Service Tax India

New Service Tax Law Effective from 01,July 2012.

Definition of service includes a declared service. The phrase declared service is also defined as an activity carried out by a person for another for consideration and specified in section 66E of the Act.

The following nine activities have been specified in section 66E as declared service.

  1. Renting of immovable property;

  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;

  3. Temporary transfer or permitting the use or enjoyment of any intellectual property right;

  4. Development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software;

  5. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;

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

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

  8. Service portion in execution of a works contract;

  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.

The above activities when carried out by a person for another for consideration would amount to provision of service. Most of these services are presently also being taxed except in so far as 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.

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.

Renting of certain kinds of immovable properties is specified in the negative list. These are:

  • Renting of vacant land, with or without a structure incidental to its use, relating to agriculture,

  • Renting of residential dwelling for use as residence,

  • Renting out of any property by the Reserve Bank of India,

  • Renting out of any property by a Government or a local authority to a non-business entity.

Renting of all other immovable properties would be taxable unless covered by an exemption.

Exemptions in respect of renting of immovable property:

  1. Threshold level exemption up to Rs. 10 lakh.

  2. Renting of precincts of a religious place meant for general public.

  3. 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.

  4. Renting to an exempt educational institution.

Notes

1. Renting of property to an educational body is exempted if provided to an educational institution for the purpose of education which is exempt from the levy of service tax; to others will be taxable.

2. Renting of vacant land for animal husbandry or floriculture is not chargeable to service tax as it is covered in the negative list entry relating to agriculture.

3. Permitting use of immoveable property for placing vending/dispensing machines is chargeable to service tax as permitting usage of space is covered in the definition of renting.

4. Allowing erection of a communication tower on a building for consideration is chargeable to service tax as permitting usage of space is covered in the definition of renting.

5. Renting of land or building for entertainment or sports is chargeable to service tax as there is no specific exemption.

6. Renting of theatres by owners to film distributors (including under a profit-sharing arrangement) Chargeable to service tax as the arrangement amounts to renting of immovable property.

7. Halls, rooms etc. let out by hotels/restaurants for a consideration for organizing social, official or business or cultural functions are covered within the scope of renting of immovable property and would be taxable if other elements of taxability are present.