1. India Newsflash
Reckoner on Service Tax
Liability
Background
With the Union Budget 2012, the finance minister has ushered in wide sweeping changes in the service
tax regulations. Most important of them being the so called “negative list” which renders almost all
services barring few, taxable under service tax law.
With the proposed changes, we see a lot of confusion and panic in the business community, this move
affects both the receivers and the providers of service in India. In light of these facts we have produced
this easy guide, which will help you determine if you need charge service tax or not.
We hope this is of great use to you and your organization.
Coverage
Under the new provisions a service is defined as “Any activity carried out by a person for another for
consideration, and includes a declared service”
Explicit exclusions from the definition are :
• Transfer of title in goods or immovable property
• A transaction in money or actionable claim
• Service by an employee to the employer
• Fees taken by any court
Hence if your company is involved in any “activity” you are liable to pay service tax unless you
fulfill any one of the following criterion.
Turnover Below Limits
Assesses ( individuals, Companies, firms) with an annual turnover less than Rs 10 lakh are
exempt from charging service tax. from their customers.
However once the turnover exceeds the specified limit, the company would have to register under
the act and collect taxes.

2. India Newsflash
Service in Negative List
Services covered under the so called “Negative list” are exempt from service tax, these services are
Services provided by Government Authorities Manufacturing
Services provided by Reserve Bank Of India
Entertainment events and Amusement facilities
(“RBI”)
Services provided by Foreign Diplomatic
Games of chance ( betting, gambling and lottery)
Mission
Services by way of renting of residential Education ( pre-school, vocational and
dwelling for use as residence recognized qualifications)
Trading of goods Toll Charges
Goods Transportation ( except goods Interest on loans and advances and interbank
transportation agency and courier agency) forex trading
Public Transport (Stage carriage, railways (
except first class and AC coaches), Metro/trams,
Sale of space or time for advertising ( other than
inland waterways, transport in a vessel of less
radio and television)
than 15 tonnes ( other than for tourists),
metered cabs, radio tax, auto-rickshaws.
Electricity Transmission and Distribution Funeral Services
Agriculture and related activities
Services in General Exemptions
Services provided to United Nations or specified Health care services by a clinical establishment,
International Organizations medical practitioner or Para- medics
Services by a section 12AA entity for charitable
Services provided by veterinary clinic
purposes
Services by a person by way of
Services of technical testing of drugs by
• Renting of a religious place for general public
approved organization
• Conduct of religious ceremony
Fee charged by Advocates from non corporates, Training or coaching relating to arts, culture or
fee for representation before tribunals sports

3. India Newsflash
Services in General Exemptions (Cont.)
Services provided
Temporary transfer of a copyright relating to
•To educational inst. by way of catering
original literary, dramatic, musical, artistic
•To educational inst. for transportation or
works or cinematograph films
admission of students
Services by way of sponsorship of tournament
Services provided to recognized sports body
or championships
Services provided by way of erection ,
Services provided to govt. or local authority by
construction, repair, alteration , renovation of
way of erection , construction, repair, alteration ,
roads, bridge, tunnel , building owned by
renovation of civil structure, historical
charitable organization, pollution control factory
monument etc.
etc.
Services provided in relation to serving of food Renting of motor vehicle meant to carry more
or beverages by units not having air- than twelve passengers to state transport
conditioning/heating or a license to serve undertaking and, a means of transportation of
alcoholic beverages goods to a goods transport agency
Services by way of renting hotels, inns or places Services by way of motor vehicle parking to
meant for residential or lodging purposes. general public excluding leasing
Transport of passengers by air terminating in an Services provided by GTA by way of
airport located in AP, Assam, Manipur, transportation of fruits, eggs, milk etc. where
Meghalaya, Mizoram, Nagaland, Sikkim, or gross amount charged for single carriage does
Tripura or WB or contract carriage for not exceed Rs 1500 and for a single consignee
transportation of passengers does not exceed Rs 750
Services of slaughtering of bovine animals Services of general insurance business
Services to govt. by way of repair of ship, boat ; Services of collecting and providing news
waste collection; storage , transport or testing of rendered by independent journalists, Press Trust
water; sewerage treatment of India or United News of India
Services by performing artist in folk or classical Process as job worker in relation to specified
art forms goods
Services by way of making telephone calls from Service provided by incubatee with a total
PCO, Airport phones etc. business turnover not exceeding 50 lakhs
Services received by govt. or charitable Services by unincorporated body or society to
organization from service provider located in own members by way of reimbursements of
non-taxable territory. charges or contribution
Services provided by Sub broker , Member of
commodity exchange , Mutual fund agent, Services provided by way of transportation of 9
Marketing agent of lottery tickets or A business specified goods by railways or by a vessel.
facilitator

4. India Newsflash
Declared Services
Notwithstanding any other factors. Services in the declared services list ARE taxable under the
provisions of service tax. These have been specified with a view to remove ambiguity in
application of law. The services under this list are :
Activity in relation to delivery of goods on hire
Renting of immovable property
purchase.
Construction of complex, building or structure
Agreeing to the obligation to refrain from ,to
or a part thereof except where entire
tolerate, to do an act. Including no compete
consideration is received after issuance of
clauses in Contracts
certificate of completion.
Temporary transfer or permitting the use of Development, design, programming, adaptation
enjoyment of any intellectual property right. etc. of information technology software
Transfer of goods by way of hiring, leasing, Service portion in activity wherein food, other
licensing without transfer of right to use. article of human consumption is supplied.
Service portion in execution of works contract.

5. India Newsflash
DISCLAIMER: This paper is a copyright of Arkay & Arkay, Chartered Accountants. No
reader should act on the basis of any statement contained herein without seeking
professional advice. The finance bill is pending parliamentary approval and may undergo
substantial changes. The authors and the firm expressly disclaim all and any liability to any
person who has read this paper, or otherwise, in respect of anything, and of consequences
of anything done, or omitted to be done by any such person in reliance upon the contents of
this paper.
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