41. Development & Supply of Content for Telecommunication, Advertising and On-line Information Services
(A) Date of Introduction: 01.06.2007 vide Notification No. 23/2007-S.T.,
dated 22.05.2007
(B) Definition and scope of service:
"Development and
supply of content" includes
development and supply of mobile value added services, music, movie clips,
ring tones, wall paper, mobile games, data, whether or not aggregated,
information, news and animation films.
(Section 65 (36c)
of Finance Act, 1994 as amended)
"Taxable
Service" means 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.
(Section 65 (105)
(zzzzb) of Finance Act, 1994 as amended)
(C) Rate of Tax & Accounting Code:
|
Rate of Tax
|
Accounting Code
|
Service Tax
|
10% of the
value of services
|
00440414
|
Education Cess
|
2% of the
service tax payable
|
00440298
|
Secondary and
Higher Education cess
|
1% of the
service tax payable.
|
00440426
|
Other
-Penalty/interest
|
As levied or
applicable
|
00440415
|
( Rate of
tax is effective from 24.02.2009.)
(
D ) Classification of Taxable
Services:
(1)
The classification of taxable services shall be determined according
to the terms of the sub-clauses (105) of section 65;
(2) When for
any reason , a taxable service is prima facie, classifiable under two or more
sub-clauses of clause (105) of section 65, classification shall be effected
as follows :-
(a) the sub-clause which provides
the most specific description shall be preferred to sub-clauses providing a
more general description;
(b) composite services consisting of
a combination of different services which cannot be classified in the manner
specified in clause (a), shall be classified as if they consisted of a
service which gives them their essential character, in so far as this
criterion is applicable;
(c) when a
service cannot be classified in the manner specified in clause (a) or clause
(b), it shall be classified under the sub-clause which occurs first among the
sub-clauses which equally merits consideration.
(
Sec.65A of Finance Act,1994)
(E)
Valuation of taxable services for charging Service tax
(1) Service tax chargeable on any taxable
service with reference to its value shall,-
(i) in a case where the provision of service
is for a consideration in money, be the gross amount charged by the service
provider for such service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration
not wholly or partly consisting of money, be such amount in money, with the
addition of service tax charged, is equivalent to the consideration;
(iii) in a case where the provision of
service is for a consideration which is not ascertainable, be the amount as
may be determined in the prescribed manner.
(2) Where the gross amount charged by a service provider, for the
service provided or to be provided is inclusive of service tax payable, the
value of such taxable service shall be such amount as, with the addition of
tax payable, is equal to the gross amount charged.
(3) The gross amount
charged for the taxable service shall include any amount received towards the
taxable service before, during or after provision of such service.
(4) Subject to the provisions of sub-sections (1), (2) and (3), the
value shall be determined in such manner as may be prescribed.
Explanation.-For the purposes of this section,-
(a) "consideration" includes any amount that is payable for the
taxable services provided or to be provided;
(b) "money" includes any currency, cheque,
promissory note, letter of credit, draft, pay order, travellers
cheque, money order, postal remittance and other
similar instruments but does not include currency that is held for its
numismatic value;
(c) "gross amount charged" includes payment by cheque,
credit card, deduction from account and any form of payment by issue of
credit notes or debit notes and 'book
adjustment, and any amount credited or debited, as the case may be, to any
account, whether called "Suspense account" or by any other name, in the books
of account of a person liable to pay service tax, where the transaction of
taxable service is with any associated enterprise.
( Sec.67
of Finance Act,1994)
Inclusion in
or Exclusion from value of certain expenditure or cost:
(1) Where any expenditure or costs are
incurred by the service provider in the course of providing taxable service,
all such expenditure or costs shall be treated as consideration for the
taxable service provided or to be provided and shall be included in the value
for the purpose of charging service tax on the said service.
[Rule 5(1) of Service Tax (Determination of
Value) Rules,2006)]
(2)
The expenditure or costs incurred by the service provider as a pure
agent of the recipient of service, shall be excluded from the value of
the taxable service if all the following conditions are satisfied, namely:-
(i) the
service provider acts as a pure agent of the recipient of service when he
makes payment to third party for the goods or services procured;
(ii) the recipient of service
receives and uses the goods or services so procured by the service provider
in his capacity as pure agent of the recipient of service;
(iii) the recipient of service is
liable to make payment to the third party;
(iv) the recipient of service
authorizes the service provider to make payment on his behalf;
(v) the recipient of service
knows that the goods and services for which payment has been made by
the service provider shall be provided by the third party;
(vi) the payment made by the
service provider on behalf of the recipient of service has been separately
indicated in the invoice issued by the service provider to the recipient of
service;
(vii) the service provider recovers from
the recipient of service only such amount as has been paid by him to the
third party; and
(viii) the goods or services procured by the service provider from the third
party as a pure agent of the recipient of service are in addition to the
services he provides on his own account.
[Rule 5(2) of Service Tax
(Determination of Value) Rules,2006)]
(F) Clarifications issued by the Board/Ministry:
Development
and supply of
content service-Scope[section 65(105)(zzzzb)]: Content developed for use in telecommunication,
advertisement and internet or websites were hitherto leviable
to service tax under "business support service". Now services provided by
content developers in relation to development and supply of content for use
by telecommunication service providers, advertising agencies and on-line
information and database access or retrieval services such as internet or
website service providers are separately specified under this service. The
term "development and supply of content" is defined separately [ section 65(36C)].
[Vide M.F.(D.R) Letter d.O.F.no.334/1/2007-TRU
dated 28.02.2007]
(G) Exemption & Exclusion:
1. Exemption
to Small Scale Service Providers:
In exercise of the powers conferred by sub-section (1) of
section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as
the said Finance Act), the Central Government, on being satisfied that it is
necessary in the public interest so to do, hereby exempts taxable services of
aggregate value not exceeding Ten lakh* rupees in any financial year from the whole of
the service tax leviable thereon under section 66
of the said Finance Act:
Provided that
nothing contained in this notification shall apply to,-
(i) taxable
services provided by a person under a brand name or trade name,
whether
registered or not, of another person; or
(ii) such value of taxable services in respect of which service
tax shall be paid by such person and in such manner as specified under sub-section
(2) of section 68 of the said Finance Act read with Service Tax Rules,1994.
2. The exemption
contained in this notification shall apply subject to the following
conditions,
namely:-
(i) the provider
of taxable service has the option not to avail the exemption contained in
this notification and pay service tax on the taxable services provided by him
and such option, once exercised in a financial year, shall not be withdrawn
during the remaining part of such financial year;
(ii) the provider of taxable service shall
not avail the CENVAT credit of service tax paid on any input services, under
rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after referred to
as the said rules), used for providing the said taxable service, for which exemption
from payment of service tax under this notification is availed of;
(iii) the provider of taxable service
shall not avail the CENVAT credit under rule 3 of the said rules, on capital
goods received in the premises of provider of such taxable service during the
period in which the service provider avails exemption from payment of service
tax under this notification;
(iv) the provider of taxable service shall
avail the CENVAT credit only on such inputs or input services received, on or
after the date on which the service provider starts paying service tax, and
used for the provision of taxable services for which service tax is payable;
(v) the provider of taxable service who
starts availing exemption under this notification shall be required to pay an
amount equivalent to the CENVAT credit taken by him, if any, in respect of
such inputs lying in stock or in process on the date on which the provider of
taxable service starts availing exemption under this notification;
(vi) the balance of CENVAT credit lying unutilised in the account of the taxable service provider
after deducting the amount referred to in sub-paragraph (v), if any, shall
not be utilised in terms of provision under
sub-rule (4) of rule 3 of the said rules and shall lapse on the day such
service provider starts availing the exemption under this notification;
(vii) where a taxable service provider
provides one or more taxable services from one or more premises, the
exemption under this notification shall apply to the aggregate value of all
such taxable services and from all such premises and not separately for each
premises or each
services; and
(viii) the
aggregate value of taxable services rendered by a provider of taxable service
from one or more premises, does not exceed rupees *ten lakhs in the preceding financial
year.
3. For the
purposes of determining aggregate value not exceeding ten*lakh rupees, to avail exemption
under this notification, in relation to taxable service provided by a goods
transport agency, the payment received towards the gross amount charged by
such goods transport agency under section 67 for which the person liable for
paying service tax is as specified under subsection (2) of section 68 of the
said Finance Act read with Service Tax Rules, 1994, shall not be taken into
account.
Explanation.-
For the purposes of this notification,-
(A) "brand name" or "trade name" means a brand name or a trade
name, whether registered or not, that is to say, a name or a mark, such as
symbol, monogram, logo, label, signature, or invented word or writing which
is used in relation to such specified services for the purpose of indicating,
or so as to indicate a connection in the course of trade between such
specified services and some person using such name or mark with or without
any indication of the identity of that person;
(B) "aggregate value not exceeding *ten lakh rupees means the sum total of
first consecutive payments received during a financial year towards the gross
amount, as prescribed under section 67 of the said Finance Act, charged by
the service provider towards taxable services till the aggregate amount of
such payments is equal to ten lakh rupees but does
not include payments received towards such gross amount which are exempt from
whole of service tax leviable thereon under section
66 of the said Finance Act under any other notification.
4. This
notification shall come into force on the 1st day of April, 2005.
[Notification
No. 6/2005-ST, dated 1-3-2005. *Amended by Notfn.No.
8/2008-ST dated 01.03.2008]
2. Services
to UN Agencies
Services provided to United
Nations or an International
Organizations are
exempt.
[Notification No. 16/2002-ST,
dated 2-8-2002]
3. Export of service: Any
service which is taxable under clause 105 of Section 65 may be exported
without payment of service tax.
( Rule 4 of Export of Services
Rules,2005)
4. Exemption to services provided to a
developer of SEZ or a unit of SEZ:
Exempts
the taxable services specified in clause (105) of section 65 of the said
Finance Act, which are provided in relation to the authorized operations in a
Special Economic Zone, and received by a developer or units of a Special
Economic Zone, whether or not the said taxable
services are provided inside the Special Economic Zone,
from the whole of the service tax leviable
thereon under section 66 of the said Finance Act subject to certain
conditions.
( Refer notification for details)
{ Notification No. 09/2009ST dated
03.03.2009 as amended by Notification
No. 15/2009ST dated 20.05.2009 }
5. Exemption to value of goods & material
sold by service provider: In
exercise of the powers conferred by section 93 of the Finance Act, 1994 (32
of 1994), the Central Government, being satisfied that it is necessary in the
public interest so to do, hereby exempts so much of the value of all the
taxable services, as is equal to the value of goods and materials sold by the
service provider to the recipient of service, from the service tax leviable thereon under section (66) of the said Act,
subject to condition that there is documentary proof specifically indicating
the value of the said goods and materials.
(Notification No.
12/2003-ST dated 20.06.2003 effective from 01.07.2003)
6. Exemption to taxable services provided by
TBI and STEP: All
taxable services, provided by a Technology Business Incubator (TBI) or a Science and Technology
Entrepreneurship Park (STEP) recognized by the National Science and technology Entrepreneurship Development Board (NSTEDB)
of the Department of Science and Technology, Govt. of India from the whole of the service tax leviable thereon
subject tio certain conditions and procedures. (
Refer notification for details)
(Notification No.09/2007 ST dated
01.03.2007)
7. Exemption to taxable services provided by
entrepreneurs located within the premises of TBI or STEP: All taxable services, provided by an
entrepreneur located within the
premises of a Technology Business Incubator
(TBI) or a Science and Technology Entrepreneurship Park (STEP)
recognized by the National Science and
technology Entrepreneurship
Development Board (NSTEDB) of the Department of Science and Technology, Govt.
of India from the whole of the service
tax leviable
thereon subject to certain conditions
and procedures. ( Refer notification for details)
(Notification No.10/2007 ST dated
01.03.2007)
8. Exemption to services provided to Foreign
Diplomatic Missions or Consular Post in India: All services
provided by any person, for the official use of a Foreign Diplomatic Mission
or Consular Post in India are exempted from service tax subject to certain
conditions and procedures. (Refer notification for details)
(Notification No. 33/2007-ST dated
23.05.2007)
9. Exemption to services provided for personal
use of a family member of Diplomatic Agent or Career Consular Officers posted
in Foreign Diplomatic Mission/Consular Post in India: All services
provided by any person, for personal use of family member of Diplomatic
Agents or Career Consular officers posted in a Foreign Diplomatic Mission or Consular Post in India are exempted from
service tax subject to certain conditions and procedures. (Refer notification
for details)
(Notification No. 34/2007-ST dated
23.05.2007)
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