1. Presents
A Knowledge Master Class
On
―Understanding New Regime of Service Taxation in India‖
Conducted by
Dr. Sanjiv Agarwal
FCA, FCS
Thursday,
13th December, 2012
Gurgaon © Dr. Sanjiv Agarwal
1

2. SESSION – III
Services not liable to
Service Tax
2

3. This Presentation Covers –
• What is Negative List
• Sectors in Negative List
• Analysis of Negative list of Services
3

4. Services on which no Service Tax shall be payable comprise of :
• Service which are specifically excluded from the scope of
definition of service itself u/s 65(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

5. What is negative list
• Defined in new section 66D
• Section 66D specifies seventeen 17 broad categories of services.
• Effective from 1-7-2012
• If an activity meets the characteristics of ‗ service ‗, it is taxable
unless specified in Negative List.
• Based on socio-economic–tax criterion
5

6. Socio – Economic Considerations in Negative list
• Administrative considerations: taxation of Government, difficult to tax
sectors.
• Under contractual obligations: Specified international bodies and diplomatic
missions
• Welfare considerations: welfare of vulnerable sections of society, essential
education, public health; public transport, services by non-profit
entities, religious services, promotion of art, culture and sports.
• Economic considerations: transport of export goods, services meant for
agriculture, animal husbandry and infrastructure development.
• Explicit activities in the nature of services, which are within the taxing
powers of States: betting and lotteries, tolls.
6

7. Negative list of services is drawn from seven sectors, viz.
• services provided by specified person
ie, Government
• social welfare & public utilities
• financial sector
• transportation
• construction & real estate
• education
• health care
• others & miscellaneous
7

8. Services by Government or a local authority excluding the following
services to the extent they are not covered elsewhere
• Services by the Department of Posts by way of speed
post, express parcel post, life insurance and agency services
provided to a person other than Government;
• Services in relation to an aircraft or a vessel, inside or outside
the precincts of a port or an airport;
• Transport of goods or passengers; or
• Support services provided to business entities
to be contd..
8

9. • Most of services provided by Central / State
Governments exempt from service tax.
• But following services are taxable -
 Department of posts - speed post, express parcel, life
insurance and agency service to non government
business entity but basic mail, money orders,
operation of saving accounts ,pension payment etc
services are covered in negative list
 In relation to vessel or aircraft service within/outside
port/airport
 Transport of goods and/ or passengers
 Support service to business entities
To be contd…..

10. • Services by government as sovereign functions (grant of
licensing rights or audit of government, passport etc.)
• Excludes corporations formed under Central Acts or
State Acts or various Government companies registered
under Companies Act, 1956 or autonomous institutions
set up by a Special Acts
• Government Department needs to be registered and to
pay tax on support services of
 Renting of immovable properties
 Speed post, express parcel, life insurance.
 Transport of goods and/ or passengers
 Services in relation to vessel or aircraft
• For other services, Government not liable to pay service
tax as tax paid by service recipient in reverses charge (N.
No. 30)
To be contd…..

11. “Support services" means
• infrastructural,
• operational,
• administrative,
• logistic,
• marketing or
• any other support of any kind 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
• shall include advertisement and promotion, construction or
works contract, renting of immovable
property, security, testing and analysis;
• Services provided by Government Security agencies are covered
under support service - under reverse charge, Service Receiver is
liable to tax.

12. • All services provided by RBI are in Negative List
• Service Provided to RBI is taxable unless
covered in negative list.
• Service provided by banks to RBI taxable unless
covered in Negative List or exempted services

13. • Services by diplomatic mission of any country located in
India
• Does not cover services provided by any office or
establishment of an International organization (Section 3
of United Nation Privileges & Immunities Act 1947)
• Example- UNESCO, UNICEF, IMF, IBRD etc.
• Notification No. 27/2012-ST dated 20.6.2012
conditionally exempts service provided by any person
 for the official use of a provision of a foreign diplomatic mission or
consular post in India
 for personal use or use of the family member of diplomatic agents
or career consular officers posted in India

14. services relating to agriculture 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 bulk packaging
and such like operations which do not alter the essential
characteristics of agricultural produce but make it only marketable for
the primary market;
(iv)renting or leasing of agro machinery or vacant land with or without a
structure incidental to its use;
(v) loading, unloading, packing, storage or warehousing of agricultural
produce;
(vi)agricultural extension services;
(vii)services by any Agricultural Produce Marketing Committee or Board
or services provided by a commission agent for sale or purchase of
agricultural produce;
to be contd…

15. The Services relating to agriculture or agriculture
produce specified in negative list-
 agricultural operations directly related to production of any
agricultural produce including
cultivation, harvesting, threshing, plant protection or seed testing;
 supply of farm labour;
 processes carried out at the agricultural farm including
tending, pruning, cutting, harvesting, drying
cleaning, trimming, sun
drying, fumigating, curing, sorting, grading, cooling or bulk
packaging and such like operations which do not alter essential
characteristics of agricultural produce but makes it only
marketable for the primary market not for retail market; (e.g.
cleaning of Wheat)
to be contd …….

16. • renting of agro machinery or vacant land with or without a
structure incidental to its use (e.g. green house, storage
shed.)
• loading, unloading, packing, storage and warehousing of
agricultural produce;
• agricultural extension services (application of scientific
research, farmer education & training)
• services provided by any Agricultural Produce Marketing
Committee or Board (APMC) for agriculture or
agricultural produce but does not include non -
agricultural activities (e.g. renting of shops or other
property or services provided by commission agent for
sale or purchase of agricultural produce)
to be contd …….

17. Agriculture -Section 65 B(3)
Cultivation of plants and rearing of all life-forms of
animals except the rearing of horses, for
food, fiber, fuel, raw material or other similar products
Agriculture Produce -Section 65B(5)
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 makes it marketable
for primary market (E.g. Plantation crops like
rubber, tea or coffee but does not include potato chips or
tomato ketchup)
to be contd …….

18. • Trading of goods is not a taxable service, it being a sale
and not a service.
• If a transaction is a sale, it is not a service and vice versa
• Transfer of title in goods is crucial
• Activities of a commission agent / clearing and
forwarding agent who sells goods on behalf of another
for a commission are not trading of goods (Title of goods
does not pass)
• Forward contracts are in the nature of trading of goods.
• Future contracts are not trading of goods
to be contd …….

19. Goods - Section 65B(25)
―goods" means
• every kind of movable property
• other than actionable claim and
• money
• 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 sale

20.  “process amounting to manufacture or production of goods" means a process
on which duties of excise are leviable under section 3 of the Central Excise
Act, 1944 or any process amounting to manufacture of alcoholic liquors for
human consumption, opium, Indian hemp and other narcotic drugs and
narcotics on which duties of excise are leviable under any State Act for the
time being in force.
 Covers manufacturing activity carried out on contract or job work basis where
• Transfer of title of goods is not involved
• Duties of excise are leviable on such process
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21.  “excisable goods” means goods specified in the First
Schedule and the Second Schedule to the Central Excise Tariff
Act, 1985 as being subject to a duty of excise and includes salt
 Mobility and marketability are essential conditions
 Goods includes any article, material or substance which is
capable of being bought and sold for a consideration and such
goods shall be deemed to be marketable.

22. Carrying out an intermediate production process as job work in
relation to -
(a) agriculture, printing or textile processing;
(b) cut and polished diamonds and gemstones; or plain and studded jewellery
of gold and other precious metals, falling under Chapter 71 of the Central
Excise Tariff Act ,1985 (5 of 1986)
(c) any goods on which appropriate duty is payable by the principal
manufacturer or
(d) processes of electroplating, zinc plating, anodizing, heat
treatment, powder coating, painting including spray painting or auto
black, 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 lakh rupees in a financial year subject to the condition that
such aggregate value had not exceeded one hundred and fifty lakh rupees
during the preceding financial year

23. Selling of space or time slots for advertisements other than
advertisements broadcast by radio or television
This entry in negative list should qualify the following tests –
• involves selling of space (in case of print media)
• involves selling of time slots ( in case of electronic media)
• purpose of selling time slots / space to be for advertisements
(publicity / sales promotion, awareness etc.)
• excludes broadcast by radio or television ( i.e. broadcast will be
taxable)
to be contd …….

24. Taxable Non-taxable
Sale of space or time for Sale of space for advertisement in
advertisement to be broadcast on print media
radio or television
Sale of time slot by a broadcasting Sale of space for advertisement in bill
organization boards, public places (including
stadia), buildings, conveyances, cell
phones, automated teller machines,
internet
Aerial advertising
Presentation made in person

25. Not covered in Negative List Covered In Negative List
Printing & Publishing of yellow pages, Spaces allotted in buses and public
business directory and trade catalogues transport system public transport system
etc. to run display of advertisement
Advertisement services to Government Private circulation of magazines / journals
departments
Purchase of time slots from broadcaster Telephone directories
and sold to advertising agency
Preparing advertisement for display Clubs, associations, professional bodies
during a movie in theatre etc. member's list / directories
Services provided by advertisement Internal directories / business
agencies in relation to preparation of informations
advertisement
Commission received by advertisement
agencies from broadcasting or publishing
companies

26. “Advertisement" 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;
• Services provided by advertisement agencies relating to
preparation / designing etc of advertisements are taxable.
• Print media includes newspaper and books.

27. • Only covers toll charges for access to road and bridge
• Includes National highways or state highways
• Toll on other roads not in negative list
• Collection charges or service charges paid to any toll
collection agency are not covered under negative list
• Does not include services used for providing such service

28. Betting or Gambling means
• putting on stake something of value,
• particularly money,
• with consciousness of risk 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
likelihood of anything occurring or not occurring
• Betting is a form of wagering contract in which money or money‘s
worth is made payable by the parties on the result of an uncertain
event, usually a game or sport
• Gambling means playing game of chance for money or risky action
undertaken with the hope of success
• Lottery is a game of chance (e.g. lottery, bingo, lotto etc.) which may
include online games
to be contd …….

29. • Auxiliary services for organizing or promoting betting or
gambling events are not covered in negative list
• State subject covered in list II
• Actionable claim
• In Union of India & Others v. Martin Lottery Agencies Ltd
(2009) 14 STR 593 (Supreme Court), it was held that
service tax can not be levied on sale of lottery ticket
• In Martin Lottery Agencies Ltd. v. Union of India (2007) 8
STR 561 (Sikkim), it was held that petitioner was not
rendering services in relation to promotion of client‘s goods
and service tax liability did not arise

30. ‗Entertainment event‘ if it is intended (may not
necessarily provide) to provide any one or more of
the following to the recipients / viewers / audience
• recreation
• pastime
• fun , or
• enjoyment
to be contd …….

31. This could be by way of –
• exhibition of cinematographic film
• circus
• concerts
• sporting events
• pageants
• award functions
• dance performance
• musical performance
• theatrical performances – drama, ballets or any such
event / programme.
to be contd …….

32. “Amusement facility" means
• a facility where fun
• recreation is provided by means of rides
• gaming devices
• bowling alleys in amusement parks
• amusement arcades
• water parks
• theme parks
• such other places
• but does not include a place within such facility where
other services are provided
to be contd …….

33. • Amusement means
entertainment, diversion, pastime, sport etc.
• Theatrical performances need not be performed in
theatre
• Standalone amusement ride in a mall – fun or recreation
by means of ride – covered under amusement –
excluded
• Membership of club which provides amusement facilities
- excluded
• Event manager for organizing an entertainment event or
entertainment is not covered in this category

34. • Provided by Electricity Transmission or
Distribution utility
• Covers both –
• Transmission
• Distribution
• Installation of gensets or similar equipment by
private contractor for distribution - taxable
• Charges collected by developer or a housing
society for distribution of electricity within a
residential complex - taxable but excluded if it
acts as a licensed authority

35. • Service by way of -
i. Pre-school education and education up to higher
secondary school or equivalent
ii. Education as a part of a prescribed curriculum for
obtaining a qualification recognized by law
iii. Education as a part of an approved vocational
education course
• Conduct of degree courses by
colleges, universities or institutions which
lead to grant of qualifications recognized by law
to be contd …….

36. Approved vocational education course
• a course run by an industrial training institute or an industrial training
centre affiliated to the National Council for Vocational Training, offering
courses in designated trades as notified under the Apprentices Act, 1961
• a Modular Employable Skill Course, approved by the National Council of
Vocational Training, run by a person registered with the Directorate
General of Employment and Training, Ministry of Labour and
Employment, Government of India
• a course run by an institute affiliated to the National Skill Development
Corporation set up by the Government of India
to be contd …….

37. • Education upto higher secondary school or equivalent
are in negative list.
• Services provided to or by an educational institution for
Auxiliary educational services and renting of immovable
property – exempted under mega notification
Negative list will not include –
• Private tuitions
• Education as a part of prescribed curriculum for
obtaining qualification recognized by law of a foreign
country
• Services provided to educational institutions
• Placement services
to be contd …….

38. Education related services not in negative list but exempt
from tax under Notification No. 25/2012-ST dated
20.06.2012
• Transportation of students to / from institutions
• Provision of mid-day meal in schools
• Admission related services to educational institutes
where education services are exempt.
• Coaching / training in recreational activities of arts,
culture or sports.

39. Renting coves all types of arrangements in relation to
immovable property with or without its transfer of possession or
control and whether wholly or partly. It would cover / include –
• allowing
• permitting
• granting access / entry / occupation
• use of facility
• letting
• leasing
• licensing, or
• other similar arrangements
(such as right to use, sub-lease, space sharing etc.)
to be contd …….

40. Renting of certain kinds of property already covered 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 non-business entity
to be contd …….

41. • Residential dwelling not defined but includes residential
accommodation
• Does not include hotel, motel, inn, guest house, camp
site, lodge, house boat or other place meant temporary
stay
• Residential dwelling used partly as a residence and partly
for non residential purpose- treated as bundled service
• Residential unit – independent residential unit with specific
facilities for living, cooking and sanitation
to be contd …….

42. 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
banks or authorised dealers of foreign exchange or
amongst banks and such dealers;
to be contd …….

43. • Transactions in money 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
• Service tax levied on service charges for transactions in
money including of charges for making of drafts, letter of
credits issuance charges, service charges relating to
issuance of CDs/ CPs etc
• Interest rate swaps and foreign exchange swaps are
excluded being securities.
to be contd …….

44. • Only interest and discount are in negative list
• Interest on
• Money borrowed
• Debt incurred
• Deposit
• Claim / obligation/ similar right
• Service charge / fee/ commission not covered (e.g. pre
payment fee, late fee, cheque bounce charges)
• interest on credit facility not utilized (commitment charges
) not covered in negative list
• Bill discounting – only discount covered
to be contd …….

45. • Any charges over and above interest/ discount taxable
• Purchase/ sale of foreign currency between banks and
authorized dealers under negative list
• Examples of services in negative list-
• Fixed deposits or saving deposits or any other such deposits in a
bank for which return is received by way of interest
• Providing a loan or over draft facility for in consideration for
payment of interest
• Mortgages 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

46. Services by-
• a stage carriage;
• railways in a class other than
(i) first class; or
(ii) an AC coach; ( exempt upto 30.9.2012)
• metro, monorail or tramway;
• inland waterways;
• public transport, other than predominantly for tourism
purpose, in a vessel, between places located in India;
and
• metered cabs, radio taxis or auto rickshaws.
to be contd …….

47. • ‗Stage Carriage‘ is defined in section 2(40) of Motor
Vehicles Act, 1988. It means a motor vehicle constructed
or adapted to carry more than six passengers excluding
the driver for hire or reward at separate fares paid by or
for individual passengers, for the whole journey or for
stages of the journey
• National waterways covered in inland waterways
• Metered cab - any contract carriage on which an
automatic device, of the type and make approved by the
State Transport 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 Motor Vehicles Act, 1988
to be contd …….

48. Covered under negative list Not Covered under negative list
Motor vehicles on hire to state Motor vehicles to state transport
transport undertaking (more taken undertaking (upto 12 passengers)
12 passengers)
Exemption to Transport of No exemption for Tourism,
passengers by a contract carriage conducted tours, chartered or hire

49. services provided in relation to transportation of
goods is specified in the negative list
• by road except the services of
(i) a goods transportation agency or
(ii) a courier agency
• by aircraft or vessel from a place outside India up to
the customs station of clearance in India; or
• by inland waterways (agents covered)
to be contd …….

50. • Services provided by GTA taxable except under
separate exemption available for
• fruits, vegetables, eggs, milk, food grains or pulses in a goods
carriage;
• goods where gross amount charged on a consignment
transported in a single goods carriage does not exceed one
thousand five hundred rupees; 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.
• Courier services – Express cargo service, angadia – taxable
to be contd …….

51. Nature of service relating to Whether covered in the negative
transportation of Goods list entry
By railways No
By air within the country or abroad No
By a vessel in the coastal waters No
By a vessel on a national waterway Yes
Services provided by a GTA No

52. • Funeral
• Burial
• Crematorium
• Mortuary
• Transportation of deceased

53. THANK YOU
FOR
YOUR
PRECIOUS TIME
AND
ATTENTION
Dr. Sanjiv Agarwal
FCA, FCS, Jaipur
asandco@gmail.com
sanjivservicetax@gmail.com