CENTRAL EXCISE COMMISSIONERATE: NEW DELHI
C.NO. CE-20/41/ST/Trade Notice/97 Dated: 4.7.97
TRADE NOTICE NO. 53 CE (SERVICE TAX)/97
Sub: Imposition of Service Tax on Consulting Engineer and Manpower Recruitment Agency - reg.
Attention of the Trade is invited to this office Trade Notice No. 50 to 52 (service Tax)/97 dated 4.7.97 through which it has been informed about the imposition of service tax on the services rendered by Consulting Engineering and Man Power Recruitment Agency w.e.f. 7th July, 1997 in terms of Notification 23/97 to 25/97-ST dated 2.7.97- Govt. of India, Ministry of Finance, Department of Revenue.
2. It is felt that some clarification in respect of these two services for guidance of Public/Trade would be beneficial/use to Trade, Industry and Public.
3. MANPOWER RECRUITMENT AGENCIES:
3.1 As per Section 88 of the Finance Act, 1997 manpower recruitment agency means any commercial concern engaged in providing any service, directly or indirectly, in any manner for recruitment of manpower to a client. The taxable service rendered by a manpower recruitment agency is defined as any service provided to a client, by a manpower recruitment agency in relation to the recruitment of manpower in any manner. The rate of service tax is 5% and the value of taxable service in relation to service provided by a manpower recruitment agency to a client shall be the gross amount charged by such agency from the client in relation to the recruitment of manpower in any manner.
3.2 It would be pertinent to note that the coverage of the term manpower recruitment agency is wide and shall include within its ambit the services provided by an agency from the primary stage of building a database of manpower for different categories of personnel employment, whether white collar or blue collar, whether for employment in India or overseas; determining manpower requirement for the client, preliminary identification, short listing and screening of prospective candidates, providing specialists for interviewing prospective candidates, arranging for their interviews at each stage; placing advertisements for recruitment of manpower in the print or electronic media etc. In short, service tax on manpower recruitment agency shall cover within its fold the entire gamut of services provided by a manpower recruitment agency to a client from the incipient stage of selecting/identifying man-power required for any prospective employment, till the stage of actual selection for the same. It may be noted that in certain cases such as where a person approaches a manpower requirement agency for being employed in a suitable position abroad, as normally happens in case of employment in Gulf countries, the prospective candidate for employment become the client for purposes of service tax.
3.3 Service Tax on manpower recruitment agencies shall be the gross amount charged to the client for services rendered in relation to the recruitment of manpower excluding the amount incurred by the manpower recruitment agency on behalf of the client towards expenses which are reimbursed on actual basis. The Commissioners may selectively, in doubtful cases require the manpower recruitment agency to substantiate such actual expenses on the basis of doumentary evidence. In case the manpower recruitment agency is billing the client on the basis of a lump sum, any deductions from the same on account of reimbursible expenses, for the purposes of determining the value of taxable service may be permitted on the basis of documentary evidence adduced by the agency.
3.4 Normally the manpower recruitment agency receives remuneration from the client for the services rendered by him as per the stipulations in the contract/agreement between them. The payment from the client is received at different stages, based on the completion of work/service at each stage. The manpower recruitment agency shall be required to pay service tax on the payments received at each stage from the client by the 15th of the succeeding month. Subsequent modifications, if any, in the bills raised to the client at the time of final payment may be allowed after verification.
4. CONSULTING ENGINEERS
4.1 Consulting Engineer means any professionally qualified engineer or engineering firm who, either directly or indirectly, renders any advice, consultancy or technical assistance in any manner to a client in one more discipline of engineering. The taxable service rendered by a consulting engineer means any service provided to a client, by a technical assistance in any manner in one or more disciplines of engineering. The rate of service tax is 5% and the value of taxable service in relation to service provided by a consulting engineer to a client shall be the gross amount charged by such engineer from the client for advice, consultancy or technical assistance in any manner in one or more discipline of engineering.
4.2 Consulting engineers shall include self-employed professionally qualified engineer who may or may not have employed others to assist him or it could be an engineering firm - whether organised as a sole-proprietorship-partnership, a private or a public Ltd., Company.
4.3 The services which attract the levy include all the services which are rendered in the capacity of a professional person and specifically include the services pertaining to structural engineering works civil/mechanical/electrical engineering works or relating to construction management. All services rendered within the above scope of the term engineering attract service tax provided they are rendered in the capacity of a consulting engineer. The scope of the services of a consultant may include any on or more of the following categories:(i) Feasibility study.
(ii) Pre-design services/project.
(iii) Basic design engineering.
(iv) Detailed design engineering.
(vi) Construction supervision & project management.
(vii) Supervision of commissioning and initial operation.
(viii) Manpower planning and training.
(ix) Post-operation and management.
(x) Trouble shooting and technical services, including establishing systems and procedures for an existing plant.
Though the above list is not exhaustive, it illustrates the wide scope and nature of the services rendered by a consulting engineer.
4.4 The services should be rendered to a client directly, and not in the capacity of a sub-consultant associate consultant to another consulting engineer, who is the prime consultant. In case services are rendered to the prime consultant, the levy service tax does not fall on the sub-consultant, the levy service tax does not fall on the sub-consultant but is on the prime of main consulting engineer who raises a bill on his client (which include the charge for services rendered by the sub-consultant).
4.5 As in the case of manpower recruitment agencies service tax on consulting engineers shall be the gross amount charged to the client for services rendered in relation to the recruitment of manpower excluding the amount incurred in the manpower recruitment agency on behalf of the client towards expenses which are reimbursed on actual basis an in case the client is titled on a lump sum basis any deduction from the same on account of reimbursible expenses, for the purpose on the basis of documentary evidence adduced by the agency.
4.6 Normally the consulting engineer receives remuneration from the client for the services rendered by him as per the stipulations in the contract/agreement between them. The payment from the client is received at different stages based on the completion of work at each stage. The consulting engineer shall be required to pay service tax on the payments received at each stage from the client by the 15th of the succeeding month. subsequent modification, if any, in the bills raised to the client at the time of final payment may be allowed after verification.
4.7 The services rendered by a consulting engineer on overseas projects shall be fully exempted from payment of service tax provided it is received in convertible foreign exchange (Notification No. 22/97-ST dated 2.7.97 refers).
5.1 As per section 69 of the Finance act, 1994, read with rule 3 and 4 of the Service Tax Rules, 1994, every person responsible for collecting the service tax is required to be registered with the concerned Central Excise Officer appointed under rule 3. Notification No. 24/97-Service Tax, dated 2/7/97 amends rule 2 of the said rules so as to prescribe that the person responsible for collecting the service tax in relation to the services provided by a manpower recruitment agency shall be the agency which raises the bill for services rendered to a client and the person responsible for collecting the service tax in relation to the services provided by a consulting engineer shall be the consulting engineer who raises the bill for services rendered to a client.
5.2 Rules relating to service tax on other services have already been notified and the trade is advised to go through them. However, for the benefit of the services which are to be covered by the Notification No. 23/97 to 25/97-ST, Services Tax dated 2.7.97, the procedures to be followed for registration, maintenance of documents, filing of returns and the manner in which the service tax is to be paid and which were contained in chapter V of the Finance Act, 1994, notified to the trade vide this Commissionerate Trade Notice No. 46-CE (Misc 46)/94 dt. 7.7.94 are reproduced along with annexures as amended from time to time and by the Finance Act, 1997.
5.4 The assessees will apply for registration in form ST-1 (Annexure-I). An acknowledgement will be provided on the duplicate copy of the ST-1 form by the Superintendent of Central Excise (Service Tax) in Room No. 254, CR Building, I.P. Estate, New Delhi. Registration No. will ba allotted on receipt of their application.
5.5 Payment of Service Tax
Rule 6 of the Service Tax Rules, 1994, deals with the payment of Service Tax. The Service tax will be deposited under Head 0044, in form TR-6 in yellow colour as amended vide Service Tax Circular No. 17/11/96 dated 24.10.96 (a copy of which is enclosed as Annexure-II) in any of the bank branches, at present authorised to collect central Excise Duties within the jurisdiction of commissionerate of Central Excise, Delhi. A list of such branches alongwith the codes Nos. (Annexure-III) is enclosed. It is to be noted that each assessee shall choose only one branch convenient to him and all payment shall be made in that branch only.
5.6 The concept of provisional assessment has been built into the scheme of Service Tax Rules. Whenever an assessee, for any reason, unable to correctly estimate on the date of deposit, the actual amounts collected for any particular month of period, the assessee may make a request in writing to the Assistant commissioner of Central Excise (Service Tax), CR Building, I.P. Estate, New Delhi to make a provisional assessment of the tax on the basis of the amount desposited. The said Central Excise Officer will, on receipt of such request, order provisional assessment of tax. In this regard, the provisions of Central Excise Rules, 1944, have been made applicable. However, there is no requirement to enter into a bond in respect of service tax.
5.7 The assessee will file quarterly return in Form ST-3 as amended vide notification No. 15/97 dated 25.4.97 in (Annexure-IV) in triplicate. In respect of provisional assessment, the assessee is required to submit a memorandum in Form ST-3A (Annexure-V) showing details of difference between the service tax deposited and the service tax actually collected for each month. The assessee shall submit quarterly return alongwith the copy each of the form TR-6 for the month covered in the quarter.
5.8 The assessment shall be completed on the basis of the particulars furnished in the quarterly return ST-3 and ST-3A, by the said Central Excise Officer. The triplicate copy of the quarterly return so assessed shall be returned to the assessee with assessment memorandum. In cases where the service tax assessed is more than the service tax self determined and paid by the assessee, the assessee shall pay the deficiency alongwith the amount of interest determined thereon within 10 days of the receipt of the copy of the quarterly return from the Central Excise Officer. The assessee may apply for refund, whenever he has paid service tax in excess of tax assessed, in accordance with the provisions of section 11-B of the Central Excise Act, 1994.
6. Appellate mechanism provided in Central Excise Act, 1944 has been made applicable to Service Tax with some modifications (Section 85 and Sec. 86) of Finance Act, 1994 may be referred to).
7. ADMINISTRATIVE MACHINERY FOR COLLECTIO OF SERVICE TAX
(1) A service tax cell has been created in the headquarters office of the Commissionerate of Central Excise, Delhi namely:-
The Assistant Commissioner of Central Excise
(Service Tax Cell)
Commissionerate of Central Excise, Delhi
Room No. 116, C.R. Building, I.P. Estate,
Tel. No. 3722048 & EAPBX 3317741, 43 Ext. 320, 310, 376
The trade is advised to send all correspondences,
applications for registration, returns etc. to the above address.
2. The trade may please note that:
a) Application for registration in form ST-I received from the assessee shall be acknowledged by an officer of the rank of Superintendent of Central Excise.
b) Certificate of registration in the form ST-2 will be issued under the name and signature of the Assistant Commissioner.
c) The Service Tax collected during any calendar month by the Assessee under Sub-section (1) of Section 68 of the Finance Act, 1994 shall be paid to the credit of Central Government in form TR-6 by the 15th of the following month.
d) Any person, responsible for collecting the Service Tax, who fails to collect the Tax in accordance with the provisions of sub-section (II), shall not withstanding such failure be liable to pay such tax to the credit of the Central Government within SEVENTY FIVE DAYS from the end of the month in which the service was rendered.
e) Quarterly Return filed by the assessee (para 4.7 above) will be assessed by the Superintendent of Central Excise (Service Tax).
f) For the purpose of provisional assessment whenever the Asstt. Commissioner will make an order for provisional assessment for the tax, on request being received in writing from the Assessee.
g) The powers of Assessment under Section 72, 73, 74 of Chapter V of the Finance Act, 1994 dealing with best judgment Assessment, value of taxable service, escaping assessment, rectification of mistake will be exercised by the Asstt. Commissioner. In respect of Assessment periods of 5 years or more referred in Section 73 of the Finance Act, 1994 (32 of 1994) Commissioner will be competent authority to exercise the powers.