specified under 11A> of the
Central (xcise Act i.e. 1;K p.a. %uch interest shall be paid for the period starting from the first day of the month
succeeding the month for which such amount is determined, till the date of payment of thereof.
*ef+nd conse:+ent to finali>ation of provisional assess3ent # #pon finali7ation of provisional assessment, the
assessee may be found as entitled to get refund from the department. %uch refund shall be granted to him alongwith
interest.
Cefund is not automatic. *he assessee is re<uired to file refund application, within one year from the date of
finali7ation of assessment, stating therein with appropriate proof that he has not passed the burden of such tax on
the other person. *he provisions of unJust enrichment are applicable in case of refund which is due to the assesee.
!f the assessee is unable to satisfy that he has not passed the burden on another person than such amount of refund
shall be credited to consumer welfare fund instead of being paid to the applicant.
2nterest on *ef+nd # !nterest at the rate specified under section 11>> of the Central (xcise Act, 19&& i.e. 'K p.a.
!nterest shall be payable from the first day of the month succeeding the month for which such amount is
determined, till the date of payment thereof.

12&
1+
,ecovery of service tax not levied or paid or s5ort-levied or
s5ort-paid or erroneously refunded
[Section /"]

:4; In case of mista7e :unintentional; According to sub+section "1$ if any service tax has not been levied
or paid or has been short+levied or short+paid or erroneously refunded, the Central (xcise Lfficer may,
within eighteen months from the relevant date, serve notice on the person chargeable with the service tax which
has not been levied or paid or which has been short+levied or short+paid or the person to whom such tax refund has
erroneously been made, re<uiring him to show cause why he should not pay the amount specified in the notice)
Excl+sion # 4here the service of the notice is stayed by an order of a court, the period of such stay shall be
excluded in computing the aforesaid period of eighteen months.
State3ent s+se:+ent to iss+e of SC" / %ub+section "1A$ further provides that Eotwithstanding anything
contained in sub-section (#), (except the period of eighteen months of serving the notice for recovery of service
tax) the entral =xcise ?fficer may serve, subse:uent to any notice or notices served under that sub-section, a
statement, containing the details of service tax not levied or paid or short levied or short paid or erroneously
refunded for the subse:uent period, on the person chargeable to service tax, then, service of such statement shall
be deemed to be service of notice on such person, sub>ect to the condition that the grounds relied upon for the
subse:uent period are same as are mentioned in the earlier notices.
Dol+ntar! pa!3ent $s+#section &0() # 4here it is discovered by the assessee on his own or it is brought to his
Bnowledge by the officer that any amount of service tax has not been levied or paid or has been short+levied or
short+paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax
refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded,
on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central (xcise Lfficer before
service of notice on him under sub+section "1$ in respect of such service tax. 4henever any such payment is made,
the assessee shall officer in writing and on receipt of such information the officer shall not serve any notice under
sub+section "1$ in respect of the amount so paid)
Iere it is to be noted that the Central (xcise Lfficer may determine the amount of short payment of service tax or
erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then,
the Central (xcise Lfficer shall proceed to recover such amount in the manner specified in this section, and the
period of eighteen months referred to in sub+section "1$ shall be counted from the date of receipt of such
information of payment.
Final Giailit! of the assessee / %ub+section "2$ provides that the Central (xcise Lfficer shall, after giving
opportunity of being heard, determine the amount of service tax due from, or erroneously refunded to, such person
"not being in excess of the amount specified in the notice$ and thereupon such person shall pay the amount so
determined.
:; In case of fraud etc. :Intentional; - 4here any service tax has not been levied or paid or has been short+
levied or short+paid or erroneously refunded by reason ofQ
"a$ fraud6 or
"b$ collusion6 or
"c$ wilful mis+statement6 or
"d$ suppression of facts6 or
12=
"e$ contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade
payment of service tax,
by the person chargeable with the service tax or his agent, then show cause notice can be issued within five years.
*his is commonly referred as ?extended periodH
Excl+sion # 4here the service of the notice is stayed by an order of a court, the period of such stay shall be
excluded in computing the aforesaid period of five years.
Dalidit! for 1E 3onths instead of % !ears # 4here any notice is issued within the extended period it is the
responsibility of the .epartment to establish that it is case of fraud or misrepresentation etc. %ub+section "'"$
provides that where any appellate authority or tribunal or court concludes that the notice issued under the proviso
to sub+section "#$ is not sustainable for the reason that the charge of fraud etc. has not been established against the
person chargeable with the service tax, to whom the notice was issued, the Central (xcise Lfficer shall determine
the service tax payable by such person for the period of eighteen months, as if the notice was issued for the
offences for which limitation of eighteen months applies under sub+section "#$.F
State3ent s+se:+ent to iss+e of SC" / %ub+section "1A$ further provides that Eotwithstanding anything
contained in sub-section (#), (except the period of eighteen months of serving the notice for recovery of service
tax) the entral =xcise ?fficer may serve, subse:uent to any notice or notices served under that sub-section, a
statement, containing the details of service tax not levied or paid or short levied or short paid or erroneously
refunded for the subse:uent period, on the person chargeable to service tax, then, service of such statement shall
be deemed to be service of notice on such person, sub>ect to the condition that the grounds relied upon for the
subse:uent period are same as are mentioned in the earlier notices.
Dol+ntar! pa!3ent # According to sub+section "&$ provides that the provisions of sub+section "-$ providing for
voluntary payment do not apply in case of fraud etc.
Final Giailit! of the assessee / %ub+section "2$ provides that the Central (xcise Lfficer shall, after giving
opportunity of being heard, determine the amount of service tax due from, or erroneously refunded to, such person
"not being in excess of the amount specified in the notice$ and thereupon such person shall pay the amount so
determined.

:c; In case of entries discovered in assessees records According to sub+section "&A$ when during the
course of any audit, investigation or verification, it is found that any service tax has not been levied or paid or has
been short+levied or short+paid or erroneously refunded, but the true and complete details of transactions are
available in the specified records, the person chargeable to service tax or to whom erroneous refund has been
made, may pay the service tax in full or in part, as he may accept to be the amount of tax chargeable or
erroneously refunded along with interest payable thereon under section := and penalty e<ual to one per cent of
such tax, for each month, for the period during which the default continues, up to a maximum of twenty+five per
cent of the tax amount, before service of notice on him and inform the Central (xcise Lfficer of such payment in
writing, who, on receipt of such information, shall not serve any notice under sub+section "1$ in respect of the
amount so paid and proceedings in respect of the said amount of service tax shall be deemed to have been
concluded.
Provided that the Central (xcise Lfficer may determine the amount of service tax, if any, due from such person,
which in his opinion remains to be paid by such person and shall proceed to recover such amount in the manner
specified in sub+section "1$.

Time 'imit for issue of SC% :Ta0le;
Situation Time-limit
4here short levy, non levy, short payment, non payment or erroneous refund
of service tax due to) +
0ive years from the relevant
date
12'
"a$ fraud6 or
"b$ collusion6 or
"e$ contravention of any of the provisions of this Chapter or of the rules made
thereunder
8it5 intent to evade payment of service tax.
4here short levy, non levy, short payment, non payment or erroneous refund
of service tax due to) +
Any other reason
(ighteen months from the
relevant date
4here certain entries are discovered in assessee@s records during inspection or
audit on which tax has not been paid
0ive years from the relevant
date

,elevant #ate - /":+;
Situation ,elevant #ate
4here return was re<uired to be filed and so filed *he date on which return has been filed.
4here return was re<uired to be filed but no return
filed
*he last date on which such return is to be filed
!n any ot5er case .ate of payment of %ervice *ax
4here service tax is provisionally assessed *he date of adJustment of the service tax after the
final assessment
4here any sum, relating to service tax, has erroneously
0een refunded
.ate of such refund
SC% - #ate of issue vers+s #ate of Serve
0or the purpose of section :- and recovery of service tax, show cause notice must be served to the person within
the stipulated time period.
.ate of issuance of show cause notice is taBen for calculation for the purpose of calculating the limitation of
period. !nstead, the date on which the notice has been received by the person shall be taBen to calculate the period.
*herefore, if the %CN issued well in time by the .epartment but received by the assessee after end of the specified
time limit, the %CN becomes invalid.
Po8er to issue S5o8 Cause %otice
*he C>(C has specified the power to issue show cause notice and to adJudicate the same under section :- as under
) +
12:
%o Central *xcise Cfficer 4mount of service tax or C*%24T credit
specified in a notice for t5e purpose of
adDudication
"1$ "2$ "-$
"1$. Assistant Commissioner of Central (xcise or
.eputy Commissioner of Central (xcise
Not exceeding Cs. = laBhs
"2$. 2oint Commissioner of Central (xcise Above Cs. = laBhs but not exceeding Cs. 2, laBhs
"-$. Additional Commissioner of Central (xcise Above Cs. 2, laBhs but not exceeding Cs. =, laBhs
"&$. Commissioner of Central (xcise 4ithout limit.
%imilar powers has been conferred to AdJudicate the matters related to penalty uEs ;-A.
,ecovery t5rou&5 4lternative mode - Section 1/
4here any amount payable by a person to the credit of the Central Aovernment under any of the provisions of
this Chapter or of the rules made thereunder is not paid, the Central (xcise Lfficer shall proceed to recover the
amount by one or more of the modes mentioned below)Q
&i( Ad9+st3ent ;ith the a3o+nt pa!ale ! the depart3ent # Clause "a$ provides that the Central (xcise Lfficer
may deduct or may re<uire any other Central (xcise Lfficer or any officer of customs to deduct the amount so
payable from any money owing to such person which may be under the control of the said Central (xcise Lfficer
or any officer of customs6
&ii( *ecover! fro3 Third ?art! # 1arnishee ?roceedings # Clause "b$ provides that the Central (xcise Lfficer
may, by notice in writing, re<uire any other person from whom money is due or may become due to such person,
or who holds or may subse<uently hold money for or on account of such person, to pay to the credit of the
Central Aovernment either forthwith upon the money becoming due or being held or at or within the time
specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient
to pay the amount due from such person or the whole of the money when it is e<ual to or less than that amount6
!t further provided that, every person to whom a notice is issued under this section shall be bound to comply with
such notice, and, in particular, where any such notice is issued to a post office, banBing company or an insurer, it
shall not be necessary to produce any pass booB, deposit receipt, policy or any other document for the purpose of
any entry, endorsement or the liBe being made before payment is made, notwithstanding any rule, practice or
re<uirement to the contrary6
!n a case where the person to whom a notice under this section is sent, fails to maBe the payment in pursuance
thereof to the Central Aovernment, he shall be deemed to be an assessee in default in respect of the amount
specified in the notice and all the conse<uences of this Chapter shall follow6
&iii( 8etaining an! 3ovale or i33ovale propert! # Clause "c$ that the Central (xcise Lfficer may, on an
authorisation by the Commissioner of Central (xcise, in accordance with the rules made in this behalf, detain
any movable or immovable property belonging to or under the control of such person, and detain the same until
the amount payable is paid6 and in case, any part of the said amount payable or of the cost of the distress or
12;
Beeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said
property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including
cost of sale remaining unpaid and shall render the surplus amount, if any, to such person6
&iv( *ecover! as an arrear of land reven+e # Clause "d$ provides that the Central (xcise Lfficer may prepare a
certificate signed by him specifying the amount due from such person and send it to the Collector of the district in
which such person owns any property or resides or carries on his business and the said Collector, on receipt of
such certificate, shall proceed to recover from such person the amount specified thereunder as if it were an arrear
of land revenue.
[[[[[[[[[[[[[
129
1/
Interest and Penalty

4. Interest
'ia0ility to Pay Interest - For non payment of Service Tax - Section /(
!f a person is liable to pay service tax uEs '; and fails to credit the tax or any part thereof to the account of the
Central Aovernment within the prescribed time limit he shall be liable to pay interest at the prescribed rate "1;K
1.A.$ for the period by which payment of service tax is delayed. !nterest under section := is mandatory and
automatic. *he assessee is re<uired to pay interest alongwith the service tax or before filing of service tax return.
Ie is not supposed to wait for a show cause notice from the department.
For non payment of #emandO - Section /":!;
*he provision of section := has been extended to the amount of short payment of service tax or erroneously
refunded service tax, if any, as may be determined under section :-.

. Penalties
%o Penalty s5ould 0e imposed in certain cases - Section 1.
According to section ;,, the penalty under section :', :: or :; shall not be imposed if the assessee proves that
there was reasonable cause for the said failure. !t is the onus on the assessee to prove that there was sufficient
cause. 0rom the number of cases on section ;,, the honorable tribunal has found only in few cases where the
assessee has satisfied that there was sufficient cause. .elay due to illness or disease is commonly accepted reason
but delay due to financial crunch is rarely accepted reason.
Penalty for failure to pay service tax - Section /+
!n accordance with section :', Nany person, liable to pay service tax in accordance with the provisions of section
'; or the rules made there under, who fails to pay such tax shall pay in addition to paying such tax, an interest on
that tax in accordance with the provisions of section :=, a penalty which shall not be less than Cs. 1,,E+ per day
or 1K per month of the amount whichever is higher subJect to maximum of amount in arrear.N
Penalty for suppressin& value of taxa0le service - Section /1
4here any service tax has not been levied or paid or
has been short+levied or short+paid or erroneously
refunded, by reason ofQ
"a$ fraud6 or
"b$ collusion6 or
"e$ contravention of any of the provisions of this
Chapter or of the rules made thereunder with the intent
4here true and complete details of the transactions are
available in the specified records, penalty shall be fifty
per cent of the service tax so not levied or paid or
short+levied or short+paid or erroneously refunded
1-,
to evade payment of service tax, the person, liable to
pay such service tax or erroneous refund, as
determined under sub+section "2$ of section :-, shall be
liable to pay a penalty, in addition to such service tax
and interest thereon, if any, payable by him, which
shall be e<ual to the amount of service tax so not levied
or paid or short+levied or short+paid or erroneously
refunded)
4here such service tax and the interest payable thereon is paid within thirty days from the date of communication
of order of the Central (xcise Lfficer determining such service tax, the amount of penalty liable to be paid by
such person shall be twenty+five per cent of such service tax provided amount of penalty is also paid within the
same period of thirty days.
!n case of a service provider whose value of taxable services does not exceed sixty laBh rupees during any of the
years covered by the notice or during the last preceding financial year, the period of thirty days shall be extended to
ninety days.
Penalty for contravention of rules and provisions of 4ct for 85ic5 no penalty is specified else85ere.
[Section //]
Penalty upto ,s. 1.-... Penalty upto ,s. 1.-... or ,s. !..B- per day-
85ic5ever is more
a( who is liable to pay service tax or re<uired to
taBe registration, fails to taBe registration in
accordance with the provisions of section '9 or
rules made under
( who fails to Beep, maintain or retain booBs of
account and other documents
c( who is re<uired to pay tax electronically,
through internet banBing, fails to pay the tax
electronically
d( who issues invoice in accordance with the
provisions of the Act or rules made thereunder,
with incorrect or incomplete details or fails to
account for an invoice in his booBs of account
e( Contravention of any of the provisions or rules
for which no penalty is separately provided
a; 0ailure to furnish information called by an
officer in accordance with the provisions of
this Chapter or rules made thereunder6 or
0; 0ailure to produce documents called for by a
Central (xcise Lfficer in accordance with the
provisions of this Chapter or rules made
thereunder6 or
c; 0ailure to appear before the Central (xcise
Lfficer, when issued with a summon for
appearance to give evidence or to produce a
document in an in<uiry.

Penalties 0y court [Section 13]
1-1
%ub+section "&$ provides that any person shall not be prosecuted for any offence under this section except with
the previous sanction of the Chief Commissioner of Central (xcise.
Bffences # 4hoever commits any of the following offences, namely,Q
"a$ Bnowingly evades the payment of service tax under this Chapter6 or
"b$ avails and utilises credit of taxes or duty without actual receipt of taxable service or excisable goods
either fully or partially in violation of the rules made under the provisions of this Chapter6 or
"c$ maintains false booBs of account or fails to supply any information which he is re<uired to supply under
this Chapter or the rules made thereunder or "unless with a reasonable belief, the burden of proving
which shall be upon him, that the information supplied by him is true$ supplies false information6 or
"d$ collects any amount as service tax but fails to pay the amount so collected to the credit of the Central
Aovernment beyond a period of six months from the date on which such payment becomes due, shall
be punishable, as under Q
?enalties
"i$ in the case of an offence specified in clauses "a$, "b$ or "c$ where the amount exceeds fifty laBh rupees,
with imprisonment for a term which may extend to three years)
Provided that in the absence of special and ade<uate reasons to the contrary to be recorded in the
Judgment of the court, such imprisonment shall not be for a term of less than six months6
"ii$ in the case of the offence specified in clause "d$, where the amount exceeds fifty laBh rupees, with
imprisonment for a term which may extend to seven years)
Provided that in the absence of special and ade<uate reasons to the contrary to be recorded in the
Judgment of the court, such imprisonment shall not be for a term of less than six months6
"iii$ in the case of any other offences, with imprisonment for a term, which may extend to one year.
?enalt! for s+se:+ent offence $S+#section &2()
!f any person is convicted of an offence punishable underQ
"a$ clause "i$ or clause "iii$, then, he shall be punished for the second and for every subse<uent offence with
imprisonment for a term which may extend to three years6
"b$ clause "ii$, then, he shall be punished for the second and for every subse<uent offence with
imprisonment for a term which may extend to seven years.F
Follo;ing are not the special reasons $S+#section &0()
0or the purposes of sub+sections "1$ and "2$, the following shall not be considered as special and ade<uate reasons
for awarding a sentence of imprisonment for a term of less than six months, namely )Q
"i$ the fact that the accused has been convicted for the first time for an offence under this Chapter6
"ii$ the fact that in any proceeding under this Act, other than prosecution, the accused has been ordered to pay
a penalty or any other action has been taBen against him for the same act which constitutes the offence6
"iii$ the fact that the accused was not the principal offender and was acting merely as a secondary party in the
commission of offence6
"iv$ the age of the accused.
Penalty for offences 0y a company [Section /14]
4here a company has committed any of the following contraventions, namely)Q
"a$ evasion of service tax6 or
"b$ issuance of invoice, bill or, as the case may be, a challan without provision of taxable service in
violation of the rules made under the provisions of this Chapter6 or
1-2
"c$ availment and utilisation of credit of taxes or duty without actual receipt of taxable service or excisable
goods either fully or partially in violation of the rules made under the provisions of this Chapter6 or
"d$ failure to pay any amount collected as service tax to the credit of the Central Aovernment beyond a
period of six months from the date on which such payment becomes due,
then any director, manager, secretary or other officer of such company, who at the time of such contravention was
in charge of, and was responsible to, the company for the conduct of business of such company and was
Bnowingly concerned with such contravention, shall be liable to a penalty which may extend to one laBh rupees.
Po8er of 4dDudication of Penalty - Section 1"4
%ection ;-A provides that, penalty proceedings shall be executed by the Central (xcise Lfficers conferred with
such power as the Central >oard of (xcise and Customs constituted under the Central >oards of Cevenue Act,
19'-, may, by notification in the Lfficial Aa7ette, specify.
S.%o Central *xcise Cfficer 4mount of service tax or C*%24T credit specified
in a notice for t5e purpose of adDudication under
section 1"4
"1$ "2$ "-$
"1$. Assistant Commissioner of Central (xcise
or .eputy Commissioner of Central (xcise
Not exceeding Cs. = laBhs
"2$. 2oint Commissioner of Central (xcise Above Cs. = laBhs but not exceeding Cs. 2, laBhs
"-$. Additional Commissioner of Central (xcise Above Cs. 2, laBhs but not exceeding Cs. =, laBhs
"&$. Commissioner of Central (xcise 4ithout limit.

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11
,efunds

*here are no specific provisions under Chapter / of the 0inance Act, 199& dealing with the refunds. Iowever,
%ection ;- provides that the provisions of the Central (xcise Act, 19&& dealing with refunds are e<ually
applicable in relation to service tax also. Accordingly the following provision related to refund has been made
applicable to service tax +
Section Su0Dect matter
11> Claim for refund of duty
11>> !nterest on delayed refund
12> 1resumption that the burden of duty has been passed on to the buyer
12C Consumer 4elfare 0und
12. #tilisation of the fund
4. Claim of ,efund
According to section 11>, except where an order of refund is given by the appellate authority, no refund shall be
allowed unless an application is made. *herefore, a person can apply for refund due to various reasons e.g.
excess or payment of service tax by mistaBe, forced by the department to pay higher service tax, finali7ation of
provisional assessment, pre+deposit of service tax for appeal, refund of Cenvat Credit etc.
. A5o can file refund application
Cefund application can be filed by any person who has borne the "incidence$ burden of service tax. Accordingly)+
+ An assessee who has paid the service tax can file an application for refund, if he has not passed on the
burden of service tax on to another person.
+ A person who has received the services and paid the amount of service tax on the services received from a
person who has claimed in his bill which was otherwise not taxable.
+ !n any other case, the person who is entitled to claim the refund.
!n all the circumstances, the person filing an application must satisfy that he has not passed on the burden of
service tax to another person.
C. Procedure for filin& of refund application B claim
Cefund claim should be lodged with the ACE.C of Central (xcise having the Jurisdiction over the person
claiming refund. An application submitted under wrong Jurisdictional officer cannot be held valid and no refund
claim shall be allowed.
Cefund application may be submitted in a simple letter alongwith 0orm C. A person filing refund application
must attach all the documents and evidences with the 0orm C to Justify that he is entitled to claim the refund and
burden has not been passed on.
#. Time limit and ,elevant #ate
1-&
A refund application must be filed with the prescribed time limit form the relevant date. Any application filing
beyond the prescribed time limit, shall be treated as never been filed and must be reJected.
Cefund application must be filed within one year from the relevant date.
Ceaning of *elevant 8ate # Celevant date has been defined in the (xplanation > to section 11> of the C.( Act.
And accordingly the relevant date shall be
Sit+ation *elevant 8ate
!n case of (xport of %ervices *he date on which services exported out of !ndia
!n case service tax was paid provisionally *he date of adJustment of service tax after final adJustment
!n any other case in the case of assessee .ate of payment of service tax
!n case of a person other than assessee .ate on which he receives the services
6hen ti3e li3it does not appl!
+ *ime limit does not apply if the service tax has been under protest Dfiling of an appeal itself is a protest$
+ !n case the order has been decided in favour of the assessee.
+ No time limit applies for refund of penalty.
*. #octrine of InDust *nric5ment
%ection 12> of the Central (xcise Act, 19&& provides that unless proved otherwise, it is presumed that every
person who has paid service tax has passed on the burden of tax to his client E customer.
A service provider who collects the service tax from his client E customer and pays to the service tax department,
is never entitled to claim the refund of service tax as he has not borne the incidence of service tax.
%ection 12> puts a heavy burden on the person claiming refund from the department to prove that the provisions
of %ection 12> are not applicable on him and he is entitled to get the refund. Ie has to prove that the incidence of
service tax has been borne by him.
1rovisions of unJust enrichment shall not be applicable in the following cases) +
+ !n case assessee reverse the Cenvat Credit and agitates the matter for allowing the credit.
+ %ervice tax, subse<uently which is not passed on to the customer
+ Cefund of interest
+ Cefund of penalty
+ Cefund of service tax on the services exported
+ Cefund of amount paid under Cenvat Credit Cules
+ 4hen price was inclusive of all duties and subse<uently the price was reduced
F. Interest paya0le after t5ree mont5s from t5e date of application
According to section 11>>, if refund is not granted within three months from the date of filing of application of
refund then interest shall be payable at the rate prescribed by the Central Aovernment between =K per annum to
2&K per annum. "At present rate applicable is 'K p.a.$
1-=
4hen the matter goes into appeal E revisions etc. and order is made in favour of appellant, the interest shall be
paid for the entire period beyond the three months from the date of submission of original refund application.
PPPPPPPPP
1-'
13
Searc5 and Sei6ure

Po8er to searc5 premises - Section 1!:1;
%ection ;2 provides that where the 2oint Commissioner of Central (xcise has reason to believe that any
documents or booBs or things which in his opinion will be useful for or relevant to any proceeding under this
Chapter are secreted in any place, he may authorise any

%uperintendent of Central (xcise to search for and sei7e
or may himself search for and sei7e, such documents or booBs or things.
#isclosure of reasons
!t is to be noted that section ;2 does not re<uire disclosure of reasons for belief to the person against
whom such search is to be conducted. Iowever, if demanded, such reasons must be disclosed at the
time of adJudication.
Provisions of Code of Criminal Procedure 8ill apply - Section 1!:!;
*he provisions of the Code of Criminal 1rocedure, 19:-, relating to searches, shall, so far as may be,
apply to searches under this section as they apply to searches under that Code.
PPPPPPP

1-:
!.
Special 4udit
[Section /!4]

!f the Commissioner of Central (xcise, has reasons to believe that any person liable to pay service tax,55
"i$ has failed to declare or determine the value of a taxable service correctly6 or
"ii$ has availed and utilised credit of duty or tax paid+
"a$ which is not within the normal limits having regard to the nature of taxable service provided, the
extent of capital goods used or the type of inputs or input services used, or any other relevant factors as
he may deem appropriate6 or
"b$ by means of fraud, collusion, or any wilful misstatement or suppression of facts6 or
"iii$ has operations spread out in multiple locations and it is not possible or practicable to obtain a true and
complete picture of his accounts from the registered premises falling under the Jurisdiction of the said
Commissioner, he may direct such person to get his accounts audited by a chartered accountant or cost
accountant nominated by him, to the extent and for the period as may be specified by the
Commissioner.
*he chartered accountant or cost accountant referred above shall, within the period specified by the said
Commissioner, submit a report duly signed and certified by him to the said Commissioner mentioning therein
such other particulars as may be specified by him.
*he person liable to pay tax shall be given an opportunity of being heard in respect of any material gathered on
the basis of the audit under sub+section "1$ and proposed to be utilised in any proceeding under the provisions of
this Chapter or rules made thereunder.
%ub+section "-$ provides that provisions of this section shall have effect notwithstanding that the accounts of
such person have been audited under any other law for the time being in force.
==========

1-;
!1
,ectification of )ista7e
[Section /$]

%ection :& of the Act provides the manner and procedure for rectification of mistaBes apparent from the orders
etc.
Time 'imit for rectification of mista7e - %ub section "1$ provides that order can be rectified within two years
from the date on which such order was passed.
A5o can rectify t5e order> - Lrder can be rectified by the Central (xcise officer who passed any order under
the Act.
Su0Dect matter of 4ppeal can not 0e rectified - /$:!;
An order which has been considered and decided in any proceeding by way of appeal or revision relating to an
order, the Central (xcise Lfficer passing such order, cannot rectify such order. Iowever, the Central (xcise
Lfficer can rectify the other portion of the order which was not considered and decided in any proceeding by way
of appeal or revision.
A5o can point out t5e mista7e> - /$:";
*he central excise officer can amend the order) +
+ on his own motion6 or
+ if any mistaBe is brought to his notice by the assessee6 or
+ if any mistaBe is brought to his notice the Commissioner of Central (xcise6 or
+ if any mistaBe is brought to his notice the Commissioner of Central (xcise "Appeals$.
A5en lia0ility &ets en5anced - /$:$; and /$:/;
An amendment, which has the effect of enhancing the liability of the assessee or reducing a refund, shall not be
made under this section unless the Central (xcise Lfficer concerned has given notice to the assessee of his
intention so to do and has allowed the assessee a reasonable opportunity of being heard.
4here any such amendment has the effect of enhancing the liability of the assessee or reducing the refund
already made, the Central (xcise Lfficer shall maBe an order specifying the sum payable by the assessee and the
provisions of this Chapter shall apply accordingly.
A5en lia0ility &ets reduced - /$:+;
%ubJect to the other provisions of this Chapter where any such amendment has the effect of reducing the liability
of an assessee or increasing the refund, the Central (xcise Lfficer shall maBe any refund which may be due to
such assessee.
Crder s5all 0e in Aritin& - /$:(;
4here an amendment is made under this section, an order shall be passed in writing by the Central (xcise Lfficer
concerned.

========
1-9
!!
,evie8 0y Commissioner
[Section 1$]

Purpose of revie8
#nder sub+section "1$ the Commissioner of Central (xcise may, of his own motion, call for and examine the record
of any proceedings in which an adJudicating authority subordinate to him has passed any decision or order under this
Chapter for the purpose of satisfying himself as to the legality or propriety of any such decision or order.
Crder after revie8
!f Commissioner is of the opinion that the order reviewed by him lacBs propriety, he may, by order, direct such
authority or any Central (xcise Lfficer subordinate to him to apply to the Commissioner of Central (xcise
"Appeals$ for the determination of such points arising out of the decision or order as may be specified by the
Commissioner of Central (xcise in his order.
*he Commissioner shall pass review order under sub+section "1$ within a period of three months from the date of
communication of the decision or order of the adJudicating authority.
Time for applyin& to t5e Commissioner :4ppeals; [Su0-section :";]
4here in pursuance of an order under sub+section "1$, the adJudicating authority or any other officer authorised in
this behalf maBes an application to the Commissioner of Central (xcise "Appeals$ within a period of one month
from the date of communication of the order under sub+section "1$ to the adJudicating authority, such application
shall be heard by the Commissioner of Central (xcise "Appeals$, as if such application were an appeal made against
the decision or order of the adJudicating authority and the provisions of this Chapter regarding appeals shall apply to
such application.

========
1&,
!"
4ppeals

4. 4ppeal to t5e Commissioner :4ppeals; - Section 1(
6ho can file an appeal # Any person aggrieved by any decision or order passed by an adJudicating authority
subordinate to the Commissioner of Central (xcise may appeal to the Commissioner of Central (xcise "Appeals$.
(very appeal shall be in the %*+& and shall be verified in the prescribed manner.
Ti3e Gi3it for filing an Appeal # An appeal shall be presented within two months from the date of receipt of the
decision or order of such adJudicating authority, relating to service tax, interest or penalty. Iowever, the
Commissioner of Central (xcise "Appeals$ may, if he is satisfied that the appellant was prevented by sufficient
cause from presenting the appeal within the aforesaid period of two months months, allow it to be presented
within a further period of one month.
?o;ers of the Co33issioner &Appeals( # *he Commissioner of Central (xcise "Appeals$ shall hear and
determine the appeal and, subJect to the provisions of this Chapter, pass such orders as he thinBs fit and such
orders may include an order enhancing the service tax, interest or penalty.
*herefore, even in the cases, where appeal has been filed by the assessee, commissioner can enhance the amount
of service tax, interest or penalty. Iowever, before maBing such enhancement, commissioner "Appeals$ has to
give a reasonable opportunity of showing cause against such enhancement.
Application of provision of Central Excise in relation to Appeal # %ubJect to the provisions of this Chapter, in
hearing the appeals and maBing orders under this section, the Commissioner of Central (xcise "Appeals$ shall
exercise the same powers and follow the same procedure as he exercises and follows in hearing the appeals and
maBing orders under the Central (xcise Act, 19&&.
. 4ppeal to t5e 4ppellate Tri0unal :C*ST4T; - Section 1+
Appeal ! an assessee@ Any assessee aggrieved by an order listed below may appeal to the Appellate *ribunal
"C(%*A*$ against such order) +
+ %ection :- + AdJudication order of demand E recovery passed by the Commissioner of Central (xcise.
+ %ection ;-A + AdJudication order of 1enalty passed by the Commissioner of Central (xcise.
+ %ection ;& 5 Ceview Lrder by the Commissioner of Central (xcise
+ %ection ;= + Lrder of the Commissioner of Central (xcise "Appeals$
Appeal by the assessee shall be made in %*+= form and in <uadruplicate.
4ppeal 0y t5e ,evenue #epartment a&ainst t5e order of t5e Commissioner of Central *xcise
[Section 1+]
%ub+section "1A$ provides that the >oard may, by notification in the Lfficial Aa7ette, constitute a committee of at
least two chief commissioners. *he Committee of Chief Commissioners of Central (xcise may, if it obJects to any
1&1
order passed by the Commissioner of Central (xcise under section :- or section ;-A direct the Commissioner of
Central (xcise to appeal to the Appellate *ribunal against the order.
4here the Committee of Chief Commissioners of Central (xcise differs in its opinion against the order of the
Commissioner of Central (xcise, it shall state the point or points on which it differs and maBe a reference to the
>oard which shall, after considering the facts of the order, if is of the opinion that the order passed by the
Commissioner of Central (xcise is not legal or proper, direct the Commissioner of Central (xcise to appeal to the
Appellate *ribunal against the order.
*he Committee of Chief Commissioners or the >oard may, if it obJects to any order passed by the Commissioner
of Central (xcise under section :- or section ;-A or section ;&, direct the Commissioner of Central (xcise to
appeal to the Appellate *ribunal against the order. *herefore, the commissioner of central excise cannot file an
appeal on its own against the order of himself.
>efore filing an appeal against own order, commissioner of Central (xcise has to get the direction from the
>oard. Appeal by the department shall be made in %*+: form and in <uadruplicate.
%ub+section "-$provides that every such appeal shall be filed within three months of the date on which the
order sought to be appealed against is received by the Committee of Chief Commissioners.

4ppeal 0y t5e ,evenue #epartment a&ainst t5e order of t5e Commissioner of Central *xcise
:4ppeals;
*he Central >oard may constitute a committee of two commissioners of Central (xcise and this committee may
review every order passed by the Commissioner "Appeals$ with a view to examine the propriety thereof.
According to %ub+section "2A$where the Committee of Commissioners obJects to any order passed by the
Commissioner of Central (xcise "Appeals$ under section ;=, it may direct any Central (xcise Lfficer to appeal on
its behalf to the Appellate *ribunal against the order.
4here the Committee differs in its opinion against the order of the Commissioner of Central (xcise "Appeals$, it
shall state the point or points on which it differs and maBe a reference to the Jurisdictional Chief Commissioner who
shall, after considering the facts of the order, if is of the opinion that the order passed by the Commissioner of
Central (xcise "Appeals$ is not legal or proper, direct any Central (xcise Lfficer to appeal to the Appellate *ribunal
against the order.
(very such appeal shall be filed within three months of the date on which the order sought to be appealed against is
received the Committee of Commissioners.

Filin& of a memorandum of cross-o0Dection
*he Commissioner of Central (xcise or any Central (xcise Lfficer subordinate to him or the assessee, as the case
may be, on receipt of a notice that an appeal against the order of the Commissioner of Central (xcise or the
Commissioner of Central (xcise "Appeals$, by the other party may, notwithstanding that he may not have appealed
against such order or any part thereof, file a memorandum of cross+obJections, verified in the prescribed manner,
against any part of the order of the Commissioner of Central (xcise or the Commissioner of Central (xcise
"Appeals$.
%uch memorandum in 0orm %*+' shall be filed within &= days from the date of receipt of notice.
4dmission of elated 4ppeal B )emorandum of Cross-o0Dections
1&2
*he Appellate *ribunal may admit an appeal or permit the filing of a memorandum of cross+obJections after the
expiry of the relevant period if it is satisfied that there was sufficient cause for not presenting it within that period.
Fees for 4ppeal
An appeal to the Appellate *ribunal shall be accompanied by a fee of,Q
4mount of Service Tax and Interest #emanded and Penalty levied 4mount of Fees
ess than Cs. = laBhs Cs. 1,,,E+
9ore than Cs. = laBhs but not exceeding Cs. =, laBhs Cs. =,,,,E+
Above Cs. =, laBhs Cs. 1,,,,,E+
Iowever, no fee shall be payable in the case of an appeal filed by the department.
And, no fee shall be payable for a memorandum of cross+obJections.
Fees for ot5er matter ot5er t5an service tax B interest and penalty
4ppeal matter 4mount fees
Appeal for grant of stay Cs. =,,E+
Appeal for rectification of mistaBe Cs. =,,E+
0or restoration of appeal Cs. =,,E+
0or restoration of application Cs. =,,E+
0or any other purpose Cs. =,,E+
Iowever, no fee shall be payable in the case of an appeal filed by the department.
And, no fee shall be payable for a memorandum of cross+obJections.
4pplica0ility of Provisions of Central *xcise in relation to appeal to C*ST4T
%ubJect to the provisions of this Chapter, in hearing the appeals and maBing orders under this section, the
Appellate *ribunal shall exercise the same powers and follow the same procedure as it exercises and follows in
hearing the appeals and maBing orders under the Central (xcise Act, 19&&.

=========
1&-
!$
4dvance ,ulin&s

Concept of 4dvanced ,ulin&s [Section 3+4:a;]
Advanced Culings means guidelines given by Authority for Advanced Culings on any <uestion of law or facts
which may affect the tax liability of the applicant in a proposed activity and such guidelines have binding effect
on the adJudicating authority.
4pplicant - 85o can apply for advance rulin&s [Section 3+4:0;]
NapplicantN means,Q
"i$ "a$ non+resident setting up a Joint venture in !ndia in collaboration with a non+resident or a resident6 or
"b$ a resident setting up a Joint venture in !ndia in collaboration with a non+resident6 or
"c$ wholly owned subsidiary !ndian company, of which the holding company is a foreign company,
who or which, as the case may be, proposes to undertaBe any business activity in !ndia6
"ii$ a Joint venture in !ndia6 or
"iii$ a resident falling within any such class or category of persons, as the Central Aovernment may, by
notification in the Lfficial Aa7ette, specify in this behalf, and which or who, as the case may be, maBes
application for advance ruling under subsection "1$ of section 9'C6 Dpublic sector undertaBings and Cesident
public companiesF
N9oint vent+re in 2ndiaN means a contractual arrangement whereby two or more persons undertaBe an economic
activity which is subJect to Joint control and one or more of the participants or partners or e<uity holders is a non+
resident having substantial interest in such arrangement.
)eanin& of %on-,esident - [Section 3+4:e;]
Nnon+residentN, N!ndian companyN and Nforeign companyN have the meanings respectively assigned to them in
clauses "-,$, "2'$ and "2-A$ of section 2 of the !ncome+tax Act, 19'16
4pplication for advance rulin& [Section 3+C:1;- :"; R :$;]
An applicant desirous of obtaining an advance ruling under this Chapter may maBe an application in 0orm AAC
"%*$ + Cule - of the Service Tax :4dvance ,ulin&; ,ules- !.." and the application shall be submitted in
<uadruplicate accompanied by a fee of ,s. !(..B- "two thousand five hundred rupees$. An applicant may
withdraw an application within thirty days from the date of the application.
@uestion t5at can 0e raised in t5e application for 4dvance ,ulin& [Section 3+C :!;]
*he <uestion on which the advance ruling is sought shall be in respect of,Q
"a$ classification of any service as a taxable service under Chapter /6
"b$ the valuation of taxable services for charging service tax6
"c$ the principles to be adopted for the purposes of determination of value of the taxable service under the
provisions of Chapter /6
"d$ applicability of notifications issued under Chapter /6
"e$ admissibility of credit of service tax.
1&&
"f$ determination of the liability to pay service tax on a taxable service under the provisions of Chapter /
0urther, the authority can accept the matter specified in the clauses "a$ to "f$ above. !n these clauses there is no
reference to circulars. *herefore, advance ruling authority is not empowered to decide the issue raised due to a
circular issued by board.
Procedure on receipt of application [Section 3+#]
Ln receipt of an application, the Authority shall cause a copy thereof to be forwarded to the Commissioner of
Central (xcise and, if necessary, call upon him to furnish the relevant records. 4here any records have been
called for by the Authority in any case, such records shall, as soon as possible, be returned to the Commissioner
of Central (xcise.
Acceptance F *e9ection of an application
*he Authority may, after examining the application and the records called for, by order, either allow or reJect the
application. 4here the application is reJected, reasons for such reJection shall be given in the order. Iowever no
application shall be reJected under this sub+section unless an opportunity has been given to the applicant of being
heard)
Cases ;here application shall e re9ected co3p+lsoril!
"a$ where the case is already pending in the applicantXs case before any Central (xcise Lfficer, the Appellate
*ribunal or any Court6
"b$ where the case is the same as in a matter already decided by the Appellate *ribunal or any Court)
Procedure after acceptance of an application
4here an application is allowed, the Authority shall, after examining such further material as may be placed
before it by the applicant or obtained by the Authority, pronounce its advance ruling on the <uestion specified in
the application within 9, days since application is received.
?ersonal hearing
Ln a re<uest received from the applicant, the Authority shall, before pronouncing its advance ruling, provide an
opportunity to the applicant of being heard, either in person or through a duly authorised representative.
Explanation) 0or the purposes of this sub+section, Nauthorised representativeX has the meaning assigned to it in
sub+section "2$ of section -=R of the Central (xcise Act, 19&&.
Brder of the Advance *+ling
A copy of the advance ruling pronounced by the Authority, duly signed by the 9embers and certified in the
prescribed manner shall be sent to the applicant and to the Commissioner of Central (xcise, as soon as may be,
after such pronouncement.
4pplica0ility :indin& nature; of advance rulin& [Section 3+*]
*he advance ruling pronounced by the Authority under section 9'. shall be binding onlyQ
"a$ on the applicant who had sought it6
"b$ in respect of any matter referred to in sub+section "2$ of section 9'C6
"c$ on the Commissioner of Central (xcise, and the Central (xcise authorities subordinate to him, in respect of
the applicant.
0urther, the advance ruling shall be binding as aforesaid unless there is a change in law or facts on the basis of
which the advance ruling has been pronounced.
4dvance rulin& to 0e void in certain circumstances [Section 3+F]
1&=
4here the Authority finds, on a representation made to it by the Commissioner of Central (xcise or otherwise,
that an advance ruling pronounced by it under sub+section " &$ of section 9'. has been obtained by the applicant
by fraud or misrepresentation of facts, it may, by order, declare such ruling to be void a0 initio and thereupon all
the provisions of this Chapter shall apply "after excluding the period beginning with the date of such advance
ruling and ending with the date of order under this sub+section$ to the applicant as if such advance ruling had
never been made. A copy of the order made, shall be sent to the applicant and the Commissioner of Central
(xcise.
Po8ers of 4ut5ority [Section 3+=]
"1$ *he Authority shall, for the purpose of exercising its powers regarding discovery and inspection, enforcing
the attendance of any person and examining him on oath, issuing commissions and compelling production of
booBs of account and other records, have all the powers of a civil court under the Code of Civil 1rocedure, 19,;.
"2$ *he Authority shall be deemed to be a civil court for the purposes of section 19=, but not for the purposes of
Chapter SS/! of the Code of Criminal 1rocedure, 19:-, and every proceeding before the Authority shall be
deemed to be a Judicial proceeding within the meaning of sections 19- and 22;, and for the purpose of section
19' of the !ndian 1enal Code.
Procedure of 4ut5ority *dit - [Section 3+E]
*he Authority shall, subJect to the provisions of this Chapter, have power to regulate its own procedure in all
matters arising out of the exercise of its powers under this Act.
Po8er of Central =overnment to ma7e rules [Section 3+I]
"1$ *he Central Aovernment may, by notification in the Lfficial Aa7ette, maBe rules for carrying out the
provisions of this Chapter.
"2$ !n particular, and without preJudice to the generality of the foregoing power, such rules may provide for all or
any of the following matters, namely)Q
"a$ the form and manner for maBing application under sub+section "1$ of section 9'C6
"b$ the manner of certifying a copy of advanced ruling pronounced by the Authority under sub+section ":$ of
section 9'.6
"c$ any other matter which, by this Chapter, is to be or may be prescribed.
"-$ (very rule made under this Chapter shall be laid, as soon as may be, after it is made, before each Iouse of
1arliament, while it is in session for a total period of thirty days which may be comprised in one session or in two
or more successive sessions, and if, before the expiry of the session immediately following the session or the
successive sessions aforesaid, both Iouses agree in maBing any modification in the rule or both Iouses agree
that the rules should not be made, the rule shall thereafter have effect only in such modified form or be of no
effect, as the case may be6 so, however, that any such modification or annulment shall be without preJudice to the
validity of anything previously done under that rule.

=======
1&'
!(
Provisions of t5e Central *xcise 4ct
4pplica0le to Service Tax
[Section 1"]

As per section ;- of the Act, certain provisions of Central (xcise are applicable to service tax, so far as, in relation
to service tax as they in relation to excise duty.

Section Su0Dect matter covered
9A Compounding of offences
9AA Lffences by companies
9> 1ublication of name etc. by court
9C 1resumption of culpable mental state
9. Celevance of statements under certain circumstances
9( Application of section ='2 of the Code of Criminal 1rocedure, 1;9;, and of the 1robation of
Lffenders Act, 19=;.
11> Claim for refund of duty
11>> !nterest on delayed refund
11C 1ower not to recover duty of excise not levied or short levied as a result of general practice
12 Application of provisions of Act No. =2 of 19'2 to Central (xcise .uties
12A 1rice of goods to indicate the amount of duty paid thereon
12> 1resumption that the incidence of duty has been passed on to the buyer
12C Consumer 4elfare 0und
12. #tilisation of the 0und
12( 1ower of Central (xcise Lfficers
1& 1ower to summon persons to give evidence and produce documents in in<uiries under this Act
1&AA %pecial audit in cases where credit of duty availed or utilised is not within the normal limits,
etc.
1= Lfficers re<uired to assist Central (xcise Lfficers
1&:
-2, -2A to -21 %ettlement of cases
--A AdJudication procedure
-&A
-=((
-=0 .eposit, pending appeal, of duty demanded or penalty levied
-=A Appeal to Iigh Court
-=I Application to Iigh Court
-=! 1ower of Iigh Court or %upreme Court to re<uire statement to be amended
-=2 Case before Iigh Court to be heard by not less than two Judges
-=3 .ecision of Iigh Court or %upreme Court on the case stated
-= Appeal to the %upreme Court
-=9 Iearing before %upreme Court
-=N %ums due to be paid notwithstanding reference, etc.
-=L (xclusion of time taBen for copy
-=R Appearance by authori7ed representative
-' .efinitions
-'A 1resumption as to documents in certain cases
-'> Admissibility of micro films, facsimile copies of documents and computer print outs as
documents and as evidence
-:A .elegation of 1owers
-:> !nstruction to Central (xcise Lfficers
-:C %ervice of decisions, orders, summons, etc.
-:. Counding off of duty, etc.
&, 1rotection of action taBen under the Act

=========
1&;
!+
Provisional 4ttac5ment of Property
[Section /"C]

A5en a property 0e attac5ed
No attachment is possible, if no show cause notice has been issued. Attachment of the property can be
made during the pendency of any proceeding under section :- or section :-A, where show cause
notice has been issued. !t is also to be noted that the property belonging to the person to whom show
cause notice has been issued can only be attached.
Prior 4pproval of Commissioner is reGuired
*he Central (xcise officer may attach property only after obtaining prior approval of the
commissioner.
Period of attac5ment
!nitial period of attachment is six months. Iowever, the Chief commissioner of Central (xcise may
extend the period of attachment upto two years.

========

1&9
!/
,esponsi0ility of t5e person collectin&
service tax
[Section /"4]

Service Tax Collected from any person to 0e deposited 8it5 Central =overnment [Section /"4]
1rovisions of this section are applicable in two cases 5
"d$ where a person collects service tax from his customers without actually being liable to pay
service tax, and
"e$ 4here a person collects service tax from his customers in excess of actual liability.
*he section re<uires that in either of the cases referred above, the whole amount collected by the service provider
from the customer in the name of service tax shall be paid to Central Aovernment immediately. Dsub+section "1$
and "2$F
,ecovery of amount not paid - issue of s5o8 cause notice [Su0-section :";]
!f the amount re<uired to be paid to the central government in accordance with sub+section "1$ and "2$ above, is
not paid, the Central (xcise Lfficer shall serve, on the person liable to pay such amount, a notice re<uiring him
to show cause why the said amount, as specified in the notice, should not be paid by him to the credit of the
Central Aovernment.
,ecovery of amount not paid - adDudication order
According to %ub section "&$ provides that the Central (xcise Lfficer shall, after considering the representation, if
any, made by the person on whom the notice is served under sub+section "-$, determine the amount due from such
person, not being in excess of the amount specified in the notice, and thereupon such person shall pay the amount
so determined.
4dDustment of amount paid under section
%ub section "=$ provides that the amount paid to the credit of the Central Aovernment under sub+section "1$ or
sub+ section "2$ or sub+section "&$, shall be adJusted against the service tax payable by the person on finalisation
of assessment or any other proceeding for determination of service tax relating to the taxable service referred to
in sub+section "1$.
#isposal of surplus amount after adDustment under su0 section :(;
%ub section "'$ provides that where any surplus amount is left after the adJustment under sub+section "=$, such
amount shall either be credited to the Consumer 4elfare 0und referred to in section 12C of the Central (xcise
Act, 19&& or, as the case may be, refunded to the person who has borne the incidence of such amount, in
accordance with the provisions of section 11> of the said Act and such person may maBe an application under
that section in such cases within six months from the date of the public notice to be issued by the Central (xcise
Lfficer for the refund of such surplus amount.
Interest on amount collected in excess - Section /"
Interest paya0le
1=,
4here an amount has been collected in excess of the tax assessed or determined and paid for any taxable service
under this Chapter or the rules made there under from the recipient of such service, the person who is liable to
pay such amount as determined under sub+section "&$ of section :-A, shall, in addition to the amount, be liable to
pay interest at such rate not below ten per cent. and not exceeding twenty+four per cent. per annum, as is for the
time being fixed by the Central Aovernment, by notification in the Lfficial Aa7ette, from the first day of the
month succeeding the month in which the amount ought to have been paid under this Chapter, but for the
provisions contained in sub+section "&$ of section :-A, till the date of payment of such amount)
*xplanation 1.Q4here the amount determined under sub+section "&$ of section :-A is reduced by the
Commissioner "Appeals$, the Appellate *ribunal or, as the case may be, the court, the interest payable thereon
under this section shall be on such reduced amount.
*xplanation !.Q4here the amount determined under sub+section "&$ of section :-A is increased by the
under this section shall be on such increased amount.
%o Interest 85ere amount paya0le pursuant to section "/ order
4here any amount of service tax becomes payable conse<uent to issue of an order, instruction or direction by the
>oard under section -:> of the Central (xcise Act, 19&&, and such amount payable is voluntarily paid in full,
without reserving any right to appeal against such payment at any subse<uent stage, within forty+five days from
the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in
other cases, the interest shall be payable on the whole amount, including the amount already paid.
Explanation 1..4here the amount determined under sub+section "&$ of section :-A is reduced by the
under this section shall be on such reduced amount.
Explanation 2..4here the amount determined under sub+section "&$ of section :-A is increased by the
under this section shall be on such increased amount.

========
1=1
!1
Pu0lication of information
[Section /"#]

Pu0lication of %ame - Su0 Section :1;
!f the Central Aovernment is of the opinion that it is necessary or expedient in the public interest to publish the
name of any person and any other particulars relating to any proceedings under this Chapter in respect of such
person, it may cause to be published such names and particulars in such manner as may be prescribed.
,estriction of pu0lication of name in case of penalty - Su0 Section :!;
No publication under this section shall be made in relation to any penalty imposed under this Chapter until the
time for presenting an appeal to the Commissioner "Appeals$ under section ;= or the Appellate *ribunal under
section ;', as the case may be, has expired without an appeal having been presented or the appeal, if presented,
has been disposed of.
?+lication of na3e of the 8irectors F ?artners F Canaging Agents F Secretaries F Treas+rers F
Canagers etc.
!n the case of a firm, company or other association of persons, the names of the partners of the firm, directors,
managing agents, secretaries and treasurers or managers of the company, or the members of the association, as
the case may be, shall also be published if, in the opinion of the Central Aovernment, circumstances of the case
Justify it.
=========
1=2
!3
#ue #ates
4. #ue dates for filin& of Service Tax ,eturn [Cule : of %ervice *ax Cules, 199&F
!n each case the Ceturn is to be filed Ialf Pearly. 0or the half year ending on -,
th
%eptember return is to be filed
on or before 2=
th
Lctober and for the half year ending -1
st
9arch, return is to be filed on or before 2=
th
April.
. #ue date for filin& of Cenvat Credit ,eturn [Cule 9"9$ of Cenvat Credit Cules, 2,,&F
!n each case the Ceturn is to be filed Ialf Pearly. 0or the half year ending on -,
th
%eptember return is to be filed
on or before -,
th
Lctober and for the half year ending -1
st
9arch, return is to be filed on or before -,
th
April.
C. #ue dates for payment of service tax in case 85ere t5e recipient of service is lia0le to pay service tax
*he due date of payment of service tax in the case of person who is liable to pay service tax on the basis of
recipient of services under section ';"2$ read with rule 2"1$"d$ and notifications, may the same date as in the case
of ordinary service provider.
*herefore, payment for service tax should be made by =
th
of the following month from the close of the relevant
month or <uarter as the case may be in which the payment for the value of services has been made to the provider
of services. And for the month E <uarter ending 9arch -1, the payment shall be made by -1
st
9arch itself in
which the payment for the value of services has been made to the service provider.
%ub %ection 2 of section '; states that + NZZZZZZ. and all t5e provisions of t5is C5apter s5all apply to
suc5 person as if 5e is t5e person lia0le for payin& t5e service tax in relation to suc5 service9.
Iowever, in case of service provider, the logic of payment of service tax linBed with the payment of the value of
the services to the service provider seems to be incorrect.
4here the service tax liability is of the service provider in ordinary course, he argues that, if he does not receive
the payment for the value of services provided by him, he can not deposit the service tax since he has no money
or the amount to be received is uncertain. *herefore, in the rule ', the liability to deposit service tax has been
linBed with the amount of services reali7ed by that service provider.
>ut, in case of person liable to pay service tax under section ';"2$ read with rule 2"1$"d$, should be liable to pay
service tax when he receives the services and his liability is fixed as per the invoice E bill or challan issued by the
provider of such service. 0urther, unliBe in the case of provider of services, there is no uncertainty in the case of
receiver of services.
#ndoubtedly, a person can not escape from payment of service tax, but in the absence of specific provision for
payment of tax in the case of receiver of services, how and when he will deposit the service tax it will always a
matter of litigation 0ecause t5e interest and penalties for late payment or non payment of service tax 8ill 0e
c5ar&ed only 8it5 respect to due date of payment of tax.
#. #ue dates for filin& of revised returns [Cule :> of %ervice *ax Cules, 199& and 9"11$ of Cenvat Credit
Cules, 2,,&F 5
Ceturn can be revised only if filed within due date and it can be filed within 9, days after the date of filing of
original return.
1=-
".
Input Service #istri0utor
*he !nput service distributor is an office of the manufacturer or the service provider where invoices in respect of
input services issued under Cule &A of the %ervice *ax Cules, are received.
4vailin& credit 0y an input service distri0utor
An !%. can avail credit on input service only if 5
a. *he office is registered as an !%.
b. *he service procured amount to an ?input service@ within the meaning of its definition
c. *he procured input service is not used exclusively in the unit where exempted goods are manufactured or
wherefrom exempted services are provided.
Calculation of credit to 0e distri0uted
Cule :of the C(N/A* Credit Cules, 2,,& provides that ++
*he credit of a service used exclusively in one unit can be distributed only to that unit.
!f it is used in more than one unit, the credit can be distributed proportionate to the turnover of the units.
*he total turnover shall be determined in the same manner as determined under rule = and shall be
determined for the month previous to the month during which the C(N/A* credit is distributed.
!n case if any of its unit pays tax or duty on <uarterly basis as provided in rule ' of %ervice *ax Cules, 199&
or rule ; of Central (xcise Cules, 2,,2 then the relevant period shall be the <uarter previous to the <uarter
during which the C(N/A* credit is distributed.
*he turnover so calculated would be ex+duty i.e not inclusive of the taxes and duties on the goods and
services supplied. e.g. a company manufactures fans in 2 units and other appliances in 2 other units.
Advertisement services for fans would <ualify as an input service for the units manufacturing fans and
hence could be distributed to such units based on the turnover of the previous month of the 2 units.
Transfer of credit to ne8 unit
!n such case, credit can be distributed only after the end of relevant period based on turnover achieved in the new
unit. Iowever, if any service is used exclusively in the new unit then full credit in respect of such service can be
transferred to that unit.
,eversal of distri0uted credit
Credit of input services is re<uired to be reversed only in accordance with the provisions of Cule ' of CCC if any
part of the input service is used for exempted goods or exempted services, depending upon the option exercised.
*he due reversals will be re<uired to be effected by the unit to which the credit has been distributed.
=======
1=&
"1
Point of Taxation ,ules- !.11

Provisions Title
Cule + ,1 %hort title and commencement.

Cule + ,2 .efinitions

Cule + ,2A .ate of payment

Cule + ,- .etermination of point of taxation

Cule + ,& .etermination of point of taxation in case of change of rate of tax

Cule + ,= 1ayment of tax in cases of new services

Cule + ,' Lmitted

Cule + ,: .etermination of point of taxation in case of specified services or persons

Cule + ,; .etermination of point of taxation in case of copyrights, etc

Cule + ,;A .etermination of point of taxation in other cases.

Cule + ,9 *ransitional 1rovisions
1==
Point of Taxation ,ules- !.11
,ule 1. S5ort title and commencement.
"1$ *hese rules shall be called the 1oint of *axation Cules, 2,11.
"2$ *hey shall come into force on the 1st day of April, 2,11.
,ule !. #efinitions.-
!n these rules, unless the context otherwise re<uires,+
:a; M4ctN means the 0inance Act, 199& "-2 of 199&$6
:0a; Mc5an&e in effective rate of taxN shall include a change in the portion of value on which tax is payable in
terms of a notification issued in the Lfficial Aa7ette under the provisions of the Act, or rules made thereunder6
:c; Mcontinuous supply of serviceN means any service which is provided or agreed to be provided continuously
or on recurrent basis, under a contract, for a period exceeding three months with the obligation for payment
periodically or from time to time, or where the Central Aovernment, by a notification in the Lfficial Aa7ette,
prescribes provision of a particular service to be a continuous supply of service, whether or not subJect to any
condition6
:d; MinvoiceN means the invoice referred to in rule &A of the %ervice *ax Cules, 199& and shall include any
document as referred to in the said rule6
:e; Mpoint of taxationN means the point in time when a service shall be deemed to have been provided6
,ule !4. #ate of payment.Q
0or the purposes of these rules, Gdate of paymentH shall be the earlier of the dates on which the payment is
entered in the booBs of accounts or is credited to the banB account of the person liable to pay tax)
1rovided that Q
"A$ the date of payment shall be the date of credit in the banB account when Q
"i$ there is a change in effective rate of tax or when a service is taxed for the first time during the period
between such entry in booBs of accounts and its credit in the banB account6 and
"ii$ the credit in the banB account is after four worBing days from the date when there is change in effective
rate of tax or a service is taxed for the first time6 and
"iii$ the payment is made by way of an instrument which is credited to a banB account,
">$ if any rule re<uires determination of the time or date of payment received, the expression Gdate of paymentH
shall be construed to mean such date on which the payment is received6
=enerally #ate of credit in t5e 0an7 account is t5e date of payment
0or the purposes of these rules,
Gdate of paymentH shall be the
"i$ there is a change in effective rate of tax or when a service is taxed
for the first time during the period between such entry in booBs of
1='
earlier of the dates on which
the payment is entered in the
booBs of accounts or is
credited to the banB account of
the person liable to pay tax)
accounts and its credit in the banB account6 and
"ii$ the credit in the banB account is after four worBing days from the
date when there is change in effective rate of tax or a service is taxed
for the first time6 and
"iii$ the payment is made by way of an instrument which is credited to a
banB account,
,ule ". #etermination of point of taxation.-
0or the purposes of these rules, unless otherwise provided, ?point of taxation@ shall be,+
"a$ the time when the invoice for the service provided or to be provided is issued)
1rovided that where the invoice is not issued within the time period specified in rule &A of the %ervice *ax
Cules,199&, the point of taxation shall be the date of completion of provision of the service.
"b$ in a case, where the person providing the service, receives a payment before the time specified in clause "a$,
the time, when he receives such payment, to the extent of such payment.
1rovided that for the purposes of clauses "a$ and "b$, Q
"i$ in case of continuous supply of service where the provision of the whole or part of the service is determined
periodically on the completion of an event in terms of a contract, which re<uires the receiver of service to maBe
any payment to service provider, the date of completion of each such event as specified in the contract shall be
deemed to be the date of completion of provision of service6
"ii$ wherever the provider of taxable service receives a payment up to rupees one thousand in excess of the
amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the
provider of taxable service, shall be determined in accordance with the provisions of clause "a$.
Explanation .+ 0or the purpose of this rule, wherever any advance by whatever name Bnown, is received by the
service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each
such advance.
Comments
*he point of taxation shall be determined in the following manner 5
a$ the time when the invoice for the service provided or agreed to be provided is issued6
b$ if invoice is not issued within the prescribed time of -,E&= days, then the completion of service
c$ the date of receipt of payment where payment is received before issuance of invoice or completion of service.
!n case of continuous supply of service e.g. *elecommunication, construction, internet, worBs contract etc. the
point of taxation would be completion of service as provided in the agreement and shall be the date of completion
of service.
,ule $. #etermination of point of taxation in case of c5an&e of rate of tax.-
1=:
Notwithstanding anything contained in rule -, the point of taxation in cases where there is a change in effective
rate of tax in respect of a service, shall be determined in the following manner, namely)+
"a$ in case a taxable service has been provided before the change of rate,+
"i$ where the invoice for the same has been issued and the payment received after the change in effective rate
of tax, the point of taxation shall be date of payment or issuing of invoice, whichever is earlier6 or
"ii$ where the invoice has also been issued prior to change in effective rate of tax but the payment is received
after the
"
change in effective rate of tax, the point of taxation shall be the date of issuing of invoice6 or
"iii$ where the payment is also received before the change in effective rate of tax, but the invoice for the same
has been issued after the
"
change in effective rate of tax, the point of taxation shall be the date of payment6
"b$ in case a taxable service has been provided after the change in effective rate of tax,+
"i$ where the payment for the invoice is also made after the change in effective rate of tax but the invoice has
been issued prior to the change in effective rate of tax, the point of taxation shall be the date of payment6 or
"ii$ where the invoice has been issued and the payment for the invoice received before the change in
effective rate of tax, the point of taxation shall be the date of receipt of payment or date of issuance of invoice,
whichever is earlier6 or
"iii$ where the invoice has also been raised after the change in effective rate of tax, but the payment has been
received before the change in effective rate of tax,, the point of taxation shall be date of issuing of invoice.
Service provided 0efore
c5an&e in rate of tax
Service provided after t5e c5an&e in rate of tax
*he date of issue of invoice or
receiving the payment,
whichever is earlier.
.ate of issue of invoice or receiving the payment, whichever is earlier.
!f payment is received before change in rate but invoice is issued after
the change then the date of issue of invoice.
,ule (. Payment of tax in case of ne8 services.Q
4here a service is taxed for the first time, then,Q
"a$ no tax shall be payable to the extent the invoice has been issued and the payment received against such
invoice before such service became taxable6
"b$ no tax shall be payable if the payment has been received before the service becomes taxable and invoice has
been issued within fourteen days of the date when the service is taxed for the first time.
,ule /. #etermination of point of taxation in case of specified services or persons.Q
Notwithstanding anything contained in these rules, the point of taxation in respect of the persons re<uired to pay
tax as recipients of service under the rules made in this regard in respect of services notified under sub+section "2$
of section '; of the Act, shall be the date on which payment is made)
1rovided that, where the payment is not made within a period of six months of the date of invoice, the point of
taxation shall be determined as if this rule does not exist)
1=;
1rovided further that in case of Gassociated enterprisesH, where the person providing the service is located outside
!ndia, the point of taxation shall be the date of debit in the booBs of account of the person receiving the service or
date of maBing the payment whichever is earlier.
,ule 1. #etermination of point of taxation in case of copyri&5ts- etc. .-
!n respect of royalties and payments pertaining to copyrights, trademarBs, designs or patents, where the whole
amount of the consideration for the provision of service is not ascertainable at the time when service was
performed, and subse<uently the use or the benefit of these services by a person other than the provider gives rise
to any payment of consideration, the service shall be treated as having been provided each time when a payment
in respect of such use or the benefit is received by the provider in respect thereof, or an invoice is issued by the
provider, whichever is earlier.
,ule 14. #etermination of point of taxation in ot5er cases.-
4here the point of taxation cannot be determined as per these rules as the date of invoice or the date of payment
or both are not available, the Central (xcise officer, may, re<uire the concerned person to produce such accounts,
documents or other evidence as he may deem necessary and after taBing into account such material and the
effective rate of tax prevalent at different points of time, shall, by an order in writing, after giving an opportunity
of being heard, determine the point of taxation to the best of his Judgment.
,ule 3. Transitional Provisions.+
Nothing contained in these rules shall be applicable,+
"i$ where the provision of service is completed6 or
"ii$ where invoices are issued prior to the date on which these rules come into force.
1rovided that services for which provision is completed on or before -,
th
day of 2une, 2,11 or where the invoices
are issued upto the -,
th
day of 2une, 2,11, the point of taxation shall, at the option of the taxpayer, be the date on
which the payment is received or made as the case may be.
=========
1=9

1',

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