14. BUSINESS AUXILIARY SERVICE
(A) Date of Introduction: 01.07.2003 vide Notification No.7/2003-ST
dated 20.06.2003
(B)
Definition and scope of service:
“Business
Auxiliary Service”
means any service in relation to, —
(i)
promotion
or marketing or sale of goods produced or provided by or belonging to the
client; or
(ii)
promotion
or marketing of service provided by the client; or
[Explanation – For the removal of doubts, it is hereby declared that
for the purposes of this sub-clause, “service in relation to promotion or
marketing of service provided by the client” includes any service provided in
relation to promotion or marketing of games of change, organised,
conducted or promoted by the client, in whatever form or by whatever name
called, whether or not conducted online, including lottery, lotto, bingo;]
(iii)
any customer care service provided on behalf of the
client; or
(iv)
procurement of goods or services, which are inputs for
the client; or
[Explanation — For the removal of doubts, it is hereby declared that
for the purposes of this sub-clause, “inputs” means all goods or services
intended for use by the client;]
(v) production or
processing of goods for, or on behalf of the client; or
(vi) provision of
service on behalf of the client; or
(vii) a service incidental or auxiliary to any
activity specified in sub-clauses (i) to (vi), such
as billing, issue or collection or recovery of cheques,
payments, maintenance of accounts and remittance, inventory management, evaluation
or development of prospective customer or vendor, public relation services, management or
supervision, and includes services as a
commission agent, but does not include any activity that amounts to
“manufacture” of excisable goods.
Explanation — For the removal
of doubts, it is hereby declared that for the purposes of this clause, —
(a) ”Commission
Agent”
means any person who acts on
behalf of another person and causes sale or purchase of goods, or provision or
receipt of services, for a consideration, and includes any person who, while
acting on behalf of another person —
(i)
deals with goods or services or documents of title to
such goods or services; or
(ii) collects payment of sale price of such goods or services; or
(iii) guarantees for collection or payment for such goods or
services; or
(iv)
undertakes any activities relating to such sale or purchase of such goods or
services;
(b) “Excisable Goods” has the meaning assigned to it in
clause (d) of Section 2 of the Central Excise Act, 1994;
(c)“Manufacture” has the meaning
assigned to it in clause (f) of Section 2 of the Central Excise Act, 1944;
(Section 65(19) of
the Finance Act, 1994)
“Taxable Service” means any service
provided or to be provided to a client by any person in relation to business
auxiliary service.
(Section 65 (105) (zzb) of the Finance Act, 1994)
(C) Rate of Tax & Accounting Code:
|
|
Rate of Tax |
Accounting Code |
|
Service Tax |
10% of the value of services |
00440225 |
|
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 |
00440226 |
( 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.
(Section 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.
(Section 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:
The Board vide Circular No.96/7/2007-ST dated
23.08.2007 on Business Auxiliary
Services has clarified the following issues-
|
048.01 / 23.08.07 |
Whether
commission received by distributors for distribution of mutual fund units is
liable to Service Tax under business auxiliary service? |
Distributors receive
commission from mutual fund for providing services relating to purchase and
sale of Mutual fund units. Services provided by such distributors are in the
nature of commission agent and are, thus, liable to service tax under
business auxiliary service [section 65(105)(zzb)]. |
Budget
2008-09 change:
1. Services provided in relation to promotion
or marketing of service provided by the client is leviable
to service tax under business auxiliary service. Organization and selling of
lotteries are globally treated as supply of service. Lotteries (Regulation)
Act, 1998 enables State Governments to organize, conduct or promote lotteries.
Lottery tickets are printed by the State governments and are sold through
agents or distributors. Tickets are delivered by the State Government to the
distributors at a discounted price as compared to the face value of the
tickets. Services provided by the distributors or agents in
relation to promotion or marketing of lottery tickets are leviable
to service tax under the existing business auxiliary service.
2. Lotteries fall under the category of games
of chance. Games of chance are known under various names like lottery, lotto,
bingo etc. and are also conducted through internet or other electronic
networks.
3. To clarify as removal of doubts , an explanation is added under business auxiliary
service stating that services provided in relation to promotion or marketing of
games of chance organized, conducted or promoted by the client are covered
under the existing definition of business auxiliary service. Amendment is only
for removal of doubts and field formations are, therefore, requested to ensure
that service tax is collected on such services.
[ Vide M.F. (D.R.) letter
D.O. F.No.334/1/2008-TRU dated 29/2/2008 ]
(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 (Prior to
03.03.2009 Notfn.No4/2004-ST dated 31.03.2004)}
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)
(
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)
(
8. Exemption to services provided to Foreign
Diplomatic Missions or Consular Post in
(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)
*********************