• a Hindu undivided family
• a company
• a society
• a limited liability partnership
• a firm
• an association or body of individuals, whether incorporated or not
• Government (Central and State Governments, will be separate persons)
• a local authority, or
• every artificial juridical person, not falling within any of the preceding

• to provide a level playing field to private entities in these areas as exemption to Government in such activities would lead to competitive inequities; and
• to avoid break in Cenvat chain as the support services provided by Government are normally in the nature of intermediary services.

• Mere transfer of title in goods or immovable property by way of sale, gift or in any other manner for a consideration does not constitute service.
• Goods has been defined in section 65B of the Act as 'every kind of moveable property other than actionable claims and money; and includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under contract of sale'.
• Immovable property has not been defined in the Act. Therefore the definition of immovable property in the General Clauses Act, 1897 will be applicable which defines immovable property to include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth.

In terms of Section 66B of the Act, service tax will be leviable on all services provided in the taxable territory by a person to another for a consideration other than the services specified in the negative list. The services specified in the negative list therefore go out of the ambit of chargeability of service tax. The negative list of service is specified in the Act itself in Section 66 D. For sake of ease of reference the negative list of services is given in Exhibit A1. In all, there are seventeen heads of services that have been specified in the negative list. The scope and ambit of these is explained in paras below.

4.1 Services provided by Government or local authority

4.1.1 Are all services provided by Government or local authority covered in the negative list?

No. Most services provided by the Central or state Government or local authorities are in the negative list except the following:

4.1.2 Would the taxable services provided by the Government be charged to tax if they are otherwise exempt or specified elsewhere in the negative list?

No. If the services provided by the government or local authorities that have been excluded from the negative list entry are otherwise specified in the negative list then such services would also not be taxable.

4.1.3 'Government'has not been defined in the Act. What is the meaning of Government?

Since 'Government'has not been defined in the Act, the definition of 'Government'as contained in the General Clauses Act, 1897 would be applicable as per which 'Government'includes both State Government and Central Government. Further as per the General Clause Act 1897, State includes Union Territory.

4.1.4 Are various corporations formed under Central Acts or State Acts or various government companies registered under the Companies Act, 1956 or autonomous institutions set up by a special Acts covered under the definition of 'Government'?

No. In terms of the definition of 'Government'as contained in the General Clause Act, 1857 and as per the settled position of law such corporations or authorities or companies are not included in the definition of 'Government'. Services provided by such entities would, therefore, not be entitled to the negative list entry relating to the 'Government'. It would also not include regulatory bodies.

4.1.5 What entities are then covered under 'Government'?

'Government'would include various departments and offices of the Central or State Government or the U.T. Administrations which carry out their functions in the name and by order of the President of India or the Governor of a State.

4.1.6 Would a department of the Government need to get itself registered for each of the services listed in answer to Q. No.4.1.1 above?

For the support services provided by the Government to business entities government departments will not have to get registered because service tax will be payable on such services by the service receiver i.e. the business entities receiving the service under reverse charge mechanism in terms of the provisions of section 68 of 35.

the Act and the notification proposed to be issued under the said section. For services mentioned at (a) to (c) of the list (point 4.1.1 above refers) tax will be payable by the concerned department.

4.1.7 What is the meaning of "support services" which appears to be a phrase of wide ambit?

Support services have been defined in section 65B of the Act as 'infrastructural, operational, administrative, logistic marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of movable or immovable property, security, testing and analysis'. Thus services which are provided by government in terms of their sovereign right to business entities are not support services e.g. grant of mining or licensing rights.

4.1.8 What is the meaning of local authority?

Local authority is defined in 65B and means the following:-

• A Panchayat as referred to in clause (d) of article 243 of the Constitution
• A Municipality as referred to in clause (e) of article 243P of the Constitution
• A Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund
• A Cantonment Board as defined in section 3 of the Cantonments Act, 2006
• A regional council or a district council constituted under the Sixth Schedule to the Constitution
• A development board constituted under article 371 of the Constitution, or
• A regional council constituted under article 371A of the Constitution.

4.2 Services provided by Reserve Bank of India

4.2.1 Are all services provided by the Reserve Bank of India in the negative list?

Yes. All services provided by the Reserve Bank of India are in the negative list.

4.2.2 What about services provided to the Reserve Bank of India?

Services provided to the Reserve Bank of India are not in the negative list and would be taxable unless otherwise covered in any other entry in the negative list.

4.3 Services by a foreign diplomatic mission located in India

Any service that is provided by a diplomatic mission of any country located in India are in the negative list. This entry does not cover services, if any, provided by any office or establishment of an international organization.

4.4 Services relating to agriculture

The services relating to agriculture that are specified in the negative list are services relating to –

• agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;
• supply of farm labour;
• processes carried out at the agricultural farm including tending, pruning, cutting, harvesting, drying cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but makes it only marketable for the primary market;
• renting of agro machinery or vacant land with or without a structure incidental to its use;
• loading, unloading, packing, storage and warehousing of agricultural produce;
• agricultural extension services;
• services provided by any Agricultural Produce Marketing Committee or Board or services provided by commission agent for sale or purchase of agricultural produce;

4.4.1 What is the meaning of 'agriculture'?

'Agriculture'has been defined in the Act as cultivation of plants and rearing or breeding of animals and other species of life forms for foods, fibre, fuel, raw materials or other similar products but does not include rearing of horses.

4.4.2 Are activities like breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture, forestry included in the definition of agriculture?

Yes. These activities are included in the definition of agriculture.

4.4.3 What is the meaning of agricultural produce?

Agricultural produce has also been defined in section 65B of the Act which means any produce of agriculture on which either no processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for primary market. It also includes specified processes in the definition like tending, pruning, grading, sorting etc. which may be carried out at the farm or elsewhere as long as they do not alter the essential characteristics.

4.4.4 Would plantation crops like rubber, tea or coffee be also covered under agricultural produce?

Yes. Such plantation crops are also covered under agricultural produce.

4.4.5 Would potato chips or tomato ketchup qualify as agricultural produce?

No. In terms of the definition of agricultural produce, only such processing should be carried out as is usually done by cultivator producers which does not alter its essential characteristics but makes it marketable for primary market. Potato chips of tomato ketchup are manufactured through processes which alter the essential characteristic of farm produce (potatoes and tomatoes in this case).

4.4.6 Would leasing of vacant land with a green house or a storage shed meant for agricultural produce be covered in the negative list?

Yes. In terms of the specified services relating to agriculture 'leasing'of vacant land with or without structure incidental to its use'is covered in the negative list. Therefore, if vacant land has a structure like storage shed or a green house built on it which is incidental to its use for agriculture then its lease would be covered under the negative list entry.

4.4.7 What is the meaning of agricultural extension services?

Agricultural extension services have also been defined in section 65B of the Act as application of scientific research and knowledge to agricultural practices through farmer education or training.

4.4.8 What are the services referred to in the negative list entry pertaining to Agricultural Produce Marketing Committee or Board?

Agricultural Produce Marketing Committees or Boards are set up under a State Law for purpose of regulating the marketing of agricultural produce. Such marketing committees or boards have been set up in most of the States and provide a variety of support services for facilitating the marketing of agricultural produce by provision of facilities and amenities like shops, sheds, water, light, electricity, grading facilities etc. They also take measures for prevention of sale or purchase of agricultural produce below the minimum support price. APMCs collect market fees, license fees, rents etc. Services provided by such Agricultural Produce Marketing Committee or Board are covered in the negative list.

4.5 Trading of goods

4.5.1 Would activities of a commission agent or a clearing and forwarding agent who sells goods on behalf of another for a commission be included in trading of goods?

No. The services provided by commission agent or a clearing and forwarding agent are not in the nature of trading of goods. These are auxiliary for trading of goods. In terms of the provision of clause (1) of section 66F reference to service does not include reference to a service used for providing such service.(For guidance on clause (1) of section 66F please refer to point no 7.1.1 of this Guidance Paper) Moreover the title in the goods never passes on to such agents to come within the ambit of trading of goods.

4.5.2 Would future contracts in commodities be covered under trading of goods?

Yes. Futures contracts would be covered under trading of goods as these are contracts which involve transfer of title in goods on a future date at a pre-determined price.

4.5.3 Would commodity futures be covered under trading of goods?

Yes. In commodity futures actual delivery of goods does not normally take place and the purchaser under a futures contract normally offsets all obligations or closes out by selling an equal quantity of goods of the same description under another contract for delivery on the same date. There are, therefore, two contracts of sale/purchase involved which would fall in the category of trading of goods.

4.5.4 Would auxiliary services relating to future contracts or commodity futures be covered in the negative list entry relating to trading of goods?

No. Such services provided by commodity exchanges clearing houses or agents would not be covered in the negative list entry relating to trading of goods.

4.6 Processes amounting to manufacture or production of goods

The phrase 'processes amounting to manufacture or production of goods'has been defined in section 65B of the Act as a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944) or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act. This entry, therefore, covers manufacturing activity carried out on contract or job work basis provided duties of excise are leviable on such processes under the Central Excise Act, 1944 or any of the State Acts.

4.6.1 Would service tax be leviable on processes which do not amount to manufacture or production of goods?

Yes. Service tax would be levied on processes, unless otherwise specified in the negative list, not amounting to manufacture or production of goods carried out by a person for another for consideration. Some of such services relating to processes not amounting to manufacture are exempt as specified in entry no. 30 of Exhibit A2.

4.6.2 Would service tax be leviable on processes on which Central Excise Duty is leviable under the Central Excise Act, 1944 but are otherwise exempted?

No. If Central Excise duty is leviable on a particular process as the same amounts to manufacture then such process would be covered in the negative list even if there is a central excise duty exemption for such process.

4.7 Selling of space or time slots for advertisements other than advertisements broadcast by radio or television

'Advertisement'has been defined in section 65 B of the Act as form of presentation for promotion of, or bringing awareness about, any event, idea, immovable property, person, service, goods or actionable claim through newspaper, television, radio or any other means but does not include any presentation made in person.

4.7.1 Sale of space of time for advertisements not including sale of space for advertisement in print media and sale of time by a broadcasting agency or organization is currently taxed under clause (zzzm) of sub-section (105) of the Finance Act,1944. So what kind of sale of space or time would become taxable and what would be not taxable?

4.7.2 Would services provided by advertisement agencies relating to preparation of advertisements be covered in the negative list entry relating to sale of space for advertisements?

No. Services provided by advertisement agencies relating to making or preparation of advertisements would not be covered in this negative list entry and would thus be taxable. This would also not cover commissions received by advertisement agencies from the broadcasting or publishing companies for facilitating business, which may also include some portion for the preparation of advertisement.

4.7.3 In case a person provides a composite service of providing space for advertisement that is covered in the negative list entry coupled with taxable service relating to design and preparation of the advertisement how will its taxability be determined?

• This would be a case of bundled services taxability of which has to be determined in terms of the principles laid down in section 66F of the Act.
• Bundled services have been defined in the said section as provision of one type of service with another type or types of services.
• If such services are bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle.
• If such services are not bundled in the ordinary course of business then the bundle of services will be treated as consisting entirely of such service which attracts the highest liability of service tax.

For guidance on how to determine whether or not a bundle of services is bundled in the ordinary course of business please refer to Guidance Note 7 of this Guidance Paper.

4.8 Access to a road or a bridge on payment of toll charges

4.8.1 Is access to national highways or state highways also covered in this entry?

Yes. National highways or state highways are also roads and hence covered in this entry.

4.8.2. Are collection charges or service charges paid to any toll collecting agency also covered?

No. The negative list entry only covers access to a road or a bridge on payment of toll charges. Services of toll collection on behalf of an agency authorized to levy toll are in the nature of services used for providing the negative list services. As per the principle laid down in sub section (1) of section 66F of the Act the reference to a service by nature or description in the Act will not include reference to a service used for providing such service.

4.9 Betting, gambling or lottery

"Betting or gambling'has been defined in section 65B of the Act as 'putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring'.

4.9.1. Are auxiliary services that are used for organizing or promoting betting or gambling events also covered in this entry?

No. These services are in the nature of services used for providing the negative list services of betting or gambling. As per the principle laid down in sub section (1) of section 66F of the Act the reference to a service by nature or description in the Act will not include reference to a service used for providing such service.

4.10 Entry to Entertainment Events and Access to Amusement Facilities.

'Entertainment events'has been defined in section 65B of the Act 'as an event or a performance which is intended to provide recreation, pastime, fun or enjoyment, such as exhibition of cinematographic films, circus, concerts, sporting events, fairs, pageants, award functions, dance performances, musical performances, theatrical performances including cultural programs, drama, ballets or any such event or programme'.
'Amusement facility'has been defined in the Act as 'a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other place but does not include a place within such facility where other services are provided'.

4.10.1 If a cultural programme, drama or a ballet is held in an open garden and not in a theatre would it qualify as an entertainment event?

Yes. The words used in the definition are 'theatrical performances'and not 'performances in theatres'. A cultural programme, drama or a ballet preformed in the open does not cease to be a theatrical performance provided it is preformed in the manner it is preformed in a theatre, i.e. before an audience.

4.10.2 Would a standalone ride set up in a mall qualify as an amusement facility?

Yes. A standalone amusement ride in a mall is also a facility in which fun or recreation is provided by means of a ride. Access to such amusement ride on payment of charges would be covered in the negative list.

4.10.3 Would entry to video parlors exhibiting movies played on a DVD player and displayed through a TV screen be covered in the entry?

Yes. Such exhibition is an exhibition of cinematographic film.

4.10.4 Would membership of a club qualify as access to an amusement facility?

No. A club does not fall in the definition of an amusement facility.

4.10.5 Would auxiliary services provided by a person, like an event manager, for organizing an entertainment event or by an entertainer for providing the entertainment to an entertainment event organizer be covered in this entry?

No. Such services are in the nature of services used for providing the service specified in this negative list entry and would not be covered in the ambit of such specified service by operation of the rule of interpretation contained in clause (1) of section 66F of the Act. For guidance on the rules of interpretation please refer to Guidance Note 7.

4.11 Transmission or distribution of electricity

4.11.1 What is the meaning of electricity transmission or distribution utility?

An 'electricity transmission or distribution utility'has also been defined in section 65B of the act. It includes the following –

• the Central Electricity Authority
• a State Electricity Board
• the Central Transmission Utility (CTU)
• a State Transmission Utility (STU) notified under the Electricity Act, 2003 (36 of 2003)
• a distribution or transmission licensee licensed under the said Act
• any other entity entrusted with such function by the Central or State Government

4.11.2 If charges are collected by a developer or a housing society for distribution of electricity within a residential complex then are such services covered under this entry?

No. The developer or the housing society would be covered under this entry only if it is entrusted with such function by the Central or a State government or if it is, for such distribution, a distribution licensee licensed under the Electricity Act, 2003.

4.11.3 If the services provided by way installation of gensets or similar equipment by private contractors for distribution of electricity covered by this entry?

No. the entry does not cover services provided by private contractors. Moreover the services provided are not by way of transmission or distribution of electricity.

4.12 Specified services relating to education

The following services relating to education are specified in the negative list –

• pre-school education and education up to higher secondary school or equivalent
• education as a part of a prescribed curriculum for obtaining a qualification recognized by law for the time being in force;
• education as a part of an approved vocational education course

4.12.1 Are services provided by international schools giving international certifications like IB also covered in this entry?

Yes. Services by way of education up to higher secondary school or equivalent are covered in this entry.

4.12.2 Are services provided by boarding schools covered in this entry?

Boarding schools provide service of education coupled with other services like providing dwelling units for residence and food. This may be a case of bundled services if the charges for education and lodging and boarding are inseparable. Their taxability will be determined in terms of the principles laid down in section 66F of the Act. Such services in the case of boarding schools are bundled in the ordinary course of business. Therefore the bundle of services will be treated as consisting entirely of such service which determines the dominant nature of such a bundle. In this case since dominant nature is determined by the service of education other dominant service of providing residential dwelling is also covered in a separate entry of the negative list, the entire bundle would be treated as a negative list service.

4.12.3 Are services provided to educational institutions also covered in this entry?

No. Such services are not covered under the negative list entry. However certain services provided to educational institutions are separately exempted by a notification:

• Services to an educational institution by way of catering under the centrally assisted mid – day meals scheme sponsored by government.
• Transport to and fro such exempt institutes.
• Services to or by an institution in relation to educational services, where the educational services are exempt from the levy of service tax, by way of services in relation to admission to such education.

4.12.4 Are private tuitions covered in the entry relating to education?

No. However, private tutors can avail the benefit of threshold exemption.

4.12.5 Are services provided by way of education as a part of a prescribed curriculum for obtaining a qualification recognized by a law of a foreign country covered in the negative list entry?

No. To be covered in the negative list a course should be recognized by an Indian law.

4.12.6 If a course in a college leads to dual qualification only one of which is recognized by law would the service provided by the college by way of such education be covered in this entry?

Provision of dual qualifications is in the nature of two separate services as the curriculum and fees for each of such qualifications are prescribed separately. Service in respect of each qualification would, therefore, be assessed separately. If an artificial bundle of service is created by clubbing two courses together, only one of which leads to a qualification recognized by law, then by application of the rule of determination of taxability of a service which is not bundled in the ordinary course of business contained in section 66F of the Act it is liable to be treated as a course which attracts the highest liability of service tax. However incidental auxiliary courses provided by way of hobby classes or extra-curricular activities in furtherance of overall well being will be an example of naturally bundled course. One relevant consideration in such cases will be the amount of extra billing being done for the unrecognized component viz-a-viz the recognized course. (For guidance on 'bundled services'please refer to Guidance Note 7).

4.12.7 Are placement services provided to educational institutions for securing job placements for the students covered in this negative list entry?

No. Such services do n0t fall in the category of exempt services provided to educational institutions (please refer to point no 4.12.3 above).

4.12.8 Are services of conducting admission tests for admission to colleges exempt?

Yes in case the educational institutions are providing qualification recognized by law for the time being in force (please refer to point no 4.12.3 above).

4.12.9 In addition to the services specified in the negative list, which educational services are exempt if provided by a charitable organization?

Please refer to point no 6.3

4.12.10 What are the courses which would qualify as an approved vocational education courses?

Approved vocational education courses have been specified in section 65B of the Act. These are –

• a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training, offering courses in designated trades as notified under the Apprentices Act, 1961(52 of 1961)
• a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Ministry of Labour and Employment, Government of India;
• a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India.

4.13 Services by way of renting of residential dwelling for use as residence

'Renting'has been defined in section 65B as ''allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property'.

4.13.1 What is a 'residential dwelling'?

The phrase 'residential dwelling'has not been defined in the Act. It has therefore to be interpreted in terms of the normal trade parlance as per which it is any residential accommodation, but does not include hotel, motel, inn, guest house, camp–site, lodge, house boat, or like places meant for temporary stay.

4.13.2 Would renting of a residential dwelling which is for use partly as a residence and partly for non residential purpose like an office of a lawyer or the clinic of a doctor be covered under this entry?

This would also be a case of bundled services as renting service is being provided both for residential use and for non residential use. Taxability of such bundled services has to be determined in terms of the principles laid down in section 66F of the Act. (Please refer to Guidance Note 7).

4.13.3 Would the nature of renting transactions explained in column 1 of the table below be covered in this negative list entry?

4.14 Financial sector

4.14.1 What are the "services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount"?

Illustrations of such services are -

• Fixed deposits or saving deposits or any other such deposits in a bank for which return is received by way of interest.
• Providing a loan or over draft facility for in consideration for payment of interest.
• Mortgages or loans with a collateral security to the extent that the consideration for advancing such loans or advances are represented by way of interest.
• Corporate deposits to the extent that the consideration for advancing such loans or advances are represented by way of interest or discount.

4.14.2 If any service charges or administrative charges or entry charges are recovered in addition to interest on a loan, advance or a deposit would such charges be also a part of this negative list entry?

No. The services of loans, advances or deposits are exempt in so far as the consideration is represented by way of interest or discount. Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration.

4.14.3 To what extent is invoice discounting covered in the negative list entry?

Invoice discounting is covered only to the extent consideration is represented by way of discount.

4.14.4 Would services provided by banks or authorized dealers of foreign exchange by way of sale of foreign exchange to general public be covered in this entry?

No. This entry only covers sale and purchase of foreign exchange between banks or authorized dealers of foreign exchange or between banks and such dealers

4.15 Service relating to transportation of passengers

The following services relating to transportation of passengers, with or without accompanied belongings, have been specified in the negative list.
Services by:

• a stage carriage;
• railways in a class other than (i) first class; or (ii) an AC coach;
• metro, monorail or tramway;
• inland waterways;
• public transport, other than predominantly for tourism purpose, in a vessel of less than fifteen tonne net; and
• metered cabs, radio taxis or auto rickshaws.

Following terms have been defined in section 65B of the Act –

• stage carriage
• inland waterways
• metered cab

4.15.1 Are services by way of giving on hire of motor vehicles to state transport undertakings covered in this negative list entry?

No. However such services provided by way of hire of motor vehicle meant to carry more than 12 passengers to a State transport undertaking is exempt (refer entry no. 22 of Exhibit A2).

4.15.2 In some cases contract carriages get permission or temporary permits to ply as stage carriages. Would such services be taxable?

Specific exemption is available to services of transport passengers by a contract carriage for transportation of passengers, excluding tourism, conducted tours, charter or hire. (Refer entry No. 23 of Exhibit A2).

4.15.3 Are national waterways covered in the definition of inland waterways?

Yes.

4.16 Service relating to transportation of goods

The following services provided in relation to transportation of goods are specified in the negative list. Services:-

• by road except the services of (i) a goods transportation agency; or (ii) a courier agency
• by aircraft or vessel from a place outside India to the first customs station of landing in India; or
• by inland waterways.

4.16.1 Are all services provided by goods transport agency excluded from the negative list?

Yes. However, there are separate exemptions available to the services provided by the goods transport agency. These are services by way of transportation of –

• fruits, vegetables, eggs, milk, food grains or pulses in a goods carriage;
• goods where gross amount charged on a consignment transported in a single goods carriage does not exceed one thousand five hundred rupees; or
• goods where gross amount charged for transportation of all such goods for a single consignee in the goods carriage does not exceed rupees seven hundred fifty.

4.16.2 Are goods transport agencies liable to pay tax in all cases or are provisions relating to reverse charge also applicable after introduction of negative list?

The provisions relating to reverse charge, i.e. service tax is liable to be paid by the consigner or consignee in specified cases, are applicable even after the introduction of negative list.

4.16.3 Are the following services of transportation of goods covered in the negative list entry?

4.16.4 Are services provided as agents for inland waterways covered by this entry?

No. these are in the nature of services used for providing the negative list entry service of transport of goods on inland waterways and would not be covered by application of the rule for interpretation where services are specified by way of description contained in clause (1) of section 66F of the Act.(for guidance on this rule please refer to Guidance Note 7)

4.16.5 If transportation of goods takes place from Delhi to Jammu by road then how would the taxability of such transportation be determined considering that Jammu is located in at a place outside taxable territory?

Please refer to Guidance Paper: GPB on Place of Provision of service.

4.17 Funeral, burial, crematorium or mortuary services including transportation of the deceased

This negative list entry is self-explanatory.

If the above activities are carried out by a person for another for consideration it would amount to provision of service. Most of these services are presently also being taxed except in so far as Sl. No.5 is concerned. It is clarified that they are amply covered by the definition of service but have been declared with a view to remove any ambiguity for the purpose of uniform application of law all over the country.

5.1 Renting of Immovable Property

Renting has been defined in section 65B as ''allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property’

5.1.1 Is renting of all kinds of immovable property taxable?

No. Renting of certain kinds of property is specified in the negative list. These are –

• renting of vacant land, with or without a structure incidental to its use, relating to agriculture. (sl no 4 of Appendix 1)
• renting of residential dwelling for use as residence (sl no 13 of appendix 1)
• renting out of any property by Reserve Bank of India
• renting out of any property by a Government or a local authority to all non-business entity.
• Renting of all other immovable properties would be taxable unless covered by an exemption (refer 5.1.2).

5.1.2 Are there any exemptions in respect of renting of immovable property?

Yes. These are:–

• Threshold level exemption up to Rs. 10 lakh.
• Renting of precincts of a religious place meant for general public is exempt.
• Renting of a hotel, inn, guest house, club, campsite or other commercial places meant for residential or lodging purposes, having declared tariff of a room below rupees one thousand per day or equivalent is exempt.

5.1.3 Would permitting usage of a property for a temporary purpose like conduct of a marriage or any other social function be taxable?

Yes. As per definition allowing or permitting usage of immovable property, without transferring possession of such property, is also renting of immoveable property.

5.1.4 Would activities referred to in column 1 of a table below be chargeable to service tax?

5.1.5 Would service tax be chargeable on renting of property located outside the taxable territory but where the property is owned by a person located in the taxable territory?

In respect of a service relating to immovable property the place of provision of service is the location of immovable property. If the immovable property is located outside taxable territory then it becomes a service provided outside the taxable territory even if the property owners is located in the taxable territory and would hence not be taxable.
For details please see the Guidance Paper: GPB on the Place of Provision of Service Rules, 2012.

5.2 Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of certificate of completion by a competent authority.

This service is already taxable as part of construction of residential complex service under clause (zzzh) of sub-section 105 of section 65 of the Act and as part of service in relation to commercial or industrial construction under clause (zzq) of sub-section 105 of section 65 of the Act. This entry covers the services provided by builders or developers where building complexes, civil structure or part thereof are offered for sale but the payment for such building or complex or part thereof is received before the issuance of completion certificate by a competent authority.

5.2.1 There are various types of arrangements under which builders or developers sell buildings, flats, office space etc. to buyers where entire consideration is received before completion certificate is issued including tripartite model, redevelopment model, investment model, reconversion model, BOT projects and joint development agreement model. How will the taxability of such arrangements be determined?

A detailed circular has been issued by the Board dealing with such arrangements in the context of existing taxable service of same description vide Circular no 151/2/2012 ST dated 10/2/12 issued from F.No. 332/13/2011 TRU. The said circular may be referred to for guidance on this point

5.2.2 In certain States requirement of completion certificate are waived of for certain specified types of buildings. How would leviability of service tax be determined in such cases?

In terms of explanation in section 66E in such cases the completion certificate issued by a architect or a chartered engineer or a licensed surveyor of the respective local body or development or planning authority would be treated as completion certificate for the purposes of determining chargeability of service tax.

5.3 Temporary transfer or permitting the use or enjoyment of any intellectual property right

5.3.1 What is the scope of the term 'intellectual property right'?

'Intellectual property right'has not been defined in the Act. The phase has to be understood as it is understood in normal trade parlance as per which intellectual property right includes the following –

• Copyright
• Patents
• Trademarks
• Designs
• Any other similar right to an intangible property

5.3.2 Would the temporary transfer of a patent registered in a country outside India also be covered under this entry?

Since there is no condition regarding the law under which an intellectual right should be registered, temporary transfer of a patent registered outside India would be covered in this entry. However, it will become taxable only if the place of provision of service of temporary transfer of intellectual property right is in taxable territory. For details please see the Guidance Paper: B on the Place of Provision of Service.

5.4 Development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software

The term 'information technology software'has been defined in section 65B of the Act as 'any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment'.

5.4.1 Would sale of pre-packaged or canned software be included in this entry?

No. Sale of pre-packaged or canned software is in the nature of sale of goods and is not covered in this entry.

5.4.2 Is on site development of software covered under this entry?

Yes. On site development of software is covered under the category of development of information technology software.

5.4.3 Would providing advice, consultancy and assistance on matters relating to information technology software be chargeable to service tax?

These services may not be covered under the declared list entry relating to information technology software. However, such activities when carried out by person for another for consideration would fall within the definition of service and hence chargeable to service tax if other requirements of taxability are satisfied.

5.4.4 Would providing a license to use prepackaged software be a taxable service?

It is a settled position of law that prepackaged software or canned software or shrink wrapped software is goods. (Supreme Court judgment in case of Tata Consultancy Services vs State of Andhra Pradesh [2002(178) ELT 22(SC) refers]. To determine whether providing license to use a software is a service or sale of goods it would need to be seen whether the license to use packaged software tantamount to 'transfer of right to use goods'. 'Transfer of right to use goods'is deemed to be a sale under Article 366(29A) of the Constitution of India and transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods is a declared service.

5.5 Activities in relation to delivery of goods on hire purchase or any system of payment by instalments

5.5.1 Is the delivery of goods on hire purchase of any system of payment by installments taxable?

No. The delivery of goods on hire purchase or any system of payment on installment is not chargeable to service tax because as per Article 366(29A) of the Constitution of India such delivery of goods is deemed to be a sale of goods.(For guidance on this aspect please refer to point nos. 2.5.7 to 2.5.12 of this Guidance Paper) However activities or services provided in relation to such delivery of goods are covered in this declared list entry.

5.5.2 What is the scope of the phrase delivery of goods on hire purchase of any system of payment by installments?

Please refer to point no 2.5.9 of this Guidance Paper.

5.5.3 If delivery of goods on hire purchase or any system of payment on installment is deemed to be sale of goods what are the activities in relation to such delivery which are covered in the declared service?

It has been held by Supreme court in the case of Association Of Leasing & Financial Service Companies Vs Union Of India [2010 (20) S.T.R. 417 (S.C.)] that in equipment leasing/hire-purchase agreements there are two different and distinct transactions, viz., the financing transaction and the equipment leasing/hire-purchase transaction and that the financing transaction, consideration for which was represented by way of interest or other charges like lease management fee, processing fee, documentation charges and administrative fees, which is chargeable to service tax. Therefore, such financial services that accompany a hire-purchase agreement fall in the ambit of this entry of declared services.

5.5.4 Is service tax leviable on the entire quantum of interest and other charges eceived in relation to a hire purchase?

No. In terms of the exemption notification relating to such activities, service tax is leviable only on 10% of the amount representing interest. No exemption is available in respect of other charges.

5.6 Transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods

5.6.1 What is the meaning and scope of the phrase 'transfer of right to use such goods'
Transfer of right to use goods is a well recognized constitutional and legal concept. Every transfer of goods on lease, license or hiring basis does not result in transfer of right to use goods. 'Transfer of right of goods'involves transfer of possession and effective control over such goods in terms of the judgement of the Supreme Court in the case of State of Andhra Pradesh vs Rashtriya Ispat Nigam Ltd [Judgment dated 6/2/2002 in Civil Appeal no. 31 of 1991]. Transfer of custody along with permission to use or enjoy such goods, per se, does not lead to transfer of possession and effective control.

The test laid down by the Supreme Court in the case of Bharat Sanchar Nigam Limited vs Union of India [2006(2)STR161(SC)] to determine whether a transaction involves transfer of right to use goods, which has been followed by the Supreme Court and various High Courts, is as follows:

• There must be goods available for delivery;
• There must be a consensus ad idem as to the identity of the goods;
• The transferee should have legal right to use the goods – consequently all legal consequences of such use including any permissions or licenses required therefore should be available to the transferee;
• For the period during which the transferee has such legal right , it has to be the exclusion to the transferor – this is the necessary concomitant of the plain language of the statute, viz., a 'transfer of the right to use'and not merely a license to use the goods;
• Having transferred, the owner cannot again transfer the same right to others.

Whether a transaction amounts to transfer of right or not cannot be determined with reference to a particular word or clause in the agreement. The agreement has to be read as a whole, to determine the nature of the transaction.

5.6.2 Whether the transactions listed in column 1 of the table below involve transfer of right to use goods?

Note: The list in the table above is only illustrative to demonstrate how courts have interpreted terms and conditions of various types of contracts to see if a transaction involve transfer of right to use goods. The nature of each transaction has to be examined in totality keeping in view all the terms and condition of an agreement relating to such transaction.

5.7 Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act

In terms of this entry the following activities if carried out by a person for another for consideration would be treated as provision of service.

• Agreeing to the obligation to refrain from an act.
• Agreeing to the obligation to tolerate an act or a situation.
• Agreeing to the obligation to do an act.

5.7.1 Would non-compete agreements be considered a provision of service?

Yes. In case a company or any other person enters into a non-compete agreement with another person for a consideration then it would be a provision of service.

5.8 Service portion in execution of a works contract

Works contract has been defined in section 65B of the Act as a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, improvement, repair, renovation, alteration of any building or structure on land or for carrying out any other similar activity or a part thereof in relation to any building or structure on land. Typically every works contract involves an element of sale of goods and provision of service. In terms of Article 366 (29A) of the Constitution of India transfer of property in goods involved in execution of works contract is deemed to be a sale of such goods. It is a well settled position of law, declared by the Supreme Court in BSNL's case [2006(2) STR 161 (SC)], that a works contract can be segregated into a contract of sale of goods and contract of provision of service. This declared list entry has been incorporated to capture this position of law in simple terms.

Further, with a view to bring certainty and simplicity the manner of determining the value of service portion in works contracts will be given in the Valuation Rules.

5.8.1 Would labour contracts in relation to a building or structure treated as a works contract?

No. Labour Contracts do not fall in the definition of works contract. It is necessary that there should be transfer of property in goods involved in the execution of such contract which is leviable to tax as sale of goods. Pure labour contracts are therefore not works contracts and would be leviable to service tax like any other service and on full value.

5.8.2 Would contracts for tailoring of clothes or development of photographs also be treated as works contracts as these are also for carrying out a particular work?

No. The phrase used is 'works contract'and not work contract. 'Works'has a defined and accepted legal meaning. As per Black’s Law dictionary 'works'means 'buildings or structures on land'. Moreover works contract has been defined in the Act as contract for carrying our specified activity, like construction, erection, commissioning,

installation, completion, fitting out, improvement, repair, renovation, alteration etc., or a part thereof in relation to any building or structure on land. Therefore contracts which do not pertain to building or structures on land would be out of the ambit of works contracts.

5.8.3 Would contracts for construction of a pipe line or conduit be covered under works contract?

Yes. As pipeline or conduits are structures on land contracts for construction of such structure would be covered under works contract.

5.8.4 Would contracts for erection commissioning or installation of plant, machinery, equipment or structures, whether prefabricated or otherwise be treated as a works contract?

Such contracts would be treated as works contracts if –

• Transfer of property in goods is involved in such a contract; and
• The machinery equipment structures are attached or embedded to earth after erection commissioning or installation.

5.8.5 What is the scope of 'building or structure on land'?

Buildings and structures on land means not only buildings or structures attached to earth but also things permanently fastened to a building or structure attached to earth.

5.8.6. Would contracts for painting of a building, repair of a building, renovation of a building, wall tiling, flooring be covered under 'works contract'?

Yes, if such contracts involve provision of materials as well.

5.8.7 What is the way to segregate service portion in execution of a works contract from the total contract?

A simplified manner for determining the value of service portion of a works contract from the total works contract is given in Rule 2A of the Service Tax (Determination of Value) Rules, 2006 ( which will be amended partially for the negative list). In brief the value of the service portion is the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract.

5.8.8 Is there any simplified scheme for determining the value of service portion in a works contract?

Yes. The scheme will be contained in the revised Rule 2A of the Service Tax (Determination of Value) Rules, 2006.

As per this scheme the value of the service portion, where value has not been determined in the manner as explained at 5.8.7 above, shall be determined in the manner explained in the table below -

Important - 'total amount'referred to in the second column of the table above would be the sum total of gross amount and the value of all goods and services supplied free of cost for use in or in relation to the execution of works contract, under the same contract or any other contract and, in case of (ii) in the table above, including the value of land charged as a part of the total consideration.

5.8.9 How is the value of goods or services supplied free of cost be determined to arrive at the total amount charged for a works contract?

If the value of goods and services supplied free of cost for use in or in relation to execution of a works contract is not ascertainable, the same shall be determined on the basis of the fair market value of the goods or services that have close resemblance to goods made available.

5.8.10 What are '’original works'?

Original works'means :

• all new constructions;
• all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;

5.8.11 Is duty paid on any goods, property in which is transferred (whether as goods or in some other form) in the execution of works contract, available as Cenvat credit?

No. Such Cenvat credit is not available, irrespective of the fact that the value of service portion in execution of the works contract is determined in the manner explained at Point no. 5.8.7 or 5.8.8 above, since such goods are not inputs for the service provided. However, the goods not forming part of such transfer will be eligible for input tax credit subject to the provisions of the Cenvat Credit Rules, 2004 including the provisions relating to reversal of credits contained in rule 6 of the said rules.

5.9 Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as part of the activity

5.9.1 What are the activities covered in this declared list entry?

The following activities are illustration of activities covered in this entry-

• Supply of food or drinks in a restaurant;
• Supply of foods and drinks by an outdoor caterer.

5.9.2 Are services provided by any kind of restaurant, big or small, covered in this entry?

Yes. Although services provided by any kind of restaurant are covered in this entry, the emphasis is to levy tax on services provided by only such restaurants where the service portion in the total supply is substantial and discernible. Thus the following category of restaurants are exempted –

• Services provided in relation to serving of food or beverages by a restaurant, eating joint or a mess, other than those having the facility of air-conditioning or central air-heating in any part of the establishment, at any time during the year, and which has a license to serve alcoholic beverage.
• Below the threshold exemption

5.9.3. How is the value of service portion to be determined?

The manner of determination of service portion in such an activity is very simple and is proposed to be given in Rule 2C of the the Service Tax (Determination of Value) Rules, 2006 (as amended for the negative list). In terms of the said rule value of the service portion shall be determined in the following manner-

Important - 'Total amount'referred to in the second column of the table above would be the sum total of gross amount and the value of all goods supplied free of cost for use in or in relation to the supply of food or any other article of human consumption or any drink, under the same contract or any other contract.

5.9.4 What are the restrictions, if any, on availment of Cenvat credit by such service providers?

In terms of the Explanation2 to the proposed Valuation rules any goods meant for human consumption classifiable under chapters 1 – 22 of Central Excise Tariff are not 'inputs'for provision of such service. Cenvat Credit is, therefore, not available on these items. Availability of Cenvat credit on other inputs, input services and capital goods would be subject to the provisions of the Cenvat Credit Rules, 2004 including the provisions relating to reversal of credits contained in rule 6 of the said rules.

Under the present system there are 88 exemption notifications. The need for exemptions is not obliterated with the introduction of negative list. While some existing exemptions have been built into the negative list, others, wherever necessary, have been retained as exemptions. In addition new exemptions are proposed to be introduced in the context of the negative list. For ease of reference and simplicity most of the exemptions are part of one single mega exemption notification (list of such proposed exemptions is placed as Exhibit A2). In addition there are 9 more exemption notifications (list of such proposed exemptions is placed as Exhibit A3). The total number of exemption notifications, therefore, proposed to be issued in the new system would be only 10.

6.1 Are services provided to all international organizations exempt?

NO. Services to only specified organizations are exempt which are as follows:

1. International Civil Aviation Organisation
2. World Health Organisation
3. International Labor Organisation
4. Food and Agriculture Organisation of the United Nations
5. UN Educational, Scientific and Cultural Organisation (UNESCO)
6. International Monetary Fund (IMF)
7. International Bank for Reconstruction and Development
8. Universal Postal Union
9. International Telecommunication Union
10. World Meteorological Organisation
11. Permanent Central Opium Board
12. International Hydrographic Bureau
13. Commissioner for Indus Waters, Government of Pakistan and his advisers and assistants
14. Asian African Legal Consultative Committee
15. Commonwealth Asia Pacific Youth Development Centre, Chandigarh
16. Delegation of Commission of European Community
17. Customs Co-operation Council
18. Asia Pacific Telecommunity
19. International Centre of Public Enterprises in Developing Countries, Ljubljana (Yugoslavia)
20. International Centre for Genetic Engineering and Biotechnology
21. Asian Development Bank
22. South Asian Association for Regional Co-operation
23. International Jute Organisation, Dhaka, Bangladesh

6.2 Health Care Services (Details at Sr. No 2 of Exhibit A2)

6.2.1 Are all health care services exempt?

No. only services in recognized systems of medicines are exempt. In terms of the Clause (h) of section 2 of the Clinical Establishments Act, 2010, the following systems of medicine are recognized systems of medicine:

• Allopathy
• Yoga
• Naturopathy
• Ayurveda
• Homeopathy
• Siddha
• Unani
• Any other system of medicine that may be recognized by central government

6.2.2 Who all are covered as paramedic?

Paramedics are trained health care professionals, for example nursing staff, physiotherapists, technicians, lab assistants etc. They are accountable for their services when provided independently. Services by them in a clinical establishment would be in the capacity of employee and not provided in independent capacity and will thus be considered as services by such clinical establishment. Similarly services
of assisting an authorized medical professional would be considered as services by such authorized medical professional only.

6.3 Charities (Details at Sr. No. 4 of Exhibit A2)

6.3.1 I am a registered charity. How do I know that activities provided by me are charitable activities?

You are doing charitable activities if you are registered with income tax authorities for this purpose under section 12AA the Income Tax Act, 1961 and carry out one or more of the specified charitable activities. Following are the specified charitable activities:-

(a) public health by way of -

(I) care or counseling of (i) terminally ill persons or persons with severe physical or mental disability, (ii) persons afflicted with HIV or AIDS, or (iii) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or
(II) public awareness of preventive health, family planning or prevention of HIV infection;

(b) advancement of religion;
(c) advancement of educational programmes or skill development relating to,-

(I) abandoned, orphaned or homeless children;
(II) physically or mentally abused and traumatized persons;
(III) prisoners; or
(IV) persons over the age of 65 years residing in a rural area;

(d) preservation of environment including watershed, forests and wildlife; or
(e) advancement of any other object of general public utility up to a value of twenty five lakh rupees in a financial year subject to the condition that total value of such activities had not exceeded twenty five lakh rupees during the preceding financial year.

6.3.2 What is the tax liability of a registered charity on their activities?

If a registered charity is doing any activity falling in negative list of services or otherwise exempt, he is not required to pay service tax on that activity. In case, where his activity is covered explicitly in any of the specified charitable activities at 'a 'to 'd'of the answer to 6.3.1 he is exempt from service tax without any value limit. For charitable activities mentioned at 'e'of the answer to 6.3.1 he is exempt up to a value of twenty five lakh rupees in a financial year if the total value of such services had not exceeded twenty five lakh rupees during the preceding financial year. However, if his activity is not for general public as defined in the notification, he is not eligible for exemption and required to pay service tax on such activities. General public is defined in the notification as 'body of people at large sufficiently defined by some common quality of public or impersonal nature'.

6.4 What is the tax liability of an individual advocate or arbitral tribunal on services provided by them?

They are not required to pay service tax on services provided by them. However, when such services are provided to a business entity, the business entity is required to pay service tax under reverse charge. Business entity is defined in section 65B of the Finance Act, 1994 as 'any person ordinarily carrying out any activity relating to industry, commerce or any other business'. The business entity can take input tax credit of such tax paid in terms of Cenvat Credit Rules, 2004.

6.5 What is the scope of exemption to coaching or training in recreational activities?

There is exemption from service tax to training or coaching in recreational activities relating to arts, culture or sports. The benefit is available to coaching or training relating to all forms of dance, music, painting, sculpture making, theatre and sports etc.

6.6 Sports (Details at Sr. No 10 of Exhibit A2)

6.6.1 What is the tax liability on services provided to a recognized sports body?

Services provided to a recognized sports body by an individual as a player, referee, umpire, coach or manager for participation in a tournament or championship organized by a recognized sports body are exempt from service tax. Similarly services by a recognized sports body to another are exempt. Services by individuals such as selectors, commentators, curators, technical experts etc are taxable. Recognized sports body has been defined in the notification.

6.7 Construction (Details at Sr No 12 to 14 of Exhibit A2)

6.7.1 I am a contractor in number of projects for constructing roads. What is my tax liability on construction of roads under different types of projects?

Construction of roads for use by general public is exempt from service tax. Construction of roads which are not for general public use e.g. construction of roads in a factory, residential complex etc would be taxable.

6.7.2 I am in to construction of hospitals and educational institutes. Am I required to pay service tax?

If you are constructing such structures for the government or local authority, you are not required to pay service tax. If you are constructing for others, you are required to pay tax.

6.7.3 I am setting up a wheat flour mill. The supplier of machines is demanding service tax on erection and installation of machineries and equipments in the flour mill. Is he is right in demanding service tax?

There is no service tax liability on erection or installation of machineries or equipments for units processing agricultural produce as food stuff excluding alcoholic beverages. You are processing wheat which is made from processing an agricultural produce. Similarly erection or installation of machineries or equipments for dal mills, rice mills, milk dairies or cotton ginning mills would be exempt.

6.8 Copyright (Details at Sr No 15 of Exhibit A2)

6.8.1 Will a music company having the copyright for any sound recording be taxable for his activity of distributing music?

Temporary transfer of a copyright relating to original literary, dramatic, musical, artistic work or cinematographic film falling under clause (a) and (b) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 is exempt. A music company would be required to pay service tax as the copyright relating to sound recording falls under clause (c) of sub-section (1) of section 13 of the Indian Copyright Act, 1957.

6.8.2 I am a composer of a song having the copyright for my song. When I allow the recording of the song on payment of some royalty by a music company for further distribution, am I required to pay service tax on the royalty amount received from a music company?

No, as the copyright relating to original work of composing song falls under clause (a) of sub-section (1) of section 13 of the Indian Copyright Act, 1957 which is exempt from service tax. Similarly an author having copy right of a book written by him would not be required to pay service tax on royalty amount received from the publisher for publishing the book. A person having the copyright of a cinematographic film would also not be required to pay service tax on the amount received from the film exhibitors for exhibiting the cinematographic film in cinema theatres.

6.9 Miscellaneous

6.9.1 I am an artist. How do I know that my activity is subjected to service tax?

The activities by a performing artist in folk or classical art forms of music, dance, or theatre are not subjected to service tax. All other activities by an artist in other art forms e.g. magic shows, mimicry, western music or dance, modern theatres, performance of actors in films or television serials would be taxable. Services provided by such an artist as brand ambassador is also taxable.

6.9.2 I have a bus with a contract permit and operating the bus on a route. The passengers embark or disembark from the bus at any place falling on the route and pay separate fares either for the whole or for the stages of journey. Am I required to pay tax?

No. However, transport of passengers in a contract carriage for the transportation of passengers, for tourism, conducted tour, charter or hire is taxable.

6.9.3 I have taken on rent a piece of vacant land from its owner. The land will be used for providing the facility of motor vehicles parking on payment. What is my service tax liability?

You are not required to pay tax on providing the facility of motor vehicle parking to general public. However, if you are providing the facility of parking of vehicles to a car dealer, you are be required to pay tax as parking facility is not for general public. Moreover, land owner is liable to pay service tax on renting of his land to you.

6.9.4 I am a Resident welfare Association (RWA). The members contribute an amount to RWA for holding camps to provide health care services to poor men and women. Am I required to pay tax on contribution received from members?

No. You are not required to pay service tax on the contribution received as you are providing exempt health care services to third persons. If contribution is for the taxable services to be provided to third persons, you are required to pay service tax.

6.9.5 What is the tax liability on services by the intermediaries to entities those are liable to pay tax on their final output services? (Details at Sr No 29 of Exhibit A2)

Services by following intermediaries are exempt from service tax:

• a sub-broker or an authorized person to a stock broker
• an authorized person to a member of a commodity Exchange
• a mutual fund agent or distributor to mutual fund or asset management company for distribution or marketing of mutual fund
• a selling or marketing agent of lottery tickets to a distributer or a selling agent
• a selling agent or a distributer of SIM cards or recharge coupon vouchers
• a business facilitator or a business correspondent to a banking company or an insurance company in a rural area

6.9.6 Footwear Association of India is organizing a business exhibition in Germany for footwear manufacturers of India. Is Footwear association of India required to pay service tax on services to footwear manufacturers?

No, the activity is exempt from service tax.

6.9.7 I am an individual receiving services from a service provider located in non- taxable territory, am I required to pay service tax?

If you are using these services for industry, business or commercial purposes, you are required to pay tax under reverse charge, unless otherwise exempt or in negative list. If use is for other purposes, you are exempt from service tax.

Despite doing away with the service-specific descriptions, there will be some descriptions where some differential treatment will be available to a service or a class of services. Section 66F lays down the principles of interpretation of specified descriptions of services and bundled services. These are explained in paras below –

7.1 Principles for interpretation of specified descriptions of services

Although the negative list approach largely obviates the need for descriptions of services, such descriptions continue to exist in the following areas –

There are two principles laid down which are contained in clauses (1) and (2) of section 66F of the Act.

7.1.1 What is the scope of the clause (1) of section 66F: 'Unless otherwise specified, reference to a service (hereinafter referred to as the "main service") shall not include reference to a service which is used for providing the main service'This rule can be best understood with few illustrations which are given below –

• 'Provision of access to any road or bridge on payment of toll'is a specified entry in the negative list in section 66D of the Act. Any service provided in relation to collection of tolls or for security of a toll road would be in the nature of service used for providing such specified service and will not be entitled to the benefit of the negative list entry.
• Transportation of goods on an inland waterway is a specified entry in the negative list in section 66D of the Act. Services provided by an agent to book such transportation of goods on inland waterways or to facilitate such transportation would not be entitled to the negative list entry.

7.1.2 What is the scope of clause (1) of section 66F: 'where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description'.

This rule can also be best understood with few illustrations which are given below –

• The services provided by a real estate agent are in the nature of intermediary services relating to immovable property. As per the proposed Place of Provision of Service Rule, 2012, the place of provision of services provided in relation to immovable property is the location of the immovable property. However in terms of the rule 5 pertaining to services provided by an intermediary the place of provision of service is where the intermediary is located. Since Rule 5 of the draft 'Place of Provision of Services Rules, 2012'provides a specific description of 'estate agent', the same shall prevail.
• Pandal and Shamiana is an existing service and will remain a subject of taxation. Likewise service provided by way of catering is a taxable service and entitled to abatement. There is abatement when the two are provided in combination. Since the combination is more a specific entry than the two provided individually, there is no need to apply the later rule of bundled services, where the character could be judged by the service which provides it the essential character.