All India Chartered Accountant’s Society

11

All India Chartered All India Chartered Accountant’s SocietyAccountant’s Society

4th Workshop on Service Tax 4th Workshop on Service Tax (Session XX I)(Session XX I)

Date: 23 July, 2011 Date: 23 July, 2011 Dr. Sanjiv AgarwalDr. Sanjiv AgarwalNew DelhiNew Delhi FCA, FCS, ACIS(UK)FCA, FCS, ACIS(UK)

Jaipur Jaipur

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This Session Covers This Session Covers

Design Services w.e.f. 1.6.2007

[Section 65 (105) (zzzzd)]

Development & Supply of Content Services w.e.f. 1.6.2007

[Section 65 (105) (zzzzb)]

Rent – a – Cab Operator’s Services w.e.f. 1.4.2000

[Section 65 (105) (o)]

Tour Operator Services w.e.f. 1.4.2000

[Section 65 (105) (n)]

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Designing ServicesDesigning Services

w.e.f. 1.6.2007 w.e.f. 1.6.2007 Section 65(105) (zzzzd) Section 65(105) (zzzzd)

What is Design Services?What is Design Services?

Design services includes services provided in relation to designing of Design services includes services provided in relation to designing of furniture, consumer products. industrial products, packages, logos, graphics, furniture, consumer products. industrial products, packages, logos, graphics, websites and corporate identity designing and production of three websites and corporate identity designing and production of three dimensional models. [Section 65 (36 b)].dimensional models. [Section 65 (36 b)].Inclusive but wide definition Inclusive but wide definition Does not include trade mark Does not include trade mark Means only the features of shape, configuration, pattern or ornament applied Means only the features of shape, configuration, pattern or ornament applied to any article by any industrial process or means, whether manual, mechanical to any article by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the financial article appeal to and or chemical, separate or combined, which in the financial article appeal to and are judged solely by the eye [Designs Act, 1911]are judged solely by the eye [Designs Act, 1911]

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What is Design Services?What is Design Services?

Means a plan or scheme conceived in the mind of something to be done; Means a plan or scheme conceived in the mind of something to be done;

a a scheme formed to the detriment of another; a drawing or sketch. To scheme formed to the detriment of another; a drawing or sketch. To

produce a scheme or plan for the making of anything; purpose or produce a scheme or plan for the making of anything; purpose or

intention, intention, combined with plan in the mind; aim; purpose; object; end combined with plan in the mind; aim; purpose; object; end

in view, in view, scheme, intention to be carried into effect. (Advanced Law scheme, intention to be carried into effect. (Advanced Law

Lexicon)Lexicon)

Context referred is architecture, engineering, applied art, creative ventures Context referred is architecture, engineering, applied art, creative ventures

etc.etc.

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Designing ServicesDesigning ServicesTo include activity in relation to design of articles or things, which could be – To include activity in relation to design of articles or things, which could be – Furniture (fixtures not covered)Furniture (fixtures not covered)Consumer products (all) Consumer products (all) Industrial products (all) Industrial products (all) Packages (all types of packages - labels, bottles, pouch, imprinting etc.)Packages (all types of packages - labels, bottles, pouch, imprinting etc.)Logos (marks, designs, trademarks, logos, emblems etc.)Logos (marks, designs, trademarks, logos, emblems etc.)Graphics (any type of graphic designing) Graphics (any type of graphic designing) Websites (only designing, not content provisioning)Websites (only designing, not content provisioning)Corporate identity designing (corporate advertisement designing, corporate Corporate identity designing (corporate advertisement designing, corporate

image designing, colour scheme etc.)image designing, colour scheme etc.)Production of three dimension models (excluding digital films)Production of three dimension models (excluding digital films)Only the act of designing in relation to above shall be covered in the scope Only the act of designing in relation to above shall be covered in the scope

and that designing of the aforesaid only shall be covered.and that designing of the aforesaid only shall be covered.

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Designing ServicesDesigning ServicesTaxable Services [Section 65 (105) (zzzzd)]Taxable Services [Section 65 (105) (zzzzd)]

Taxable service means any service provided or to be provided to any person, Taxable service means any service provided or to be provided to any person, by any other person in relation to design services, but does not include by any other person in relation to design services, but does not include service provided by service provided by an interior decorator referred to in sub-clause (q); andan interior decorator referred to in sub-clause (q); and a fashion designer in relation to fashion designing referred to in sub-a fashion designer in relation to fashion designing referred to in sub-

clause (zv). clause (zv).

Basic Tests for Taxability Basic Tests for Taxability service should be provided or to be provided by any person to any other service should be provided or to be provided by any person to any other

person (i.e., both can be any person),person (i.e., both can be any person), service should be in relation to design services,service should be in relation to design services, design must relate to specified items in the definition,design must relate to specified items in the definition, service provider should not be a fashion designer or an interior decorator.service provider should not be a fashion designer or an interior decorator.

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Designing ServicesDesigning ServicesTaxable Service Excludes Taxable Service Excludes Services in relation to conceptualizing, outlining, creating the designs Services in relation to conceptualizing, outlining, creating the designs

and preparing patterns for costumes, apparels, garments, clothing and preparing patterns for costumes, apparels, garments, clothing accessories, jewellery or any other articles intended to be worn by accessories, jewellery or any other articles intended to be worn by human beings are leviable to service tax under fashion designing human beings are leviable to service tax under fashion designing service [section 65(105)(zv)]service [section 65(105)(zv)]

Services in relation to planning, design or beautification of spaces is Services in relation to planning, design or beautification of spaces is leviable to service tax under interior decorator's service [section 65(105)leviable to service tax under interior decorator's service [section 65(105)(q)).(q)).

Taxable Service IncludeTaxable Service Include services, other than the above specifically mentioned taxable services, services, other than the above specifically mentioned taxable services,

like furniture design, aesthetic design, consumer or industrial products, like furniture design, aesthetic design, consumer or industrial products, logos, packaging, production of three dimensional models, etc. logos, packaging, production of three dimensional models, etc.

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Person liable Person liable

Any person other than fashion designer or an Any person other than fashion designer or an interior decorator providing designing services interior decorator providing designing services to the customer or client shall be the person to the customer or client shall be the person liable to pay service tax.liable to pay service tax.

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Development &Supply of Content Services

W.e.f. 1.6.2011W.e.f. 1.6.2011 Section 65(105) (zzzzb Section 65(105) (zzzzb) )

Meaning of Development & Supply of Content Service [Section 65 Meaning of Development & Supply of Content Service [Section 65 (36c)](36c)]

Development and supply of content includes development and supply of Development and supply of content includes development and supply of mobile value added services, music, movie clips, ring tones, wall paper, mobile value added services, music, movie clips, ring tones, wall paper, mobile games, data, whether or not aggregated, information, news and mobile games, data, whether or not aggregated, information, news and animation films.animation films.

Inclusive definition Inclusive definition Includes both – development and supply Includes both – development and supply

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What is includedWhat is included

Development and supply of – Development and supply of – mobile value added servicesmobile value added services musicmusic movie clipsmovie clips ring tonesring tones wallpaperwallpaper mobile games mobile games data (aggregated or otherwise) data (aggregated or otherwise) informationinformation news, andnews, and animation filmsanimation films

Development & supply of above shall only be covered. Development & supply of above shall only be covered.

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Content means the substance and style of a communication's subject matter. Content provider is one who provides the content, consisting of information of various kinds, such as financial, news, intended for terminal users; the person providing material for transmission and other similar services on the internet (P. Ramanatha Aiyar's Advanced Law Lexicon)

By development is meant the act, process or result of developing or growing or causing to grow; the state o! being developed; happening; the application of research findings of other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services prior to the commencement of commercial production or use. (P. Ramanatha Aiyar's Advanced Law Lexicon)

The word 'supply' has to be understood literally or as the term is known in business.

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Data [defined in section 65 (36)]Data [defined in section 65 (36)]

As per information Technology Act, 2000 As per information Technology Act, 2000

A representation of information, fact, knowledge, concepts or A representation of information, fact, knowledge, concepts or instructions which are being prepared or have been prepared in a instructions which are being prepared or have been prepared in a formalised manner, and is intended to be processed, is being formalised manner, and is intended to be processed, is being processed or has been processed in a computer system or processed or has been processed in a computer system or computer network and may be in any form (including computer computer network and may be in any form (including computer printouts, magnetic or optical) storage media, punched cards, printouts, magnetic or optical) storage media, punched cards, purchased tapes) or stored internally in the memory of the purchased tapes) or stored internally in the memory of the

computer.computer.

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Information [defined in section 65 (53)]Information [defined in section 65 (53)]As per Information Technology Act, 2000.As per Information Technology Act, 2000. Information is invisible under computer based environment Information is invisible under computer based environment Includes data and data bases Includes data and data bases Includes following modes of information storage / transmission Includes following modes of information storage / transmission

data, data, text, text, images, images, sound,sound, voice,voice, codes, codes, computer programmes, computer programmes, software, software, data bases,data bases, micro film, andmicro film, and computer generated micro fiche.computer generated micro fiche.

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Taxable Service [Section 65 (105) (zzzzb)]

Any service provided or to be provided to any person, by any other person in relation to development and supply of content for use in telecommunication services, advertising agency services and on-line information and database access or retrieval services.

• It will become a taxable service under section 65(105) (zzzzb) only if such content is developed and supplied for use in anyone or more of the following – • telecommunication services,• advertising agency services,• online information & database access or retrieval services.

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Taxable services shall cover services provided by content developers in Taxable services shall cover services provided by content developers in relation to development and supply of content for intended use by relation to development and supply of content for intended use by specified users i.e.,specified users i.e.,

telecommunication service providers telecommunication service providers advertising agenciesadvertising agencies online information and database access or retrieval services which shall online information and database access or retrieval services which shall

cover platforms like -cover platforms like - websiteswebsites internetinternet blogs, orblogs, or any electronic/telecom mediaany electronic/telecom media

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To be a taxable service, following conditions should be satisfied – To be a taxable service, following conditions should be satisfied – Service should be provided or agreed to be provided by any person to other Service should be provided or agreed to be provided by any person to other

person. person. The service provided should be any service in relation to development and The service provided should be any service in relation to development and

supply d content.supply d content. 'Content' should be the subject matter of development and supply'Content' should be the subject matter of development and supply The use of content should be for specified purposes only, i.e., for use in The use of content should be for specified purposes only, i.e., for use in

telecommunication services, advertising agency services and online data telecommunication services, advertising agency services and online data information and database access or retrieval services.information and database access or retrieval services.

Taxable service shall not include services provided in relation to delivery of Taxable service shall not include services provided in relation to delivery of content of cinema in digital form after encryption electronically.content of cinema in digital form after encryption electronically.

Also excludes KPO services, equity research, legal support, IPR research, Also excludes KPO services, equity research, legal support, IPR research, industrial designs, publications, software etc.industrial designs, publications, software etc.

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The taxable service has to undergo two-fold test The taxable service has to undergo two-fold test

It has to be in relation to development and supply of content, It has to be in relation to development and supply of content,

such content should be meant for use (actually used, or intended for such content should be meant for use (actually used, or intended for such use) in telecommunication services, advertising services and such use) in telecommunication services, advertising services and online information and data base access or retrieval services.online information and data base access or retrieval services.

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Interpretation of ‘AND’Interpretation of ‘AND’ No clarification from CBECNo clarification from CBEC Following views available (C & F services)Following views available (C & F services)

Kulcip Medicines v.Kulcip Medicines v. CCE (2005) 3 STJ 743CCE (2005) 3 STJ 743 – Taxable when both are rendered – Taxable when both are rendered CCE v. Kulcip Medicines (2009) 14 STR 608 (P & H) –CCE v. Kulcip Medicines (2009) 14 STR 608 (P & H) – Affirmed Cestat’s Affirmed Cestat’s

orderorder Medpro Pharma Ltd. v. CCE (2006) 3 STR 355Medpro Pharma Ltd. v. CCE (2006) 3 STR 355 – any one service also held to – any one service also held to

be taxable be taxable CCE v. Adhunik Steels Ltd. (2006) 7 STJ 144CCE v. Adhunik Steels Ltd. (2006) 7 STJ 144 - any one service also held to be - any one service also held to be

taxable. taxable.

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Person Liable Person Liable Any person providing services to any other person Any person providing services to any other person

in relation to development and supply of content in relation to development and supply of content shall be liable to pay service tax.shall be liable to pay service tax.

2020

Rent –a-cab Operator’s ServicesRent –a-cab Operator’s Services

W.e.f. 16.7.2007; 1.4.2000 W.e.f. 16.7.2007; 1.4.2000 Section 65 (105) (n)Section 65 (105) (n)

Exempt during 1.3.1999 to 31.3.2000.Exempt during 1.3.1999 to 31.3.2000.

held to be constitutionally valid not coming under profession, held to be constitutionally valid not coming under profession, trade or calling trade or calling -- Secretary, Federation of Bus Operators Association of Tamilnadu v. Secretary, Federation of Bus Operators Association of Tamilnadu v.

Union of India (2001) 134 ELT 618 (Madras)Union of India (2001) 134 ELT 618 (Madras)

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Rent a cab scheme operator [Section 65 (91)] Rent a cab scheme operator [Section 65 (91)] Rent-a-cab-scheme operator means any person engagedRent-a-cab-scheme operator means any person engagedin the business of renting cabs. in the business of renting cabs.

The operator must be a personThe operator must be a person The person must be engaged in a specified business.The person must be engaged in a specified business. The business must be of renting cabs.The business must be of renting cabs.

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Cab [Section 65 (20)] Cab [Section 65 (20)] Amended w.e.f. 1.6.2007 Amended w.e.f. 1.6.2007

Cab means—Cab means—(i)(i) a motor cab, ora motor cab, or(ii)(ii) a maxi-cab, ora maxi-cab, or(iii)(iii) any motor vehicle constructed or adapted to carry more than any motor vehicle constructed or adapted to carry more than twelve passengers, excluding the driver, for hire or reward:twelve passengers, excluding the driver, for hire or reward:

Provided that the maxi-cab referred to in sub-clause (ii) or motor Provided that the maxi-cab referred to in sub-clause (ii) or motor vehicle referred to in sub-clause (iii) which is rented for use by an vehicle referred to in sub-clause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, subject or field, other than a commercial training or coaching centre, shall not be included within the meaning of ‘cab’.shall not be included within the meaning of ‘cab’.

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Maxi cab [Section 65 (70)] Maxi cab [Section 65 (70)] Defined in Motor Vehicles Act, 1988 Defined in Motor Vehicles Act, 1988 Any motor vehicle constructed or adapted to carry not Any motor vehicle constructed or adapted to carry not

more than six passengers excluding the driver for hire more than six passengers excluding the driver for hire or reward.or reward.

Criteria of No. of passengers which a cab carry – 6 to Criteria of No. of passengers which a cab carry – 6 to 12 [eg, matador, van, tempo etc.]12 [eg, matador, van, tempo etc.]

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Motor cab [Section 65 (71)]Motor cab [Section 65 (71)] Defined in Motor Vehicles Act, 1988Defined in Motor Vehicles Act, 1988 Any motor vehicle constructed or adapted to carry not Any motor vehicle constructed or adapted to carry not

more than six passengers excluding the driver for hire more than six passengers excluding the driver for hire or reward.or reward.

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Taxable Service [Section 65 (105) (o)]Taxable Service [Section 65 (105) (o)]

Any service provided or to be provided to any person, by a rent a cab scheme Any service provided or to be provided to any person, by a rent a cab scheme operator in relation to the renting of a cab.operator in relation to the renting of a cab.

Following conditions must be satisfied for taxability of service —Following conditions must be satisfied for taxability of service — it should be provided (includes to be provided) to any personit should be provided (includes to be provided) to any person it should be in relation to specified serviceit should be in relation to specified service such specified service should be in relation to renting of cab.such specified service should be in relation to renting of cab.

Cab could be – Cab could be – motor cab motor cab maxi cabmaxi cab motor vehicle (w.e.f. 1.6.2007)motor vehicle (w.e.f. 1.6.2007)

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Renting Renting Use of vehicle for hire / reward Use of vehicle for hire / reward Rent – an act to let out or allow use of something (house, car, Rent – an act to let out or allow use of something (house, car,

properties) for a considerationproperties) for a consideration Renting of cab / car / vehicle Renting of cab / car / vehicle Consideration based on per hour, month or any contracted Consideration based on per hour, month or any contracted

timetime Rent is allowing use of something one owns in exchange of Rent is allowing use of something one owns in exchange of

payment payment [R.S. Travels v. CCE (2008) 12 STR 27 (Cestat, New [R.S. Travels v. CCE (2008) 12 STR 27 (Cestat, New Delhi)]Delhi)]

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Rent –a-cab Operator’s ServicesRent –a-cab Operator’s ServicesTaxability Issues Taxability Issues Taxability for educational purposes Taxability for educational purposes

ServiceService Educational Educational Commercial Commercial

Renting of motor cabRenting of motor cab TaxableTaxable Taxable Taxable Renting of maxi-cabRenting of maxi-cab Not taxableNot taxable Taxable Taxable Renting of motor vehicleRenting of motor vehicle Not taxableNot taxable Taxable Taxable

Motor Vehicle used as Ambulance Motor Vehicle used as Ambulance Not covered under cab Not covered under cab [Circular No. 334/1/2007 – TRU dated 28.2.2007][Circular No. 334/1/2007 – TRU dated 28.2.2007]

Ambulance also held to be not taxable in Ambulance also held to be not taxable in Bachan Singh Salooja v. CCE (2007) 10 STT Bachan Singh Salooja v. CCE (2007) 10 STT 482 (Cestat, New Delhi)482 (Cestat, New Delhi)

Renting a cab with driver for specific destination / at hirer’s disposal – covered.Renting a cab with driver for specific destination / at hirer’s disposal – covered.[Shiva Travels v. CCE Meerut (2006) 7 STJ 161; (2006) 4 STR 388 (Cestat, New [Shiva Travels v. CCE Meerut (2006) 7 STJ 161; (2006) 4 STR 388 (Cestat, New Delhi); Ghanshyam Lodhinal v. CCE, Jaipur-I (2010) 24 STT 434 (Cestat, New Delhi); Ghanshyam Lodhinal v. CCE, Jaipur-I (2010) 24 STT 434 (Cestat, New Delhi)]Delhi)]

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Taxability Issues Taxability Issues

Providing cab with driver for a specific destination paid on per Km. basis (taxi use)- not Providing cab with driver for a specific destination paid on per Km. basis (taxi use)- not covered.covered.[Surya Tours & Travels v. CCE (2009) 16 STT 147 (Cestat, New Delhi); CCE, Rohtak v. [Surya Tours & Travels v. CCE (2009) 16 STT 147 (Cestat, New Delhi); CCE, Rohtak v. Miglani Taxi Service (2009) 15 STR 566 (Cestat, New Delhi) ; R.S. Travels v. CCE (2009) 12 Miglani Taxi Service (2009) 15 STR 566 (Cestat, New Delhi) ; R.S. Travels v. CCE (2009) 12 STR 27 (Cestat, New Delhi)STR 27 (Cestat, New Delhi)

Renting of cabs on monthly basis coveredRenting of cabs on monthly basis covered [Anil Kumar Agnihotri v. CCE (2007) 11 STT 59 (Cestat, New Delhi); Dharmabhakti Travels [Anil Kumar Agnihotri v. CCE (2007) 11 STT 59 (Cestat, New Delhi); Dharmabhakti Travels v. CCE (2007) 9 STT 322 (Cestat, Ahmedabad)]v. CCE (2007) 9 STT 322 (Cestat, Ahmedabad)]

Sub contractors also covered – Sub contractors also covered – Sai Cars Travels v. CCE (2006) 6 STT 136 (Cestat, Mumbai)Sai Cars Travels v. CCE (2006) 6 STT 136 (Cestat, Mumbai)

Bharat Travels Company v. CST. Ahmedabad (2011) 32 STT 30 (Cestat, Ahmedabad) Bharat Travels Company v. CST. Ahmedabad (2011) 32 STT 30 (Cestat, Ahmedabad) Provision of vehicle to other tour operators; no written agreement with customers that vehicle Provision of vehicle to other tour operators; no written agreement with customers that vehicle rented for any specified period; charges not collected on per hour / per Km. basis- held not a rented for any specified period; charges not collected on per hour / per Km. basis- held not a rent a cab service – vehicle to be handed over to customer to be at his disposal for specified rent a cab service – vehicle to be handed over to customer to be at his disposal for specified period of time and charges are not entirely dependent upon only Kms. or hours of use. period of time and charges are not entirely dependent upon only Kms. or hours of use.

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Valuation / ExemptionsValuation / Exemptions Notification No. 9/ 2004-ST dated 9.7.2004 and Notification No. 9/ 2004-ST dated 9.7.2004 and

Notification No. 1/2006-ST dated 1.3.2006 –Notification No. 1/2006-ST dated 1.3.2006 –

60% abatement from taxable value if cenvat credit is not 60% abatement from taxable value if cenvat credit is not availed on inputs / capital goods / inputs service or benefit of availed on inputs / capital goods / inputs service or benefit of

Notification No. 12 /2003 not takenNotification No. 12 /2003 not taken. . Notification No 40/2010-ST dated 28.6.2010-Notification No 40/2010-ST dated 28.6.2010-

Services provided within an airport or port are exempt to the Services provided within an airport or port are exempt to the extent of 60%extent of 60%

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Export of Service Export of Service Based on performance – partly or fully out side IndiaBased on performance – partly or fully out side IndiaImport of Service Import of Service Based on performance – partly or fully in India Based on performance – partly or fully in India Cenvat Credit Cenvat Credit Rule 5 – refund allowed to exporter of service can claim Rule 5 – refund allowed to exporter of service can claim

refund of cenvat credit for duty / service tax paid on inputs / refund of cenvat credit for duty / service tax paid on inputs / input services used in providing services which are exported.input services used in providing services which are exported.

w.e.f. 1.4.2011, rent -a -cab service will not be treated as input w.e.f. 1.4.2011, rent -a -cab service will not be treated as input service except in case of courier, tour operator, rent a cab, service except in case of courier, tour operator, rent a cab, cargo handling, outdoor catering and pandal & shamiana cargo handling, outdoor catering and pandal & shamiana services. services.

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Tour Operator’s ServicesTour Operator’s Services

W.e.f. 1.4.2000W.e.f. 1.4.2000 Section 65(105) (n)Section 65(105) (n)Tour [Section 65 (113)]Tour [Section 65 (113)]““tour” means a journey from one place to another tour” means a journey from one place to another irrespective of the distance between such places. irrespective of the distance between such places. Journey from one place to otherJourney from one place to other Distance traveled immaterialDistance traveled immaterial Any type of journey covered (local / upcountry)Any type of journey covered (local / upcountry) Even a journey from home to office is coveredEven a journey from home to office is covered May exclude tours for educational bodyMay exclude tours for educational body

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Tour operator [Section 65(115)]Tour operator [Section 65(115)](Revised w.e.f. 16.5.2008)(Revised w.e.f. 16.5.2008)

tour operator” means any person engaged in the business of planning, tour operator” means any person engaged in the business of planning, scheduling, organising or arranging tours (which may include scheduling, organising or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle or a contract carriage by whatever operating tours in a tourist vehicle or a contract carriage by whatever name called, covered by a permit, other than a stage carriage permit, name called, covered by a permit, other than a stage carriage permit, granted under the Motor Vehicles Act, 1988 or the rules made thereunder.granted under the Motor Vehicles Act, 1988 or the rules made thereunder.

ExplanationExplanation.— For the purposes of this clause, the expression “tour” does .— For the purposes of this clause, the expression “tour” does not include a journey organised or arranged for use by an educational not include a journey organised or arranged for use by an educational body, other than a commercial training or coaching centre, imparting skill body, other than a commercial training or coaching centre, imparting skill or knowledge or lessons on any subject or field;or knowledge or lessons on any subject or field;

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Tour operator to satisfy following conditions-Tour operator to satisfy following conditions- tour operators can be any person,tour operators can be any person, tour operator should be engaged in business,tour operator should be engaged in business, such business can be of planning, scheduling, organising or arranging such business can be of planning, scheduling, organising or arranging

tours,tours, tours shall include arrangements for accommodation, sight seeing or tours shall include arrangements for accommodation, sight seeing or

other similar arrangements,other similar arrangements, tour can be undertaken by any mode of transport,tour can be undertaken by any mode of transport, tour operator shall include any person engaged in operation of tours in tour operator shall include any person engaged in operation of tours in

a tourist vehicle or contract carriage covered by a permit but excluders a tourist vehicle or contract carriage covered by a permit but excluders stage carriage,stage carriage,

tour excludes journey organized or arranged for use by educational tour excludes journey organized or arranged for use by educational body imparting skills or knowledge or lessons on any subject or field body imparting skills or knowledge or lessons on any subject or field (other than commercial coaching or training centre).(other than commercial coaching or training centre).

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Tour operators services shall have following exclusions-Tour operators services shall have following exclusions-

Tours undertaken in a vehicle having stage carriage permit.Tours undertaken in a vehicle having stage carriage permit.

Journey from one place to another in tourist vehicle having contract Journey from one place to another in tourist vehicle having contract carriage permit for use by educational institutions (schools, collegesetc) carriage permit for use by educational institutions (schools, collegesetc) but not by commercial training or coaching centers.but not by commercial training or coaching centers.

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CBEC Clarification (TRU Letter dated 29.2.2008)CBEC Clarification (TRU Letter dated 29.2.2008)Tour in a vehicle covered by following permits leviable to serviceTour in a vehicle covered by following permits leviable to service

tax-tax- Contract Carriage permit granted under section 74 of the MVA, 1988 and Contract Carriage permit granted under section 74 of the MVA, 1988 and

authorization certificate issued under Motor Vehicles (All India Permit for authorization certificate issued under Motor Vehicles (All India Permit for Tourist Transport Operators) Rules, 1993; andTourist Transport Operators) Rules, 1993; and

Permit granted under section 88(9) in accordance with the provisions of Permit granted under section 88(9) in accordance with the provisions of section 74 of the MVA, 1988 in respect of tourist vehicles, for the purpose section 74 of the MVA, 1988 in respect of tourist vehicles, for the purpose of promoting tourism.of promoting tourism.

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Tourist vehicle [Section 65(114)]Tourist vehicle [Section 65(114)]

A contract carriage constructed or adapted and equippedA contract carriage constructed or adapted and equipped

and maintained in accordance with the specificationsand maintained in accordance with the specifications

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Essential ingredients of tourist vehicleEssential ingredients of tourist vehicle It must be a motor vehicle;It must be a motor vehicle; It is a contract carriage;It is a contract carriage; It carries a passenger or passengers on hire or reward;It carries a passenger or passengers on hire or reward; It includes a maxi-cab and motor cab;It includes a maxi-cab and motor cab; It plies under a contract for fixed set of passengers It plies under a contract for fixed set of passengers

and does not allow any other and does not allow any other passenger to board or passenger to board or alight at will; andalight at will; and

It does not include stage carriages.It does not include stage carriages.

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Three Tests Three Tests Person must be engaged in the business of operating Person must be engaged in the business of operating

tourstours Tour must be conducted using a vehicleTour must be conducted using a vehicle Vehicle must be under the grant of permit under Vehicle must be under the grant of permit under

MVA.MVA.

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Contract CarriageContract CarriageContract carriage means a motor vehicle which carries a passenger or Contract carriage means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether passengers for hire or reward and is engaged under a contract, whether expressed or implied, for the use of such vehicle as a whole for the expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person with a holder of a permit in relation to such vehicle or any person authorized by him in this behalf on a fixed or an agreed rate or sum —authorized by him in this behalf on a fixed or an agreed rate or sum —(a)(a) on a time basis, whether or not with reference to any route or on a time basis, whether or not with reference to any route or

distance; ordistance; or(b)(b) from one point to another, and in either case, without from one point to another, and in either case, without

stopping to pick up or set down passengers not included in the contract stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes —anywhere during the journey, and includes —

(i)(i) a maxi-cab; anda maxi-cab; and(ii)(ii) a motor cab notwithstanding that separate fares are a motor cab notwithstanding that separate fares are

charged charged for its passengers.for its passengers.

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Contract Carriage –Basic Ingredients Contract Carriage –Basic Ingredients It carries passengers for hire or reward;It carries passengers for hire or reward; It is engaged in contract whether expressed or implied for use of such It is engaged in contract whether expressed or implied for use of such

vehicle as a whole;vehicle as a whole; The contract must be entered into by the person with the holder of permit The contract must be entered into by the person with the holder of permit

in relation to such vehicle or with any person authorized by him;in relation to such vehicle or with any person authorized by him; The agreed consideration can either by on time basis or one point to The agreed consideration can either by on time basis or one point to

another;another; The vehicle should not stop to pick up or set down passengers not included The vehicle should not stop to pick up or set down passengers not included

in the contract anywhere during the journey;in the contract anywhere during the journey; It includes maxi-cab or motor-cab.It includes maxi-cab or motor-cab.

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State CarriageState Carriage

Stage carriage means a motor vehicle Stage carriage means a motor vehicle constructed or adapted to carry more than six constructed or adapted to carry more than six passengers excluding the drive for hire or passengers excluding the drive for hire or reward at separate fares paid by or for reward at separate fares paid by or for individual passengers, either for the whole individual passengers, either for the whole journey or for stages of the journey.journey or for stages of the journey.

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PermitPermit

Permit means a permit issued by a State or Permit means a permit issued by a State or Regional Transport authority or an authority Regional Transport authority or an authority prescribed in this behalf under this Act prescribed in this behalf under this Act authorizing the use of a motor vehicle as a authorizing the use of a motor vehicle as a transport vehicle.transport vehicle.

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Taxable Service [Section 65 (105) (n)]Taxable Service [Section 65 (105) (n)]

taxable service means any service provided for taxable service means any service provided for to be provided to any person, by a tour to be provided to any person, by a tour operator in relation to a tour.operator in relation to a tour.

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Taxable service shall include –Taxable service shall include – Conducting / arranging tours – planning, scheduling Conducting / arranging tours – planning, scheduling

organizing etc.organizing etc. All domestic and inbound tourist servicesAll domestic and inbound tourist services Package toursPackage tours Journeys /tours undertaken or providing transport servicesJourneys /tours undertaken or providing transport services Lodging / boarding arrangementsLodging / boarding arrangements Guide servicesGuide services Sight seeing services/ assistanceSight seeing services/ assistance Value added services – reservation, ticketing , entertainment Value added services – reservation, ticketing , entertainment

etc etc

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Taxability IssuesTaxability Issues No service tax on college / school buses- transportation of school children in No service tax on college / school buses- transportation of school children in

school bus,; in case of hired buses, service tax would be attachedschool bus,; in case of hired buses, service tax would be attached

In case of cabs, transportation of school children is not taxable (Circular No 137 In case of cabs, transportation of school children is not taxable (Circular No 137 dated 15.12.2008].dated 15.12.2008].

Haj & Umrah Pilgrimage – considered as export (partly performed inside / outside Haj & Umrah Pilgrimage – considered as export (partly performed inside / outside India .India .

Delivery and handling of itinerary is part of tour operator’s services- Delivery and handling of itinerary is part of tour operator’s services- Taanya Taanya Tours,Tours,, , Travels & Freight Forwarders Pvt Ltd v CCE , Chennai (2011) 22STR 530 Travels & Freight Forwarders Pvt Ltd v CCE , Chennai (2011) 22STR 530 (Cestat, Chennai)(Cestat, Chennai)

Department can not ignore definition of stage carriage and tourist vehicle – SCN to Department can not ignore definition of stage carriage and tourist vehicle – SCN to spare bus permit holders held to be bad – spare bus permit holders held to be bad – M Sugantni v Asstt. CCE (2011) 23 STR M Sugantni v Asstt. CCE (2011) 23 STR 7 (Madras).7 (Madras).

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Exemption / Abatements Exemption / Abatements ((a) Services provided in relation to a tour by a tour operators —a) Services provided in relation to a tour by a tour operators —

(i) (i) In case of package tour (bill to indicate that it is In case of package tour (bill to indicate that it is inclusive of charges for such tour)inclusive of charges for such tour) 60% exempt60% exempt

(ii) (ii) In case of other than package tour (bill to indicate In case of other than package tour (bill to indicate that amount charged in bill is gross amount that amount charged in bill is gross amount charged for such tour)charged for such tour) 60% exempt60% exempt(Notification No. 1/2006-ST, dated 1-3-2006 refers)(Notification No. 1/2006-ST, dated 1-3-2006 refers)

(b) Services provided in relation to tour where services (b) Services provided in relation to tour where services 90% exempt 90% exempt are solely of arranging or booking accommodation for are solely of arranging or booking accommodation for any person (bill to indicate such fact and bill contains any person (bill to indicate such fact and bill contains the value of such booking or accommodation) the value of such booking or accommodation) (Notification No. 1/2006-ST, dated 1-3-2006 refers)(Notification No. 1/2006-ST, dated 1-3-2006 refers)

(c)(c) Taxable services provided by tour operators, operating Taxable services provided by tour operators, operating 60% exempt60% exemptunder a contract carriage permit for transport of under a contract carriage permit for transport of passengers for the period 1-4-2000 to 4-2-2004. passengers for the period 1-4-2000 to 4-2-2004. (Refer Notification No. 15/2007-ST, dated 4-1-2007)(Refer Notification No. 15/2007-ST, dated 4-1-2007)

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Exemption / AbatementsExemption / Abatements Exemption from service tax has been provided to interstate or Exemption from service tax has been provided to interstate or intra-state transportation of passengers in a vehicle bearing intra-state transportation of passengers in a vehicle bearing contract carriage permit with specified conditions contract carriage permit with specified conditions vide vide Notification No 20/2009-ST dated 7.7.2009. Notification No 20/2009-ST dated 7.7.2009.

Finance Act, 2011 Changes (Section 72)Finance Act, 2011 Changes (Section 72)Retrospective effect to the notification of the Government of Retrospective effect to the notification of the Government of India No 20/2009-ST G.S.R 492(E), dated the 7th July, 2009, India No 20/2009-ST G.S.R 492(E), dated the 7th July, 2009, from the 1st day of April, 2000, so as to allow the exemption from the 1st day of April, 2000, so as to allow the exemption to a tour operator having a contract carriage permit for inter-to a tour operator having a contract carriage permit for inter-state or intra –state transportation of passengers, excluding state or intra –state transportation of passengers, excluding tourism, conducted tour, charter or hire servicetourism, conducted tour, charter or hire service

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ExportExport When service is performed outside India – partly or When service is performed outside India – partly or

fullyfully

Haz & Umrah Pilgrimage – treated as export Haz & Umrah Pilgrimage – treated as export (Circular No 117 dated 30.10.2009)(Circular No 117 dated 30.10.2009)

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THANK YOU FOR

YOUR PRECIOUS TIME

AND ATTENTION

Dr. Sanjiv AgarwalFCA, FCS, Jaipur

[email protected]@gmail.com

All India Chartered Accountant’s Society

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