This document provides an overview of the scope of taxation of services under the new service tax regime in India. It discusses key aspects such as the definition of "service", exclusions and inclinations, charge of service tax, declared services, and bundled services. The presentation covers topics like the meaning of service, consideration, persons, activities that constitute a service, negative list of services, exemptions, and taxability of various services and transactions.

1. Presents
5th Knowledge Master Class
On
“Service Tax Law Simplified”
Conducted by
Dr. Sanjiv Agarwal
FCA, FCS
Wednesday,
20th March, 2013
Gurgaon © Dr. Sanjiv Agarwal
1

2. SESSION – II
Scope of Taxation of
Services
2

3. This Presentation Covers
• Scope of ‘Service’ under New Regime
• Exclusions from /Inclusions in Service
• Charge of Service Tax
• Declared Services
• Bundled Services
3

4. ‘Service' has been defined in clause (44) of the section 65B
and means –
 any activity
 For a consideration
 carried out by a person for another
 and includes a declared service (66E)
4

5. Services on which Service Tax shall be attracted comprise of :
 Those services which satisfy the definition of service u/s 65B (44)
 Nine specified declared services u/s 66E
 Those services which do not find place in negative list of services
u/s 66D
 Those services which are not exempt from levy of Service Tax
under Notification No. 25/2012-ST dated 20.06.2012
to be contd….
5 5

6. Scope of services under Service Tax
Services on which no Service Tax shall be payable comprise of :
• Services which are specifically excluded from the scope of
definition of service itself u/s 65B(44)
• 17 broad services specified in the negative list of services u/s
66D
• Services which are exempt from levy of Service Tax under N.
No. 25/2012-ST dated 20.06.2012
• Specified services otherwise exempt under specific
notifications
• Activities where service provider and service receiver are in
non –taxable territory
6 6

7. The New Taxability Concept
SERVICE FOR A CONSIDERATION
9 DECLARED SERVICES
E: Employee
M: Money
A: Actionable claim E - MAGIC TEST
G: Goods
I: Immovable property
C: Court Fee
1. Non -
Taxable 2. Negative
territory list (17)
(POPS)
3.
Exemptions
(39)
Taxable
7

8.  Activity must be for a consideration (nexus / reciprocity)
 Activity – includes both activity as well as non-activity
 Consideration – includes both monetary and non
monetary consideration.
 Two persons are involved –
Service provider
Service receiver
 Only services provided by one person to another are
taxable
 Person – natural as well as artificial
8

9. Activity
 Not defined in the Act
 In common understanding, activity includes –
 An act done
 A work done
 A deed done
 An operation carried out
 Execution of an act
 Provision of a facility etc.
 Activity could be active or passive and forbearance to act
 Agreeing to an obligation to refrain from an act or to tolerate an
act or a situation - listed as a declared service u/s 66E
9

10. Consideration
 Means everything received or recoverable in return for a
provision of service which includes -
 Monetary payment
 Non-monetary payment
 Deferred consideration
 Under Indian Contract Act, 1872, Consideration means -
“When, 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 promise”
10

11. Activity for a Consideration
 Activity should be carried out by a person for a
consideration
 Activity without consideration like-
 Donation
 Gifts
 Free charities
outside the ambit of service
 Charity for consideration would be service and
taxable unless otherwise exempted
11

12. Money- 65B(33)
"money" means legal tender, cheques, promissory note, bill of
exchange, letter of credit, draft, pay order, traveller cheques, money
order, postal or electronic remittance or any similar instrument but shall
not include any currency that is held for its numismatic value
Actionable Claim –Section 3 of Transfer of Property Act, 1882
• Claim to unsecured debts
• Claim to beneficial interest in movable property not in possession of
claimant
• Right to insurance claim
• Arrears of rent
12

13. Tax on Money Remittance (Circular No. 163 dated 10.7.2012)
 No service tax on foreign currency remitted to India from
overseas
 Amount of remittance comprises money
 Service excludes money transactions
 Even fee for remittance is not taxable (POPS)
 Sender of money outside India - bank / company remitting
located outside India
 Fee charged by Indian bank - remitter located outside India
(not taxable as per POPS)
13

14. Person-65B(37)
"person" includes,––
• an individual,
• a Hindu undivided family,
• a company,
• a society,
• a limited liability partnership,
• a firm,
• an association of persons or body of individuals, whether incorporated
or not,
• Government,
• a local authority, or
• every artificial juridical person, not falling within any of the above
14

15. Government – Not defined
 Section 3 (22) of General Clause Act, 1897
 Includes Central/State Government/ Union Territory
 Actions taken in the name of President/ Governor
 Most of services provided by Government are in
Negative List
15

16. 'Service' does not include -
 any activity that constitutes only a transfer in title of goods or immovable
property by way of sale, gift or in any other manner.
Sale of developed plots is a service (Narne Constructions Pvt. Ltd. v UOI
2013 (29)STR 3 (SC)
 a transfer, delivery or supply of goods which is deemed to be a sale of goods
within the meaning of clause (29A) of article 366 of the Constitution
 a transaction only in money or actionable claim
 a service provided by an employee to an employer in the course of the
employment.
 fees payable to a court or a tribunal set up under a law for the time being in
force
16

17. This scope shall not apply to –
a) functions performed by M.P., M.L.A., Members of
Panchayats / Municipalities who receive any consideration
in performing the functions of that office as such member;
or
b) duties performed by any person who holds any post in
pursuance of the provisions of the Constitution in that
capacity; or
c) duties performed by any person as a Chairperson or a
Member or a Director in a body established by the Central
Government or State Government or local authority and
who is not deemed as an employee before the
commencement of this section.
17

18. For the purpose of scope of service -
(a) an unincorporated association or a AOP 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.
(c) A 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
18

19.  Draft Circular (F. No. 354 /127/2012-TRU dated 27.7.2012) issued for clarification
on certain activities / facilities / reimbursements to employees by the employers
(a) Treatment of supplies made by the employer to employees
 Amount deducted from salary / paid for service provided by the employer to
employee is for consideration and hence taxable
 Employer who provides some services free of cost (e.g. crèche, gymnasium or
a health club) are not liable to tax
(b) Treatment of reimbursements made by the employer to the employee
 Reimbursements of expenditure incurred on behalf of the employer in course
of employment would not amount to a service, hence non-taxable
19

20. (c )Treatment of supplies and reimbursements made by the
employer to ex-employees/ pensioners
Same tax treatment for ex- employees of the company –
 Reimbursement of expenses on behalf of
company – non-taxable ?
 Facilities for consideration – taxable
 Facilities free of cost - non taxable ?
20

21.  Director’s services to the company are taxable w.e.f 1.7.2012
 Sitting fees, commission, bonus, etc. are subject to service
tax
 W.e.f. 1.7.2012 upto 6.8.2012, service tax to be deposited by
the directors while from 7.8.2012 vide Notification No.
45/2012, Service Tax on such services will be deposited by
the company under reverse charge
 WTDs /MDs /EDs who are under contractual employment
with the company and receive salary or remuneration from
the company will not be covered - considered as employees
of the company
21

22.  Interest on loan by director to company, dividend on shares, other
professional charges on account of services not rendered as a director
(in professional capacity) are not liable to Service Tax
 In case of nominee director, the nominating company who receives fees
will be liable to pay service tax
 The invoice / receipt to be issued by the directors within 30 days
 In case of nominee directors, the invoice will be issued by the
nominating company if payment made to such Company
 In the case of Government nominees, the services shall be deemed to
be provided by the Government but liable to be taxed under reverse
charge basis (support service)
22

23.  Partnership firm is not a distinct legal entity apart from the
partners under the Partnership Act, 1932
 Partner is not an employee of the firm -contract of
employment requires two distinct firms, viz., employer and
employee
 Partners are the real owners of the assets of Firm to the extent
of their share
 Salary paid to partner is only profit known by a different
name
 It is only a transaction in money
 Incomes received from firm treated as income from Profits
and Gains of Business or Profession under I T Act, 1961
 Partnership Act, 1932 can not be over-looked
23

24.  Non commercial construction for non-government purpose
 Private roads (not meant for general public)
 Residential construction of more than one unit
 Commercial artists/performers
 Film actors/ directors /reality show judges
 Tourism boats
 Board director’s sitting fee
 Non-compete fee
 Arbitrators to business entities
 Discourses and lectures/ yoga classes
to be contd..
24

25. Banking services to government
Unrecognized IPRs
Services to RBI
Hotel telephone calls
Video library facilities by hotels
Matrimonial sites
Astrologers
Works contracts for movable properties
All sub-contracts except exempted works contracts
On board catering and other facilities
Executive Lounge at railway station/ airport
25

26. Section 66 (upto 30.6.2012)
 There shall be levied a tax @ 12 percent of the value of
taxable services as referred to in section 65(105), i.e.,
taxable services
 Not to apply w.e.f. 1.07.2012
26

27.  Section 66B (W.e.f 1.7.2012)
There shall be levied a 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
27

28. Essential ingredients to be present for charge of Service
Tax
 There should be a service involved
 Such service should not be one included in the negative list
as defined in section 66D.
 Services should be provided or agreed to be provided.
 Services should be provided in the taxable territory only.
 Services should be provided by one person to another
person.
 Tax shall be levied on value of services so provided or
agreed to be provided.
 Collection shall be in prescribed manner.
28

29. Provided or to be provided v. provided or agreed to be provided
 Before actual provision of service is made, all relevant
information on chargeable event must be known
 On account advance payment without any identification of
services or activities may not be liable to service tax
 Services which have only been agreed to be provided but
are yet to be provided are taxable
 Receipt 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.
29

30.  Clause 44 of section 65B defines service – it includes a declared service.
 There are 9 categories of services or activities as declared services implying that
on all such nine declared services, Service Tax shall be payable
 Does not include any such transfer, delivery or supply of any goods which is
deemed to be a sale within the meaning of Article 366(29A) of the Constitution of
India.
 What is declared services is defined in section 65B(22) to mean any activity
carried out by a person for another person for a consideration and declared as
such under section 66E of the Act.
 They are amply covered by the definition of service but have been declared with a
view to remove any ambiguity for the purpose of uniform application of law all
over the country
30

31. Following constitute Declared Services (Section 66E)
 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 certificate of completion by a
competent authority;
 Temporary transfer or permitting the use or enjoyment of any intellectual property
right;
 Development, design, programming, customization, adaptation, up gradation,
enhancement, implementation of information technology software;
31

32.  Agreeing to an obligation to refrain from an act, or to tolerate an act or
a situation, or to do an act;
 Transfer of goods by way of hiring, leasing, licensing or any such
manner without transfer of right to use such goods;
 Activities in relation to delivery of goods on hire purchase or any
system of payment by installments ;
 Service portion in execution of a works contract;
 Service portion in an activity wherein goods, being food or any other
article of human consumption or any drink (whether or not
intoxicating) is supplied in any manner as part of the activity.
32

33. Renting of Immovable Property
Renting (Section 65B (41)) -
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
Renting of certain kinds of immovable properties is specified in the negative list
• 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 Reserve Bank of India
• Renting out of any property by a Government or a local authority to a non-
business entity
33

34. Exemptions to Renting of Immovable property
 Threshold level exemption up to Rs. 10 lakh.
 Renting of precincts of a religious place meant for general public is
exempt.
 Renting 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 equivalent is exempt.
 Renting of immovable property to / by educational institution in
respect of exempted education
34

35. Nature of Activity Taxability
Renting of property to educational body Not chargeable to service tax; exemption
Renting of vacant land for animal Not chargeable to service tax as it is covered in
husbandry or floriculture the negative list entry relating to agriculture
Permitting use of immoveable property for Chargeable to service tax as permitting usage of
placing vending/dispensing machines space is covered in the definition of renting
Allowing erection of communication tower Chargeable to service tax as permitting usage of
on a building for consideration. space is covered in the definition of renting
Renting of land or building for Chargeable to service tax as there is no specific
entertainment or sports exemption.
Renting of theatres by owners to film Chargeable to service tax as the arrangement
distributors amounts to renting of immovable property.
Renting of immovable property outside India not taxable in India even if owners are 35
in India

36. Construction Activities [Section 66E (b)]
Construction activities means 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.
It includes construction of -
 Complex
 Building
 Civil structure or part thereof
 Complex or building intended for sale to a buyer except where
entire consideration is received after issuance of completion
certificate by the competent authority.
Actual sale after construction-if any consideration received before such
completion certificate, it will also be taxed.
36

37.  Construction is not defined
 Construction includes
 additions,
 alteration,
 replacement, or
 remodeling
of any existing civil structure
37

38. Who is Competent Authority to issue Completion Certificate
 Government
 Any authority authorized to issue CC under any law
 In absence of any requirement to issue CC,
• Architect under Architect Act, 1972
• Chartered Engineer registered with Institution of Engineers
• Licensed surveyor (of local body / development or planning
authority)
38

39. Residential Complex
 Complex comprising of one or more buildings having more than one
residential unit
 Even two units would be called ‘complex’
 Single residential unit – self contained residential unit designed for
use, wholly / principally, for residence of one family
 Original work – new construction and all type of addition / alteration
to abandoned / damaged structures on land as are required to make
them workable / erection , commissioning, installation.
 Sale of developed plots is a service (Narne Constructions Pvt. Ltd. v
UOI 2013 (29)STR 3 (SC)
39

40. Temporary transfer or permitting the use or enjoyment of any intellectual
property right [Section 66 E (c)]
Intellectual property right’ has not been defined but Intellectual property
right includes :
 Copyright
 Patents
 Trademarks
 Designs
 Any other similar right to an intangible property
40

41. Examples of IPRs
 Patents - New technical, concepts,
inventions
 Copyright - Text, graphics, software, data
compilations, art, music
 Trademarks - Brands (Services/ Products)
image and reputation
 Confidential Information - Ideas, information, know-how,
processes etc.
 Design Rights -Form and appearance,
decoration, apparels
41

42. What is taxed in IPR
 all IPRs (whether recognized in law or not) excluding
copy rights
 temporary transfer of IPRs
 permitting the use of IPRs
 enjoyment of IPRs
42

43. Copyrights as IPRs are exempted which include :
 literary work
 dramatic work
 musical work
 artistic works
 cinematograph films
43

44. Information Technology software related services [section 66E(d)]
 It includes following in relation to Information Technology Software (ITS)
–
 Development
 Design
 Programming
 Customization
 Adaptation
 Upgradation
 Enhancement
 Implementation
44

45. ITS is defined in Section 65B(28)
 Representation in ITS should be of any of the following –
• Instruction
• Data
• Sound
• Image
• Source code
• Object code
 Such items represented should be recorded in a machine readable form,
 Such items represented and recorded should be capable of being
manipulated.
 They should provide interactivity by way of a –
• computer, or
• automatic data processing machine, or
• any other device or equipment
45

46. Scope of ITS Service
Design - plan, scheme
Programming - process of writing a computer programme
Customization - modifying to meet a specific requirement
Adaptation - change to suit, adopt
Up gradation - raising standard, improving quality / version /
features
Enhancement - in value, content, quality
Implementation - execution
46

47. Agreeing to obligation to refrain from an Act / to tolerate Act or situation /
to do an Act [section 66E(e)]
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.
47

48. Examples of Obligations / Actions
 non compete fees for agreeing not to compete
 compensation on termination of business agreements
 advance forfeited for cancellation of agreement to provide a
service.
 forfeiture of security deposit for damages done by service
receiver in course of receiving of services.
 cancellation charges being charged by airlines, hotels etc.
 consideration for non-appearance in a court of law or withdrawal
of suit.
 demurrage charges or detention charges
48

49. Transfer of goods by hiring, leasing, licensing [66E(f)]
There should be transfer of goods involved
 Such transfer of goods should be by way of –
 hiring
 leasing
 licensing, or
 any such manner
 Such transfer should be without transfer of right to use
such goods.
 Excludes intangible goods
 Only goods [section 65B(25)] covered
49

50. Transfer of right to use
 Taxable only when transfer of right to use goods is not there
 Constitutional / legal concept
 Can be determined when agreement is read in whole, not just
one clause
 Transfer of right to use is deemed sale u/s 366(29A) of
Constitution
 If owner retains effective control, no transfer of right can take
place
 Service excludes deemed sale u/s 366(29A)
50

51. Tests laid down by Supreme Court in BSNL v UOI [(2006)2 STR 161
(SC)]
 There must be goods available for delivery ;
 There must be consensus ad idem as to the identity of the goods;
 The transferee should have legal right to use the goods – consequently
all legal consequences of such use including any permissions or licenses
required therefore should be available to the transferee;
 For the period during which the transferee has such legal right, it has to
be the exclusion to the transferor – this is the necessary concomitant of
the plain language of the statute, viz., a ‘transfer of the right to use’ and
not merely a license to use the goods;
 Having transferred, the owner cannot again transfer the same right to
others
51

52. Examples of transfer without right to use
 Car on hire with driver – right to use not transferred
 Conditional supply of equipment – not free to use goods
 Bank lockers – possession not transferred to hirer
 Scaffolding structure for temporary purpose – no transfer of right /
effective control and possession
 Hiring of Pandal / Shamiyana – No effective control
 Hiring of audio visual equipment with attendant – no transfer of right /
possession
52

53.  Includes delivery of goods on -
 hire purchase
 any system of payment by installment
 Payment in parts / installments
 Lease payment is calculated so as to cover full cost of asset together with
interest charges
 Transfer of substantially all risks and rewards in relation to goods so
transferred
 Not taxable as covered under deemed sale of goods
 But services in relation to such sale taxable
53

54. Delivery of goods on hire purchase /
installments [section 66E(g)]
 Delivery of goods on hire purchase
 Transfer of possession (and not just of custody)
 The hirer has the option or obligation to purchase the goods in
accordance with the terms of the agreement.
 In hiring, hirer has no such option and risks remain with owner / not
transferred to hirer
 In hire purchase, hirer has option / obligation to purchase goods
 Operating lease not covered
 Involves two transactions – financial transaction and hire purchase.
Financial transaction is chargeable to Service Tax [Association of Leasing
& Financial Services v. Union of India (2010) 20 STR 417 (SC)].
 Service Tax levied only on 10 percent value representing interest in
financial lease and not full value (Notification No. 26/2012-ST)
54

55. Works Contract [65B(54)]
 “Works 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 movable or immovable property
or for carrying out any other similar activity or a part thereof in
relation to such property.
55

56. Works Contract covers
 Construction
 Erection
 Commissioning
 Completion
 Fitting out
 Repair
 Maintenance
 Renovation
 Alteration, or
 Any other similar activity or part there of
56

57. Some issues in works contracts
Labour contracts Excluded
Repair & Maintenance of motor vehicles yes if property in goods
transferred in execution of WC
Construction of pipeline / conduit yes, structures on land
Painting / repair / renovation of building yes if involves provision of
, wall tiling, flooring etc. material also
Erection/commissioning installation of yes if transfer of property in
plant/ machine etc goods is involved and machinery
etc
57

58. Value of service portion in execution of work contract = gross amount charged for works
contact less value of transfer of property in goods involved in execution of works contract
Gross amount includes Gross amount does not include
Labour charges for execution of Value of transfer of property in goods involved in the
the works execution of the said works contract.
Amount paid to a sub-contractor where value added tax or sales tax has been paid or payable
for labour and services on the actual value of property in goods transferred in the
Charges for planning, designing execution of the works contract, then such value adopted for
and architect’s fees the purposes of payment of value added tax or sales tax,
shall be taken as the value of property in goods transferred
in the execution of the said works contract. (Rule 2A
explanation)
Cost of establishment of the Value Added Tax (VAT) or sales tax, as the case may be, paid,
contractor relatable to supply of if any, on transfer of property in goods involved in the
labour and services and other execution of the said works contract
similar expenses relatable to
supply of labour and services
Profit earned by the service
provider relatable to supply of
labour and services 58

59. Alternative valuation model (Rule 2A of Valuation Rules)
Where works contract is for… Value of the service portion shall be…
(A) execution of original works forty percent of the total amount charged
for the works contract
(B) maintenance or repair or seventy per cent of the total amount
reconditioning or restoration or servicing charged including such gross amount
of any goods
(C) in case of other works contracts, not sixty percent of the total amount charged
included in serial nos. (A) and (B) above, for the works contract
including contracts for maintenance,
repair, completion and finishing services
such as glazing, plastering, floor and wall
tiling, installation of electrical fittings.
59

60.  Total Value = Sum total of
+ gross amount charged
+ value of goods and services supplied free of
cost for use in or in relation to execution of WC
whether us same contract /any other contract
+ value of land charged as part of total
consideration
- amount charged for such goods / services, if
any
- VAT levied, if any
 If value of FOC goods / services is not ascertainable, it will be
determined on basis of fair market value having close resemblance
 FMV based on generally accepted accounting principles
 No Cenvat available on goods / inputs used in works contract
60

61.  Supply of foods and drinks is deemed sale and hence not taxable
 However, only service portion in deemed sale is sought to be taxed
 Service portion in activity wherein goods, being food or any other article of
human consumption or any drink (whether or not intoxicating) is supplied
in any manner as a part of the activity is a declared service.
 Levy of Service Tax on services provided by only such restaurants where
service portion in total supply is substantial and discernible
61

62. Service portion in supply of foods and
drinks [section 66E(i)]
 Restaurants provided conditional exemption
 Services provided in relation to serving of food or beverages by a
restaurant, eating joint or a mess, other then those having the
facility of air-conditioning or central air-heating in any part of the
establishment, at any time during the year, and which has a license
to serve alcoholic beverage.
 W.e.f. 1.04.2013, and has been deleted and thus, all AC restaurants
will be taxable
 Threshold exemption
 What activities are covered –
• Supply of food or drinks in a restaurant;
• Supply of food and drinks by an outdoor caterer.
62

63.  in a restaurant -40% of total value charged
 by outdoor catering - 60% of total value charged
 Exemption under Notification No. 25/2012-ST to mid day meal scheme and
restaurants without bar license / air conditioning / central heating facility
 Abatement @ 30% under Notification No. 26/2012-ST provided Cenvat credit
is not taken on goods
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64. Principles of Interpretation of specific description of services [section 66F]
 Section 65A dealing with classification of taxable services omitted w.e.f.
1.7.2012
 useful in deciding whether a service falls in negative list / exemptions /
declared services
 composite v bundled service
 bundled service –
 collection of services / tied up services
 more than one service
 element of one service combined with element of provision of other
service (s).
 Examples - Mailing done by RTI, Air traveling and catering therein
 Earlier issue – which taxable service
 Now – whether any activity is a ‘service’ or not a ‘service’.
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65. Rule 1
Reference to main service can not be used for services used for providing
the main service
 If some service is provided with reference to provision of main service,
it does not be come main service,
 Related services do not take the colour of main service.
 Examples
 Provision of access to any road or bridge on payment of toll
 Security services
 IT related services
 Contract commission
 Transportation of passengers by rail
 Air travel agency
 Tour operators
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66. Rule 2
Most specific description to be preferred over more general
description for services capable of differential treatment for
any purpose based on its description
 Examples
 Real estate agent for immovable property
• If taxed as intermediary, his location is important
• If taxed as immovable property, location of property is important
 Outdoor catering by pandal & shamiana / convention to be taxed as
specific combined entry exist for abatement and not as individual
services
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67. Taxability of naturally bundled services in ordinary course
of business (Rule 3)
If 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
 Perception of service provider / service receiver
 Trade practice
 Example
• Packaged hotel accommodation for convention delegates
may include
 Hotel room accommodation
 Breakfast
 Tea / coffee during conference
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68. Bundled Services
 Access to gym / health club / pool
 Internet
 Business centre
 Sight seeing
 Could be considered as naturally bundled convention services as each
activity is taxable but does not provide essential character and taxed
accordingly
 Indicators of naturally bundled services
 There is a single price or the customer pays the same amount, no matter how
much of the package they actually receive or use
 The elements are normally advertised as a package.
 The different elements are not available separately.
 The different elements are integral to one overall supply – if one or more is
removed, the nature of the supply would be affected.
 Each case to be individually examined
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69. Rule 4 Taxability of services not naturally bundled in ordinary course of
business
 If 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.
 Examples
 Renting of two floors or two portions of building by a common
agreement (treated as commercial use)
 Management of event covering advertisement, promotion, space
booking, photography, videography, public relation etc.
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70. THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur
asandco@gmail.com
sanjivservicetax@gmail.com
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