Wednesday, January 16, 2008

‘List A’ shall include the present members of the company

‘List A’ shall include the present members of the company, i.e., m.embers whose

names appear in the company’s register of members at the time of the winding-up of the company.

‘List B’ shall include the past members of the company. i.e., members who ceased to be members within one year preceding the commencement of the winding-up of the company.

If the assets of a company in liquidation are insufficient to meet the debts and liabilities of the company and the expenses of the winding-up and to repay the nominal value of the company’s shares, the contributories may be called upon to make good the difference. The contributories who are primarily liable to satisfy the deficiency of the company’s assets are those who are members of it at the commencement of the winding-up, and they are known as the ‘A List’ contributories. But if the Court, or the liquidator in a voluntary winding-up, approves a transfer of shares after the commencement of the winding-up, the transferee, or if there are successive transfers, the latest transferee, will be a’ A List’ contributory in respect of the shares. In a company limited by shares, the only limit on an’ A List’ contributory’s liability is the amount unpaid on his shares, and in a company limited by guarantee, the only limit is the maximum amount guaranteed, plus the amount unpaid on his shares if the company has a share capital [Pennington’s Company Law, Fifth edition, page 928].

Any person who was a member of the company within a year before the commencement of the winding-up may also be called upon to contribute, and such contributories are known as ‘B List’ contributories.

In the event of a company being wound-up every present and past member shall

be liable to contribute to the assets of the company to an amount sufficient

(a) for payment of (i) its debts and Habilities, and (ii) costs, charges and expenses

of the winding-up, and

(b) for the adjustment of the rights of the contributories among themselves.

Liability of Present Members

The liability of a present member (i.e., ‘List A’ contributory) shall be limited

1. In the case of a company limited by shares, to the amount remaining unpaid

on the shares; and

2. In the case of a company limited by guarantee, to the amount undertaken to be

contributed by him to the assets of the company in the event of its being wound-up.

. Explain the nature and extent of the liability of a contributory

Nature of Liability of Contributory (Section 429)

Sub-section(l) of Section 429 provides that the liability of a contributory shall create a debt accruing due from him at the time when his liability commenced, but payable at the times specified in calls made on him.for enforcing the liability.

The object of sub-section (1) of Section 429 is to make clear the time when the cause of action against a contributory on his failure to satisfy the calls made on him by the liquidator would arise. However, once a call has been made, the liability of the contributory to pay it becomes a statutory debt. A new liability to pay the unpaid balance commences. “It is settled in a long course of decisions that the members of a company in liquidation are liable in respect of unpaid calls even though the calls were made by the company before it went into liquidation and the suit of the company for its realisation had become barred by time. The principle of these decisions is that Section 429 creates a new liability on the shareholders in respect of such calls, which is distinct from and independent of the rights which the company had against them before the winding-up” [Pokhar Mal Vs. Flour and Oil Mills Co. Ltd. AIR [1934] Lah. 1015]. As the debt under the statute is a new creation, quite distinct and apart from any creditor’s claim to recover from the shareholder, as a contributory in the windingup, the unpaid share money will not be affected by the fact that prior to the winding up, the company had issued calls for the amount and allowed the recovery under these calls to become time barred [East Bengal Sugar Mills Ltd., In re (1914) 11 Compo Cas. 169 (Cal.)]. Since the power to make calls in a compulsory winding up is vested in the court under Section 470, the statutory liability of a contributory to pay can arise only under a call validly made, that is, a call made by the court and not by the liquidator himself [Associated Banking Corporation of India Ltd. V s. Mahomed Akbar AIR 1950 Born. 386]. The proper procedure seems to be that the Court shall first make an order for calls to be made, and liquidator in pursuance of the order shall make the calls.

Ex-contractu and Ex-lege Liability. Under Section 429, the liability of a member to be included in the list of contributories is not ex contractu, i.e., it does not arise as a result of the contract of membership; his liability is ex lege which means that it arises by reason of the fact that his name appears in the Register of members. Thus, a member shall be liable even where the allotment was void. Again, he cannot escape liability as a contributory where he had sold his shares to a purchaser who has not got the shares registered in his name.

Before a company goes into liquidation, the liability of a member to contribute is measured by the contractual obligation arising from membership. But after liquidation, Section 429 imposes a new liability on the shareholders in respect of unpaid calls made before or after the winding-up. Such calls can be recovered even if they are barred by limitation before the order of winding-up was made.

Extent of Liability of Contributories (Section 426). For determining liability of contributories, the list of contributories shall be prepared in two parts, viz., Ust A and Ust B.

Contributory’s Petition [Section 439(1)©]

A ‘contributory’ means any person liable to contribute to the assets of a company in the event of its being wound up. Except for this purpose, the term ‘contributory’

includes a holder of fully paid shares. .

A ‘contributory’, however, may petition:

(i) On the ground that the number of members is reduced below the statutory

minimum of seven members in case of public company and two in case of private company.

(ii) on any other ground, if the shares in respect of which he is a contributory or some of them were originally allotted to him or have been held by him and registered in his name for at least six out of the eighteen months preceding the commencement of the winding-up, or have devolved upon him through the death of the former holder.

Thus, in Re Gattapardo Ltd. [1969] 2 All ER 344, a transfer though executed and stamped in June 1967, was registered in October 1968, the shareholder presented a winding up petition in December, 1968. Held, the petition was not valid since she had not held shares for six months as required by the Act.

A holder of fully paid shares is a contributory for the purpose of a petition not because he is liable to contribute (which he is not) but because he may have an interest in the assets in a winding up. In Re.othery Construction Co. [1966] 1 All ER 145. Buckley, f. observed, “In my judgement it remains a rule of this Court that where a fully paid shareholder petitions for compulsory winding up, he must show, on the face of his petition, a prima facie probability that there will be assets available for distribution amongst the shareholders. But in India this judgement is not applicable in view of

Corporate Laws &: Secretarial Practice

Section 439(3). “A contributory shall be entitled to present a petition for winding-up a company notwithstanding that he may be the holder of fully paid-up shares, or that the company may have no assets at all or may have no surplus assets left for distribution among the shareholders after the satisfaction of the liabilities.” This position presumably stems from the proposition that a shareholder as such has a stake in the affairs of the company irrespective of whether he is holder of fully paid shares. However, the Court has complete discretion whether to order winding up on taking totality of circumstances into account.

Saturday, January 12, 2008

technical inspection and certification"means inspection or examination of goods or process or material o

Indian Service Tax

Technical Inspection and Certification Service

Effective Date

1/7/2003.

Authority

Notification No. 7/2003-ST, dt. 20/6/2003 (For full text see under "Business Auxiliary Service").

Rate of Service Tax

8% upto 9/9/2004. 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions

"technical inspection and certification"means inspection or examination of goods or process or material or any immovable property to certify that such goods or process or material or immovable property qualifies or maintains the specified standards, including functionality or utility or quality or safety or any other characteristic or parameters, but does not include any service in relation to inspection and certification of pollution levels; [Section 65(108)]

"technical inspection and certification agency" means any agency or person engaged in providing service in relation to technical inspection and certification; [Section 65 (109)]

Taxable Service

Services provided in relation to technical inspection or certification.

Value of Taxable Service

Gross amount charged for rendering such services Exemption: Inspection and certification of pollution levels.

Person liable to Pay

Any person or agency providing such services.

Head of Account

Tax Collection - 00440249, Other Receipts - 00440250, Deduct Refunds - 00440251.

Main text of Department Circular/Trade Notice

[Para 2.5 of Cir.No. 59/8/2003, dated 20/6/2003]

2.5 Technical Inspection and Certification Services:

A doubt has been raised whether certification given in respect of immovable property should fall under the purview of 'technical inspection and certification services'. In this regard it may be recalled that earlier, CBEC vide its order No. 1/1/2002, dated 26/02/2003, issued under Section 37B (of the Central Excise Act as made applicable to service tax) had clarified that certification given under authority of any code or statute can not be considered as a consulting engineer service. However, the new service included in 2003 budget, namely 'technical inspection and certification services' would cover certification of all types including that of immovable property. Therefore, it is clarified that such services become taxable from the notified date.

"survey and exploration of minerl'means geological, geophysical or other prospecting, surface or sub-surface surveying

Indian Service Tax

Survey and Exploration of Mineral Services

Effective

Date: 10/09/2004.

Authority: Finance (No.2) Act, 2004

Rate of Service Tax: 10% - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition

"survey and exploration of minerl'means geological, geophysical or other prospecting, surface or sub-surface surveying or map making service, in relation to location or exploration of deposits of mineral, oil or gas; [Section 65 (104a)]

Taxable service: Taxable service means any service provided to a customer, by any person, in relation to survey and exploration of mineral; [Section 65 (105) (zzv)]

Value of taxable service: Gross amount Exemptions: See Notification No. 18/2004-ST, dt. 10/9/2004 at the end of the Chapter of' "Airport Services". Soil testing, non-mineral objects

Person liable to pay

Survey and Exploration of Mineral Service provider

Head of Account

To be issued.

Main text of Department Circular/Trade Notice

F.No. B2/8/2004-TRU Date: 10/9/2004

07 . Survey and exploration of minerals

The service tax would be leviable when the service of survey and exploration of minerals is provided by any person to a customer. The survey and exploration may result in locating ores, crude etc. Subsequent to survey and exploration, the mineral is extracted and transported for refining, processing and production. The service tax under this category would be limited to the services rendered in relation to survey and exploration only and not on the activity of actual extraction after the survey and exploration is complete. The transport, refining, processing or production of the extracted products would also be out of the ambit of service tax. Activities such as seismic survey, collection/processing/interpretation of data and drilling or testing in relation to survey and exploration would, however, fall within the ambit of taxable service.

"storage and warehousing"includes storage and warehousing servicesforgoods including liquids and gases

Indian Service Tax

Storage And Warehousing Service

Effective Date: 16/08/2002.

Authority: Notification No. 8/2002-ST, dt. 1/8/2002 (for full text of Notification see under'Beauty Parlour').

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10%from10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition: "storage and warehousing"includes storage and warehousing servicesforgoods including liquids and gases but does not include any service providedforstorage of agricultural produce or any service provided by a cold storage; [Section 65(102)]

Taxable service: Storage and warehousing services provided by a storage or warehouse keeper in relation to storage of goods except agricultural produce or service provided by cold storage.

Value of taxable service: Gross amount charged by the storage or warehouse keeperfromthe customers.

Exemptions

Agricultural produce, cold storage
Cloak room services
FCI
Renting of premises
Port trust

Person liable to pay: StorageorWarehouse keeper.

Head of Account

			Sl. Code	SCCD
Minor-head	004400148	Storage and Warehouse Services	00440192
Sub-head	00440014801	Tax Collection	00440193	119
Sub-head	00440014802	Other Receipts	00440194	110
Sub-head	00440014803	Deduct Refunds	00440195	111

Main text of Departmental Circular/TN

F.No. B11/1/2002-TRU, Date: 1/8/2002

The section referred to hereinafter are the sectionsorclauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to subclauseorclause means clauseorsub-clause of Section 65 of the Finance Act, 1994 as amen led by the Finance Act, 2002.
As per clause (87), "storage and warehousing" includes storage and warehousing services for goods including liquids and gases but does not include any service provided for storage of agricultural produce or any service provided by a cold storage. As per sub-clause (zza) of clause (90), the taxable service is any service provided, to any person, by a storage or warehouse keeper in relation to storage and warehousing of goods.
Storage and warehousing service for all kinds of goods are provided by public warehouses, private warehouses, by agencies such as the Central Ware Housing Corporation, Air Port Authorities, Railways, Inland Container Depots, Container Freight Stations, storage godown and tankers operated by private individuals etc. The storage and warehousing service provider normally make ahrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. Service provided in ports has already been covered under the category of port service.
Service provided in relation to agriculture produce and service provided by cold storage is outside the ambit of the levy. Doubts have been raised about the scope of term “agricultural produce". In order to clarify the scope of this tem1 beyond doubts, an order has been issued under the power vested under Section 95 of the Finance Act (see Order No. 1/2002-ST, dated 1/8/2002). As clarified in the order, the term agricultural produce would cover all cereals, pulses, fruits, nuts and vegetables, spices, copra, sugar cane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, and similar products. However, manufactured products such as sugar, edible oils, processed food etc., will not come under the purview of the term 'agricultural produce'.
It has been stated that in some case a storage owner only rents the storage premises. He does not provide any service such as loading/unloading, stacking, security etc. A point has been raised as to whether service tax would be leviable in such cases. It is clarified that mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods. Essential test is whether the storage keeper provides for security of goods, stacking, loading/unloading of goods in the storage area.
A point has been raised by the Airport Authority of India (AAI) that they have established cold storage for perishable goods at cargo complexes at various places as part of cargo warehousing activities and whether the exemption provided in respect of cold storage would be applicable to these cold storages also. It is clarified that service provided by a cold storage has been specifically excluded fTom the tax net. Therefore the service of cold storage provided by AAI will also be exempt.
Another point raised is that AAI are collecting terminal charges which is only a facilitation charge for providing a terminal and as such does not involve any service. As per the Notification No. Cargo/ 13519/Pt. I , dated 4/6/1993 of the Intemational Airport Authority of India "terminal charges" means charges payable to or collected by the Authority or Cargo Handling Agency for use of facilities for processing of cargo. As per this notification "storage and processing charges" specifically include terminal charges also. Therefore service tax is leviable on such charges.
A doubt has been raised whether cloak room services for passenger's luggage in railway stations, bus stations etc., would come within the purview of storage and warehousing services. It is clarified that these are passenger terminal services incidental to rail transport qr road transport, they do not come within the purview of storage and warehousing services.
The Central Warehousing Corporation has stated that they have more than 450 warehouses which are controlled by 17 regional offices. The billing is done both at the warehouse level and at the Regional Office level. However accounting for the warehousing charges as well as the cargo handling services is done only at the Regional Office level. Therefore, they have requested that only their Regional Offices should be registered for service tax purposes. The Service Tax rules empower the Commissioner of Central Excise to register only those offices which have centralised accounting facility. The Commissioners may exercise this power in such cases and register only the regional offices of CWC.
Another point made by the CWC is that they engage handling and transport contractors (H&T contractors) to provide handling and transport services who would be charging them service tax for cargo handling services. CWC add supervision charges and raises the bill to the customers. For warehousing they raise a separate bill. The question is whether CWC is liable to pay service tax on cargo handling services and if so, whether they can take credit of the tax paid on cargo handling services by the H&T contractor. Similar situations may exist in respect of other storage and warehouse keepers. It is clarified that if the storage and warehouse keeper undertakes cargo handling services also and raises its own bill to the customer for such service, then he would be liable to pay service tax under the category of cargo handling services also. However, he would be eligible to take credit of service tax paid on cargo handling services rendered by the H&T contractors and adjust the same against his service tax liability on cargo handling services provided he raises a separate bill for the same to his client. In other words, he cannot adjust the credit against storage and warehousing service charges.

Storage of empty containers

Cir. No. 60/9/2003-ST, Date: 10/7/2003

Sub:- Levy of service tax on storage of empty containers regarding.

I am directed to say that a doubt has been raised regarding levy of service tax on storage of empty containers. The matter has been examined. It is clarified that the handling/storage and warehousing of empty containers would be covered within the scope of storage and warehousing services, as it is covered under the heading goods under Section 65(87) of the Finance Act, 1994. The Service Tax would be leviable on it. Further, the clarification issued vide letter No. F.B.II/ I/2002/TRU, dated 1/8/2002 regarding empty containers not to be considered as Cargo for Cargo Handling Services, has no relevance in the instant case.

Storage of liquid cargo

Order No. 2/1/2002-ST, Date: 24/4/2002

N.B.: For full text see under "Clearing & Forwarding Agent".

It has been represented by Collector of Central Excise, Kanpur that a Stock Broker registered with Kanpur Stock Exc

Indian Service Tax

Clarifications

[TN No. 3/94-ST, dated 19/10/1994 of the Indore Collectorate]

Attention of the Trade is invited that certain doubts have been expressed by the trade and the field formations, requiring clarification from the Board. After considering the reports of the Collectorates, following clarifications are being issued:

It has been represented by Collector of Central Excise, Kanpur that a Stock Broker registered with Kanpur Stock Exchange and is having his office branch outside the jurisdiction of Collectorate of Central Excise, Kanpur. Whether the Stock Broker should apply for registration in Kanpur Collectorate for his office outside the jurisdiction of Collectorate of Central Excise, Kanpur or with the Collectorate where his branch office is located.
Decision: A Broker who is registered with Kanpur Stock Exchange has to apply for registration with Collectorate of Central Excise, Kanpur. All the offices of this broker irrespective of location will be registered with Collectorate of Centra] Excise, Kanpur.
Wheter sub-brokers are covered by Service Tax?
Decision: At present sub-brokers are not covered.
Collector of Central Excise, Bolpur has raised the point that Sikkim Stock Exchange has not yet been recognised and whether Service Tax can be collected for the transaction in Sikkim Stock Exchange.
Decision: Service Tax is required to be collected from Stock Brokers. Stock-Broker has been defined in the Act itself i.e. stock broker means a stock broker who has either made an application for registration or is registered as a stock-broker in accordance with the rules and regulation made under the Securities & Exchange Board of India Act, 1992. Hence, all stock-brokers in the jurisdiction of Collectorate of Central Excise, Bolpur will be governed by service tax scheme.
Whether the amount of Service Tax charged/collected is required to be shown separately in the Contract Note/Bill?
Decision: It is desirable for the reasons for transparency that Service Tax charged/collected is shown separately in the Contract Note/Bills.
Collector of Central Excise, Calcutta-I has raised the point that service brokers are engaged as underwriters. These Service Brokers are receiving commission for the Company which floats its securities into the market. Whether Service Tax is required to be levied on this commission?
Decision: Taxable service means any service provided to an investor, by a stock-broker in connection with the sale or purchase of securities listed on a recognised stock exchange. The commission charged by stock-broker as underwriters is for floating securities. Hence, it is not covered.

Jobbing, Own Trading etc.

Cir. No. 20/14/96-ST, Date: 31/12/1996

Sub: Service Tax - Transaction amounting to taxable service subject to service tax.

The Trade is hereby informed that certain doubts whether the following transactions amount to taxable service subject to service tax have been raised for clarification from the Board:

(A) Jobbing - Transactions entered on principal to principal basis between member brokers of the same stock exchange.

(B) Own Trading - Transactions entered on their own account by the brokers.

(C) Arbitrace - Transactions entered into by two brokers of different stock exchange in order to profit from price difference between two markets.

2. The matter has been examined by the Board in consultation with other field formations. As per Section 65 (6) of Finance Act, 1994, taxable service means any service provide to an invest by a stock broker in connection with the sale or purchase of securities listed at recognised stock exchange. In view of this definition, the points raised above are clarified below:

(A) When the transaction is on principal to principal basis between brokers, no investor is involved and as such no taxable service is provided and therefore, no service tax is chargeable.

(B) Where a broker enters into a transaction on his own account with an investor who is a non-member of the stock exchange the service provided will be taxable service and subject to service tax.

(C) In case of arbitrage transaction i.e. the transaction between two brokers of different stock exchanges, the service is provided by a broker i.e. the member of a stock exchange to a non-member of that stock exchange even though the investor may be a member of another stock exchange. Their being an investor involved in the transaction, the service so provided to the investor will be a taxable service subject to service tax.

Registration with NSE

Cir. No. 12/6/96, Dated: 16/9/1996

Sub: Service Tax - Registration of Stock Brokers of National Stock Exchange.

I am directed to refer to Para 1 of Board's Service Tax Circular No. 4/4/ 94, dated 6/9/1994, wherein it was clarified that a stock broker registered with a particular Stock Exchange has to apply for registration with the Commissioner of Central Excise having jurisdiction over the place in which the concerned Stock Exchange is situated, irrespective of whether all offices of the stock broker are situated within or outside the jurisdiction of the said Commissionerate. Doubts have been expressed regarding registration of members/Stock Brokers of National Stock Exchange having its Headquarters at Mumbai.

2. The matter have been examined by the Board. National Stock Exchange permits its members to operate from any part of India through satellite network owned, operated any managed by National Stock Exchange using Very Small Aperture Terminals (VSAT) installed at trading members office whereas the members of local stock exchange is required to carry on business compulsorily within the jurisdiction of the said Stock Exchange where he is registered.

3. Board is of the view that Trading members/Stock Brokers of National Stock Exchange will have to register their premises with the Central Excise Commissionerate having the jurisdiction over the place where trading membership is granted and infrastructural facilities are provided for installing the Very Small Aperture Terminals and operating the business.

Registration with OTCEI

[TN No. 141/96, dated 4-12-1996 of Cochin Commissionerate]

Sub:- Service Tax - Registration of Members/Dealers Over the Counter Exchange of India (OTCEI).

Attention is invited to this office Trade Notice No. 113/96, dated 14/10/1996 wherein it has been decided that Trading Members/Stock Brokers of National Stock Exchange will have to register their premises with the Central Excise Commissionerate having jurisdiction over the place from where trading member operate their business.

The above instructions will apply mutatis mutandis to the members/dealers of Over the Counter Exchange of India (OTCEI). Thus the members and dealers of OTCEI are required to register with Central Excise Commissionerate having jurisdiction over the place of operation of their business. Similarly if domestic stock exchanges allow trading by members/dealers through computers from other centres outside their jurisdiction (viz. BOLT) such members/dealers are required to be registered with the Central Excise Commissionerate having jurisdiction over the place of operation of their business. It may also be noted that even if the member/dealer has registered himself as a stock broker of a conventional stock exchange for transaction of securities of that stock exchange, he has to separately apply for registration as a member/dealer ofOTCEI, National Stock Exchange etc. for sale or purchase of securities listed on such exchange.

Double Taxation

[Trade Notice No. 63/96, dated June, 1996 of the Pune Commissionerate]

Sub: Service Tax - Buying/Selling of securities by a Member of one stock exchange through a member of another. Stock exchange on behalf of an investor - Regarding.

Certain doubts were expressed regarding 'whether Service Tax is chargeable at both the ends, when an investor is provided with taxable service by two brokers of different stock exchanger' by various quarters.

The situation envisaged is as under:

If a Calcutta based investor buys a security quoted on the Bombay stock exchange through his broker in Calcutta, he ends up paying service tax twice, first to the Bombay stock exchange broker & then to the Calcutta stock exchange broker through whom the initial order was placed. In a situation like this, it has been represented that, it amounts to double taxation on a transaction of one' single security.

The matter has been examined by the Board. According to Section 66 of the Finance Act, 1994, the Service Tax is to be charged at the rate of 5% of the 'Value of taxable service'. In respect of sale & purchase of securities, taxable service means any service provided to an investor by a stock broker in connection with the sale or purchase of securities listed on a recognised stock exchange. The valuation of taxable service in relation to service provided by a stock broker to an investor shall be the aggregate commission or brokerage charged by him on the sale or purchase of securities.

In the situation pointed out above, the investor is provided with taxable service by two brokers. First by the Bombay stock exchange broker through the Calcutta stock exchange broker and then by the Calcutta stock exchange broker.

Since, the Commissionlbrokerage is charged at both the ends, the charge of service tax at both the ends is both conceptually & legally correct. The investor placed his order for buying a security quoted at the Bombay stock exchange for the reason that either it is not available at the Calcutta stock exchange or the price is more beneficial at the Bombay stock exchange. It is open to the investor to either place his order on the Bombay stock exchange broker direct or through his Calcutta stock exchange broker. In the former case, he would have to pay service tax only on the service provided by the Bombay stock exchange broker. In the latter case, he pays higher commission paid to him by the Calcutta stock exchange broker which includes the brokerage of the Bombay stock exchange broker also for the service provided to him at both the exchanges through the Calcutta stock exchange broker. It can't therefore be said that the investor is paying service tax twice. The investor in fact, pays double commission for avoiding the hassless involved in going to the Bombay stock exchange broker direct.

The service tax being the percentage of the brokerage charged trom the investor there is no double taxation involved. Service tax charged is only incidental to the charging of the commissionlbrokerage charged by the brokers.

It is, therefore, clarified that charging of service tax from an investor who is provided with taxable service by two brokers of different stock exchanges does not amount to double taxation.

Showing Brokerage Separately

Cir. No. 15/9/1996, Date: 4/10/1996

Sub: Service Tax - Showing of Service Tax on brokerage separately on the Bill.

Certain doubts have been expressed regarding showing Service Tax collected/charged separately, on the contract notelbills.

It was earlier clarified by the Board, that, it is desirable for the reasons for transparency, that, Service Tax charged/collected is shown separately in the contract notelbills.

The matter has been re-examined by the Board. It has been observed that there is lack of uniformity in showing Service Tax collected/charged separately on the contract notes or bills. Hence, to avoid non-uniformity of practice it has been further clarified by the Board that, the Stock Brokers should prominently indicate the amount of Service Tax in the Bill relating to sale or purchase of securities.

M/s. Pune Stock Exchange Co. Ltd./National Stock Exchange & OTCEI are requested to bring the contents of this trade notice to the noticeoftheir Stock brokers/trading members/& dealers.

Notification

Prior to 10/9/2004

[Notification No. 25/2004-ST, dated 10/9/2004]

Forfull text see under "Banking & Other Financial Services".

Case Law

No service tax when one stock broker sells stock to another stock broker - 1999 (110) ELT 925 (New Delhi - Cegat).

No tax if brokerage includes service tax - 1996 (88) ELT 566 (Mumbai- Cegat).

No levyofservice taxonnotional amount - 1998 (98) ELT 515 (Ca1. Cegat).

"recognised stock exchange"has the meaning assigned to it in clause (f) of Section 2 of the Securities Contracts

Indian Service Tax

Stock Broker Service

Effective Date: 01/07/1994.

Authority: Notification No. 1/94-ST, dt. 20/6/1994 (for full text of Notification see under'Telephone Service').

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions: "recognised stock exchange"has the meaning assigned to it in clause (f) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); [Section 65 (90)]

"Stock Broker" means a stock-broker who has either made an application for registration or is registered as a stock-broker in accordance with the rules and regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); [Section 65 (101)].

Taxable service: Share Broker service provided by a stock broker to an investor in connection with the sale or purchase of securities listed on a recognised stock exchange.

Value of taxable service: Aggregate of the commission or brokerage charged by the stockbroker (including the amount paid by him to any sub-broker).

Exemptions

When the transaction is on principal to principal basis between brokers.
When one broker sells stock to another broker - 1999 (110) ELT 925 (New Delhi - Tri).
No tax on notional amount - 1998 (98) ELT 515 (Cal-Tri).
Underwriters
Deals in unlisted securities & unrecognised Stock Exchange.

Person liable to pay: Stock Broker.

Head of Account

			Sl. Code	SCCD
Minor-head	004400103	Stock Brokers Services
Sub-head	00440010301	Tax Collection	00440008	110
Sub-head	00440010302	Other Receipts	00440009	111
Sub-head	00440010303	Deduct Refunds	00440121	112

Questions & Answers

Q. 1 Who is a Stock Broker? When does the service provided by Stock Broker become liable to pay Service Tax?

Ans. Stock Broker is a person who has either made an application for registration or is registered as a stock broker under the rules and regulations of Securities and Exchange Board of India Act, 1992. The service provided by the stock broker becomes liable to levy of when

Stock Broker is registered as per SEBI Act, 1972.
Stock is listed in the Stock Exchange.
The Stock Exchange is recognised Stock Exchange as per Securities Contract Regulation) Act, 1956.
The Sale/Purchase are on behalf of an investor.

Q. 2 What is the value of taxable service in case of service provided by Stock Broker?

Ans. The value of the taxable services, provided by a Stock Broker, is the aggregate of the commission or brokerage charged by such broker on the sale or purchase of securities from the investors and includes the commission or brokerage paid by the broker to any sub-brokers.

Q. 3 Are there any transactions/charges undertakenlreceived by Stock Broker which are not chargeable to Service Tax? If so which are those transactions?

Ans. Following transactions undertaken by the Stock Brokers do not attract the levy of Service Tax:

Private placement charges,
Public issue consultancy fee,
Brokerage for primary market operations,
Stock Broker's own transaction.
Jobbing business.
Arbitrage.

Q. 4 Is a Stock Broker required to have separate registration for each of the offices when all offices are not falling within the same Commissionerate?

Ans. No, a Stock Broker registered with a particular Stock Exchange has to apply for registration with the Commissioner of Central Excise having jurisdiction over the place in which the concerned Stock Exchange is situated, irrespective of whether all the offices of the Stock Broker are situated within or outside the jurisdiction of the said Commissionerate.

Q. 5 Whether a suspended share broker should continue to hold registration or should surrender the registration?

Ans. (a) When a registered assessee ceases to carry on the service for which he is registered, he should surrender his registration certificate immediately to the Central Excise authority.

(b) A suspended share broker can continue to hold registration, if he so desires, but he should then file NIL return to the Central Excise authority.

Changes from 10/9/2004

F.No. B2/8/2004-TRU, Date: 10/9/2004

16. Sub-brokers:

Services provided by brokers, sub-brokers to investors in connection with sale and purchase of securities listed on recognized stock exchanges would be subjected to service tax.

Main text of Departmental Circular/TN

[TN No. 111/94, dated 05/07/1994 of Hyderabad Commissionerate]

In respect of Stock Brokers, they will have to apply for registration individually and assessment will take place on individual basis. They will apply for registration to the jurisdictional Collectorates.

Taxable service: Steamer Agent's service provided to a shipping line by a steamer agent in relation to a ship's husbandry

Indian Service Tax

Steamer Agent Service

Effective Date: 15/06/1997.

Authority: Notification No. 17/97 -ST, dt. 06/06/1997 (for full text of Notification see under'Custom House Agent').

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition: "steamer agent"means any person who undertakes, either directly or indirectly-

to perform any service in connection with the ship's husbandry or dispatch including the rendering of administrative work related thereto; or
to book, advertise or canvass for cargo for or on behalf of a shipping line or
to provide container feeder services for or on behalf of a shipping line, [Section 65(100).

Taxable service: Steamer Agent's service provided to a shipping line by a steamer agent in relation to a ship's husbandry or despatch or any administrative work related thereto as well as the booking, advertising or canvassing of cargo, including container feeder services.

Value of taxable service: Gross amount charged by steamer agent from the shipping line for services related to a ship's husbandry or despatch or any administrative work related thereto or for booking, advertising or canvassing of cargo, container feeder services, including the commission paid to steamer agent.

Exemptions: Passenger booking, cruises

Person liable to pay: Steamper Agent

Head of Account

			Sl. Code	SCCD
Minor-head	004400108	Steamer Agent Services
Sub-head	00440010801	Tax Collection	00440029	119
Sub-head	00440010802	Other Receipts	00440030	117
Sub-head	00440010803	Deduct Refunds	00440031	114

Questions & Answers

Q. 1 Who is a "Steamer Agent"?

Ans. "Steamer Agent" is a person who undertakes, either directly or indirectly.

to perform, any service in connection with the ship' husbandry or dispatch including the rendering of administrative work related thereto or
to book, advertise or canvass for cargo for or on behalf of a shipping line; or to provide container feeder services for or on behalf of a shipping line

Q. 2 What is the taxable service in case of services provided by a Steamer Agent?

Ans. The taxable service provid~d by a steamer agent to a shipping line, is the service in relation to a ship's husbandry or dispatch or any administrative work related thereto as well as the booking, advertising or canvassing of cargo, including container feeder services.

Q. 3 What is the value of taxable service in case of Steamer Agent?

Ans. The value of the taxable service in relation to service provided by a steamer agent to a shipping line, is the gross amount charged by such agent from the shipping line for services in relation to a ship's husbandry or dispatch or any administrative work related thereto or in relation to the booking, advertising, or canvassing of cargo container feeder services including the commission paid to such agent.

Steamer agents incur various types of expenses on behalf of the shipping line such as pilottage and berth hire charges, Indian Coast light dues paid to the port authorities, cargo expenses paid to port authorities and transporters such as CONCOR/railways, private transporters, chartered accountants fee, income tax, brokerage paid on export cargo, ship handling expenses paid to stevedoring agents. For all the above charges the Steamer agent is ordinarily reimbursed by the shipping line. Further, the steamer agent bills the principals i.e. the shipping line, for two types of service charges - husbandry fee, which they charge for a ships husbandry and the agency commission, which is paid by the shipping line on the import and export cargo. These commissions are usually paid as a percentage of the net ocean freight (basic freight) which is clearly indicated in the agreement entered into between the steamer agent and shipping line.

In relation to the steamer agent, the service charges will constitute the husbandry fee as well as the agency commission on import/export cargo. Other expenses incurred by the steamer agent on behalf of the shipping line shall not be taken into account.

Q. 4 Is the registration in respect of Steamer Agents allowed only of their seaport offices or the branch offices also?

Only sea port offices of the steamer agent which are raising the bill to the shipping lines should be registered for the purposes of Service Tax.

Branch offices in ICDs which are more in the nature of sales offices and which do not raise the bill, would not have to be registered.

Q. 5 Is the container handling service provided by Steamer Agent to be charged to the Service Tax?

Ans. Yes. The container handling service provided by Steamer Agent and payment received thereof, would be liable for payment of Service Tax under the category of service provided by the Steamer Agent.

Main text of Departmental Circular/TN

[TN No. 39-CE (Service Tax 39)97, dated 11.06.1997 of New Delhi Commissionerate]

3.1 The expression 'Steamer Agents' has been defined to mean any person who undertakes, either directly or indirectly.

to perform any service in connection with the ships' husbandry or qispatch including the rendering of administrative work related thereto or
to book, advertise or canvass for cargo for or on behalf of a shipping line or
to provide container feeder services for or on behalf of a shipping line

3. 2 The taxable service provided by a steamer agent to a shipping line, is the service provided by a Steamer Agent in relation to a ships' husbandry or dispatch or any administrative work related thereto as well as the booking, advertising or canvassing of cargo, including container feeder services. The value or the taxable service in relation to service provided by a steamer agent to a shipping line, shall be the gross amount charged by such agent from the shipping line for services in relation to a ship's husbandry or dispatch or any administrative work related thereto or in relation to the booking, advertising or canvassing of cargo, container feeder services including the commission paid to such agent.

3. 3 Steamer Agents incur various types of expenses on behalf of the shipping line such as pilottage and berth hire charges, Indian Coast light dues paid to the port authorities, cargo expenses paid to port authorities and transporters such as CONCOR/railways, private transporters, chartered accountants fee, income tax, brokerage paid on export cargo, ship handling expenses paid to stevedoring agents. For all the above charges the Steamer Agent is ordinarily reimbursed by the Shipping line. Further, the Steamer Agent bill the principals i.e. the shipping line, for two types of service charges. One is called the husbandry fee which they charge for a ships' husbandry. The second is the agency commission Nhich is paid by the shipping line on the import and export cargo. These commissions are usually paid as a percentage of the net ocean freight

(basic freight) which is clearly indicated in the agreement entered into between the Steamer Agent and shipping line.

3. 4 It is clarified that in relation to the Steamer Agent, the service charges will constitute the husbandry fee as well as the agency commission on import! export cargo. Other expenses incurred by the Steamer Agent on behalf of the shipping line shall not be taken into account.

3. 5 It has been represented that the accounting for purposes of service tax should be on per voyage, per vessel basis and further that the registration for service tax purposes should be done only of their seaport offices. It has been decided that only such sea port offices of the Steamer Agent should be registered for service tax purpose which are raising the bill to the shipping lines. The branch offices in ICDs which are just sales offices and do not raise any bills to the shipping line, need not be registered. This is for the reasons that billing is done by the sea port offices and not the branch offices.

"sound recording studio or agency"means any commercial concern engaged in the business of rendering

Indian Service Tax

Sound Recording Service

Effective Date: 16/07/2001.

Authority: Notification No. 4/2001-ST, dt. 9/7/2001 (for full text of Notification see under Broadcasting).

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions: "sound recording studio or agency"means any commercial concern engaged in the business of rendering any service relating to sound recording; [Section 65 (99)]

"Magnetic Storage Device" includes wax blanks, discs or blanks, strips or films for the purpose of original sound recording, [Section 65 (63)]

Taxable service: Sound recording service provided by a sound recording studio to a client.

Value of taxable service: Gross amount charged from a client, but the cost of unrecorded magnetic tape or such other storage device, if any, sold to the client during the course of providing the service, shall not be included in the value of this taxable service.

Exemptions

(i) Reproduction of original master to make further copies of the audio tape or CDs

(ii) Lending/hiring of video/sound & recording equipment sub-contracting (iii) Sale of cassettes Person liable to pay: Sound Recording Studio or Agency.

Head of Account

			Sl. Code	SCCD
Minor-head	004400140	Sound Recording Service	00440160
Sub-head	00440014001	Tax Collection	00440161	118
Sub-head	00440014002	Other Receipts	00440162	111
Sub-head	00440014003	Deduct Refunds	00440163	110

Questions & Answers

Q. 5.1 Whether lending/hiring of Video/Sound Recording equipment come under Service Tax?

Ans: The lendinglhiring of Video/Sound Recording equipment is in the nature of Sub-contracts and because the Sub-contractors are not providing the services to the customer directly, they are not required to pay the Service Tax.

[Source: Directorate of Publicity and Public Relations, Customs & Central Excise, New Delhi, October, 2003).

Main text of Departmental Circular/TN

1. As per Section 65(66), "sound recording" means recording of sound on a magnetic storage device and editing thereof, in any manner. As per Section 65 (72) (zj), taxable service is any service provided to a client by a sound recording studio or agency in relation to any kind of sound recording.

2. Any service provided by sound recording studio or agency in relation to recording of sound will be covered under the tax net. The activities which fall under the category of service are providing the facility of studio, technical persons, musical instruments and other devices or any other facility or all the facilities in a consolidated manner, required for recording of sound, editing thereof, providing different kinds of sounds from the sound library for use in theatre, films and radio etc., services for mixing of sounds, etc. The service charges that are paid for the use of these facilities and it is usually in terms of hours of usage. It is clarified that reproduction of original master to make further copies of the audio tape or CDs etc., will not come within the purview of service tax.

rent-a-cab scheme operator" means any person engaged in the business of renting of cabs; [Section 65 (91)]

Indian Service Tax

Rent-a-Cab Scheme Operator*

Effective Date: 01/04/2000

Authority: Notification No. 3/99-ST, dt. 28/02/1999 (See at the end of this Chapter).

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions: "rent-a-cab scheme operator" means any person engaged in the business of renting of cabs; [Section 65 (91)]

"cab" means a motorcab or maxicab; [Section 65 (20)]

"light motor vehicle" means any motor vehicle constructed or adapted to carry more than six passengers, but not more than twelve passengers, excluding the driver; [Section 65 (62)]

"maxicab" has the meaning assigned to it in clause (22) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); [Section 65 (70)]

"motorcab"has the meaning assigned to it in clause (25) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); [Section 65 (71)]

"motor car" has the meaning assigned to it in clause (26) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); [Section 65 (72)]

"motor vehicle" has the meaning assigned to it in clause (28) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); [Section 65 (73)]

Taxable service: Renting a cab service by a rent-a-cab scheme operator in relation to the renting a cab.

Value of taxable service: Gross amount charged by rent-a-cab scheme operator from a person for services of renting of a cab provided to him.

Exemptions

Metered Taxis/Cabs
Company/Personal Cabs

Person liable to pay: Rent-a-cab operator.

Head of Account

			SI. Code	SCCD
Minor-head	004400112	Rent-a-Cab Scheme Operator Services
Sub-head	00440011201	Tax Collection	00440048	114
Sub-head	00440011202	Other Receipts	00440049	117
Sub-head	00440011203	Deduct Refunds	00440050	119

Questions & Answers

Q. 1 Who is a "Rent a cab scheme operator"?

Ans. "Rent a cab scheme operator" is a person who is engaged in the business of renting of cabs.

The new definition of rent a cab scheme operator introduced in the Finance Act, 1998 , is effective from 16tlr October, 1998. This definition is wider in scope than the earlier definition which only included a person who was the holder of a licence under the Rent-a-Cab-Scheme, 1989 framed by the Central Government under the Motor Vehicles Act, 1988 as a rent-a-cab-scheme operator. Under the Rent-a-Cab-Scheme, 1989 framed under the Motor Vehicles Act, 1988, a licence is granted only in case a person has a minimum of 50 cabs. This meant that a person who had less number, say 5 or 10 cabs and was engaged in the business of car rental, was not liable to pay service tax on the services of renting of cabs. Consequent upon the revised definition, such persons who are engaged in the business of renting of cabs, even if not covered under the Rent a Cab Scheme, 1989, framed under the Motor Vehicles Act, 1988, will also be required to pay service tax on the services of renting of cabs irrespective of number of cabs rented out by them.

Q. 2 What is the taxable service in case of Rent- a- cab- .scheme?

Ans. The taxable service rendered by a Rent a cab scheme operator means any service provided to any person, by a rent a cab scheme operator in relation to the renting of a cab.

Q. 3 What is the value of service in case of Rent a cab scheme?

Ans. The value of taxable service in relation to the service provided by a Rent a cab scheme operator to any person, is the gross amount charged by such operator from such person for services in relation to the renting of a cab and includes such rental.

Any other charges billed to the customer such as processing charges, administrative fees, charges for providing extra accessories or providing other value added services such as a provision of driver etc. shall also be includible in the gross amount chargeable to Service Tax.

However, Service Tax will not be payable in cases where a bill is raised on a Rent a Cab Scheme operator, by another rent-a-cab scheme operator who has sub-let the motor cab to the latter operator provided the principal operator pays Service Tax on the amount billed to his client for renting out the motor cab so obtained by him.

Main text of Departmental Circular/TN

[TN No. 1/2000, dated 27/4/2000 of the Pune Commission rate]

The definition of term "Rent-a-Cab Scheme Operator" as per Section 65 (38) of Finance Act, 1994 as amended means "any person engaged in the business of renting of cabs". Prior to amendment, scope of the said term was limited to a person who was holding a licence under the Rent-a-Cab Scheme, 1989, framed by the Central Government, under the Motor Vehicle Act, 1988, as a Rent-a-Cab Scheme Operator. Under the said scheme, Licence is granted only in the case where a person has a minimum of 50 cabs. However, in the revised definition, the requirement of operators being registered under the Renta-Cab Scheme has been dispensed with. Consequently, any person who is engaged in the business of renting of cabs would be required to pay Service Tax irrespective of number of vehicles engaged by him in providing this service. The definition of 'Cab' includes 'Motor Cab' or 'MAXI CABS' Section 2 (25) of the Motor Vehicles Act, 1988, a Motor Cab is defined as any motor vehicle constructed or adapted to carry not more than 6 passengers excluding the driver for hire or reward, and MAXI CABS means' any motor vehicle constructed or adapted to carry more than 6 passengers, but not more than twelve passengers excluding the driver, for hire or reward. In either case, these are vehicles available for time, and are more popularly known as Vans.

5.1 Any person who gives his vehicle viz. Car/TaxiNan to a third person for the purpose of local transport will also be covered under the Rent-a-Cab Scheme Operator. The taxable service rendered by a Rent-a-Cab scheme operator means any service provided to any person by a Rent-a-Cab scheme operator in relation to the renting of a cab. The rate of service tax is 5% and the value of taxable service in relation to the service provided by a Rent-a-Cab Scheme operator to any person, shall be the gross amount charged by such operator from such person for services in relation to the renting of a cab and include such rental.

5.2 The value of taxable service in relation to the service provided by a Rent-a-Cab Scheme Operator to any Customer, shall be the gross amount charged by such operator from such customer for services in relation to the renting of a cab and include the rental so charged. Any other charges billed to the customer such as processing charges, administrative fees, charges for providing extra accessories or providing other value added services such as a provision of driver etc. shall also be includible in the gross amount chargeable to service tax.

5.3 However service tax will not be payable in cases where a bill has been raised on a Rent-a-Cab Scheme Operator, by another Rent-a-Cab Scheme Operator who has sub-let the motor cab to the latter operator provided he pays service tax on the amount billed to his client for renting out the motor cab so obtained by him.

* Originally levy was effective from 16/07/1997 to 22/02/1999 vide Notification No. 26/97-ST, dt. 11/07/1997. Later Noti. No. 3/99, dated 28/02/1999 exempted this service from 23/02/1999 to 31/03/2000

"scientific or technical consultancy"means any advice, consultancy, or scientific or technical assistan

Indian Service Tax

Scientific and technical

Consultancy Service

Effective Date: 16.07.2001.

Authority: Notification No. 4/2001-ST, dt. 9/7/2001 (for full text of Notification

see under Broadcasting).

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition: "scientific or technical consultancy"means any advice, consultancy, or scientific or technical assistance, rendered in any manner, either directly or indirectly, by a scientist or a technocrat, or any science or technology institution or organisation, to a client, in one or more disciplines of science or technology; [Section 65(92)].

Taxable service: Scientific or technical consultancy provided by a scientist or a technocrat, or by any science or technology institution or organisation to a client.

Value of taxable service: Gross amount charged from the client. Exemptions:

(i) Services by doctors, medical colleges, nursing homes, hospitals, diagnostic pathological labs, technocrats

(ii) Mere testing

(iii) Grants & Aids

Person liable to pay: Scientists, Technocrat, Institution and Organisation.

Head of Account :

SI. CodeSCCD

Minor-head 004400131 Scientific & Technical 00440124

Consultancy Service

Sub-head 00440013101 Tax Collection 00440125 116

Sub-head 00440013102 Other Receipts 00440126 113

Sub-head 00440013103 Deduct Refunds 00440127 118

Main text of Departmental Circular/TN:

[Ministry's ENo. B.II/I/2000-TRU dated 9/7/2001 - Annexure I]

1. Section 65(60)* defines "scientific and technical consultancy" as any advice, consultancy, or scientific or technical assistance, rendered in any manner,

* Section 65(92), w.e.f. 10/9/2004.

by a scientist or a technocrat, or any science or technology institution or organisation, to a client, in one or more discipline of science or technology. The taxable service has been defined in clause 72 (za) of Section 65 as "any service provided, to a client, by a scientist or a technocrat, or any science and technology institution or, organisation, in relation to scientific or technical consultancy".

2. The taxable service should be understood in the context of its commonly understood meaning and scope. For instance, it would cover consultation, advice or technical assistance provided by a scientist or a technocrat or a science or technology institution on any issue relating to any branch of science and technology. Such consultation may be in the nature of an expert opinion/advice in regard to scientific or technical feasibility or any other scientific or technical aspect of a project, process or design, recommending an apt technology, suggestion for improvement in existing technology or process, providing consultation on any technical problem or about new technology, etc. Some of the specific issues raised and clarifications thereon are given below.

3. Points for clarification:

Point raised for clarification Clarification

Whether services rendered by In common parlance, these categories

doctors, medical colleges, of service providers are not known

nursing homes, hospitals, as scientists or technocrats or

diagnostic and pathological science or technology institutions

labs, etc., would come under the or organisations. They will not be

purview of the proposed levy. covered under service tax.

Whether public funded research Yes. Service tax is liable to be paid

institutions like CSIR, ICAR, when any scientific or technical

DRDO, IITs and IISc., Regional consultancy service is rendered

Engineering Colleges etc., which whether by public funded

are exempt from payment of institutions or by private agencies.

income tax 'are covered under

the service tax.

Whether testing services will be Mere testing will not attract service

covered under the proposed levy? tax. However, in case testing is an

integral part of the consultancy, then

such activity is part and parcel of the

taxable service and no abatement

of any kind admissible.

Many public funded research In the facts of this case, no service is

institutions receive grants or rendered to anyone. Hence the question

aids from the Government for of payment of service tax does not

conducting research /project arise. However, if they render service

work. Whether such activities to anyone on payment basis, service

would be covered under the levy? tax will be payable on such services.

Whether the service tax will be If scientific or technical consultancy

leviable on consultancy provided is provided to a government

to government departments, department for which consultation

public sector undertakings?Fees are received, then service tax would be applicable.

Credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004

Indian Service Tax

Notification

Exemption

[Notification No. 3/99-ST, dt. 28/2/1999]

2. This notification shall have effect upto and inclusive of the 31 st day of March, 2000.

Effective Rate

[Notification No. 9/2004-ST, dt. 9/7/2004]

In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service provided by a rent-a-cab scheme operator in relation to renting of a cab, from so much of the service tax leviable thereon under Section 66 of the said Act, as is in excess of the service tax calculated on a value which is equivalent to forty per cent of the gross amount charged from any person by such operator for providing the said taxable service.

¹[Provided that the said exemption shall not apply in such cases where

Credit of duty paid on inputs or capital goods has been taken under the provisions of the Cenvat Credit Rules, 2004 or
Such rent-a-cab scheme operator has availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003 [G.S.R. 503 (E), dated the 20th June, 2003].

Case Law

Constitutional validity upheld - 2001 (134) ELT 618 (Mad.).

"rent-a-cab scheme operator"means any person engaged in the business of renting of cabs; [Section 65(91)]

Indian Service Tax

Rent-a-Cab Scheme Operator*

Effective Date: 01/04/2000

Authority: Notification No. 3/99-ST, dt. 28/02/1999 (See at the end of this Chapter).

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions: "rent-a-cab scheme operator"means any person engaged in the business of renting of cabs; [Section 65(91)]

"cab"means a motorcab or maxicab; [Section 65 (20)]

"light motor vehicle"means any motor vehicle constructed or adapted to carry more than six passengers, but not more than twelve passengers, excluding the driver; [Section 65 (62)]

"maxicab"has the meaning assigned to it in clause (22) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); [Section 65(70)]

"motorcab"has the meaning assigned to it in clause (25) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); [Section 65(71)]

"motor car"has the meaning assigned to it in clause (26) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); [Section 65(72)]

"motor vehicle"has the meaning assigned to it in clause (28) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988); [Section 65 (73)]

Taxable service: Renting a cab service by a rent-a-cab scheme operator in relation to the renting a cab.

Value of taxable service: Gross amount charged by rent-a-cab scheme operator from a person for services of renting of a cab provided to him.

Exemptions

Metered Taxis/Cabs
Company/Personal Cabs

Person liable to pay: Rent-a-cab operator.

Head of Account

			SI. Code	SCCD
Minor-head	004400112	Rent-a-Cab Scheme Operator Services
Sub-head	00440011201	Tax Collection	00440048	114
Sub-head	00440011202	Other Receipts	00440049	117
Sub-head	00440011203	Deduct Refunds	00440050	119

Questions & Answers

Q. 1 Who is a "Rent a cab scheme operator"?

Ans. "Rent a cab scheme operator" is a person who is engaged in the business of renting of cabs.

Q. 2 What is the taxable service in case of Rent- a- cab- .scheme?

Ans. The taxable service rendered by a Rent a cab scheme operator means any service provided to any person, by a rent a cab scheme operator in relation to the renting of a cab.

Q. 3 What is the value of service in case of Rent a cab scheme?

Main text of Departmental Circular/TN

[TN No. 1/2000, dated 27/4/2000 of the Pune Commission rate]

Taxable service: Real Estate agent providing service to a client in relation to real estate.

Indian Service Tax

Real Estate Agent and Consultant

Effective Date: 16/10/1998.

Authority: Notification No. 53/98-ST, dt. 7/10/1998 (for full text of Notification see under'Architect').

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definitions: "real estate agent"means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real estate consultant; [Section 65 (88)]

"Real Estate Consultant" means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate; [Section 65 (89)]

Taxable service: Real Estate agent providing service to a client in relation to real estate.

Value of taxable service: The gross amount charged by such agent from the client in connection with the sale, purchase, leasing or renting of real estate including any advice, consultancy, assistance, relating to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing acquisition or management, of real estate.

Exemptions

(i) Actual construction of any building by builders/developers

(ii) Civil contractors, Lawyers, Interior decorators

Person liable to pay: Real Estate Agent or Consultant.

Head of Account

			SI. Code	SCCD
Minor-head	004400127	Real Estate Agent/Consultant Services	00440103
Sub-head	00440012701	Tax Collection	00440104	113
Sub-head	00440012702	Other Receipts	00440105	118
Sub-head	00440012703	Deduct Refunds	00440106	111

Questions & Answers

Q. 1 Who is Real Estate Agent and Real Estate Consultant?

Ans. "Real estate agent" is a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real estate consultant.

"Real estate consultant" is a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate.

Q. 2 What is the taxable service in case of Real Estate Agent?

Ans. Taxable service means any service provided to a client, by a real estate agent in relation to real estate.

Apart from the traditional services in respect of sale/purchase/leasing of real estate such concerns are inter-alia, providing services to real estate developers and promoters in respect of evaluation of a proposed real estate scheme/project by conducting techno economic studies, providing feasibility reports and by even helping in marketing real estate projects. Such services shall also attract service tax. It would include comprehensive realty services provided by International realty concerns, who are providing such services in India.

Q. 3 What is the value of the taxable service in case of Real Estate Agent?

Ans. Value of the taxable services in relation to the service provided by a real estate agent to a client, is the gross amount charged by such agent from the client for services rendered in connection with the sale, purchase, leasing or renting of real estate including any advice, consultancy or technical assistance relating to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate.

Q. 4 Would the services of actual construction of any building carried out by the builder/ developer be liable for payment of service tax under the category of service provided by the real estate agent or real estate consultant?

Ans. No, the activity of actual construction of any building, carried out by builders/developers would not attract service tax levy, as it is not a service within the meaning of the term real estate agent or real estate consultant.

Main text of Departmental Circular/TN

[TN No. 1I6/98-ST, Dated 15/10/1998 of Hyderabad Commissionerate]

8.1 As per Section 65(35)*, "real estate agent" means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting, of real estate and includes a real estate consultant. Section 65(36)** defines a "real estate consultant" to mean any person who renders in any manner, either directly or indirectly, advice, consultancy, or technical assistance, in relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management, of real estate.

8.2 The rate of service tax on realty service is 5%. It may be noted that some international realty concerns, such as Richard Ellis, Colliers and Jardine etc. have opened shop in India and they are providing comprehensive realty services. Apart from the traditional services in respect of sale/purchase/leasing of real estate, such concerns are, inter alia, providing services to real estate developers and promoters in respect of evaluation of a proposed real estate scheme/project by conducting techno-economic studies, providing feasibility reports and by even helping in marketing real estate projects. Such services shall also attract service tax. However, it is clarified that activity of actual construction of any building, carried out by builders/developers does not attract service tax levy as it is not a service within the meaning of the term real estate agent or real estate consultant.

Rail Travel Agent" means any person engaged in providing any service connected with booking of passage for travel by rail, [Section 65 (87)

Indian Service Tax

Rail Travel Agent

Effective Date: 16/08/2002.

Authority: Notification No. 8/2002-ST, dt. 1/8/2002 (for full text of Notification see under 'Beauty Parlour').

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition: "Rail Travel Agent" means any person engaged in providing any service connected with booking of passage for travel by rail, [Section 65 (87)].

Taxable service: Rail travel agent providing services connected with booking of passage for travel by rail.

Value of taxable service: Gross amount charged from the customer or commission received from Railways.

Person liable to pay: Rail Travel Agent.

Head of Account

			SI. Code	SCCD
Minor-head	004400150	Rail Travel Agent Services	00440200
Sub-head	00440015001	Tax Collection	00440201	115
Sub-head	00440015002	Other Receipts	00440202	114
Sub-head	00440015003	Deduct refunds	00440203	117

Main text of Departmental Circular/TN

F. No. B11/1/2002-TRU, Date: 1/8/2002

The section referred to hereinafter are the sections or clauses of the Finance Act, 1994 as amended by the Finance Act, 2002. Reference to subclause or clause means clause or sub-clause of Section 65 of the Finance Act, 1994 as amended by the Finance Act, 2002.
As per clause (72), "rail travel agent" means any person engaged in providing any service connected with booking of passage for travel by rail. The taxable service is any service provided to a customer, by a rail travel agent in relation to booking of passage for travel by rail.
As per Section 67, the value of taxable service includes the commission or any amount received by the rail travel agent from the Railways or the customer but does not<>
A point has been raised as to whether the service tax is leviable on rail travel agent not registered with railways. It is clarified that any person whether registered with the Railways or not engaged in providing any service connected with booking of passage for travel by rail is liable to service tax.
Rail travel agent charges the customer, generally on per ticketlberth basis. Further, cancellation of tickets is also quite frequent and rail travel agent also charges the customer for cancellation of tickets. Service tax is payable in both the cases.

“port” has the meaning assigned to it in clause (q) of section 2 of the major port Trusts Act, 1963 (38of 1963).

Indian Service Tax

Port Services (Minor Ports)

N.B see salso port service (major ports)

Effective date: 1/7/2003.

Authority: Notification No. 7/2003-ST, dt. 20/6/2003 (for full text see under “Business Auxiliary Service”).

Rate of Service Tax: 8%.

Defination: as per Section 65 (81) “port” has the meaning assigned to it in clause (q) of section 2 of the major port Trusts Act, 1963 (38of 1963).”

As per Section 65 (82) “port service” means any service rendered by a port or other port or anu person authorised by such port or other port, in any manner,in relation to a vessel or goods:

Taxable service: services provided by minor ports or their authorised person relating to port services

Value of taxable service: Gross amount (including demurrage charges,if any) charge by minor ports in relation to such port services.

Person liable to pay: Minor ports

Head of Account

			SI.Code	SCCD
Minor- head	004400144	Port Services	00440176
Sub-head	00440014401	Tax collection	00440177	115
Sub-head	00440014402	Other Receipts	00440178	114
Sub-head	00440014403	Deduct Refunds	00440179	117

Levy of service tax under the head "Port Services" - Case of Management Committee (CFH Scheme), Paradeep Port

Indian Service Tax

Clarifications

Paradeep Port

Cir. No. 44/7/2002-ST, Date: 26/06/2002

Sub:- Levy of service tax under the head "Port Services" - Case of Management Committee (CFH Scheme), Paradeep Port - Regarding.

I am directed to say that doubts have been raised as to whether Management Committee (CFH Scheme), operating at Paradeep Port is liable to pay service tax under the head "Port Services", or not.

2. The Management Committee (CFH Scheme) has been constituted under the orders of the Hon'ble Supreme Court of India to take care of the problems of the workers at Paradeep Port. The Management Committee operates under the, "Paradeep Port, Clearing, Forwarding and Handling Workers (Regulation of Employment) Scheme, 1994". The Management Committee undertakes the supply of clearing, forwarding and handling workers at the prescribed rates to the listed employers Jor clearing, forwarding and handling operations, as are decided by the Committee, in the Port area.

3. Two officers of the Paradeep Port Trust are associated with the Management Committee to oversee the administration of the Committee.

4. All the labour Contractors and handling Contractors whose services are utilized by the Management Committee are issued with labour permits/licenses by the Paradeep Port Trust.

5. As per Section 65 of the Finance Act, 1994 'Port Services' means 'any services rendered by a port or any person, authorised by a port in any manner in relation to vessels and goods'. The doubt is whether the Management Committee can be considered to have been authorised by the port for rendering its services within the port area.

6. The matter has been examined by the Board. The scope of "port services" has already been clarified earlier by the Board vide Annexure VIII to letter. F.No. B11/1/2000-TRU, dated 9/7/2001. It was,inter alia,clarified that a Dock Labour Board is liable to pay service tax on the labour charges recovered by them. The Management Committee of Paradeep Port functions like a Dock Labour Board. Further, the Contractors utilized by the Management Committee for rendering their services are issued licenses or permits by the Paradeep Port Trust to operate within the port area. It cannot, therefore, be said that the Management Committee is not authorized by the Port Trust for rendering services in relation to vessels and goods within the port area.

7. It is understood that such a system does not operate in any other port in India.

8. It is, therefore, clarified that the Management Committee is liable to pay service tax under the head "port services", for the services rendered by them within the port area in relation to vessels and goods.

Ship Repair

Cir. No. 67/16/2003-ST, Date: 10/11/2003

I am directed to say that a doubt has been raised regarding levy of Service Tax on ship repair during the dry docking by the person duly authorised in this behalf by port authorities. This involves removal of damaged parts and replacement by new parts. This may involve repairing the outside bottom area of a ShipNesse1 by supplying huge quantities of MS plates etc.

The matter has been examined, Port services means any service rendered by port or any person authorised by them, in any manner, in relation to a vessel or goods, Thus, all such services rendered, including during dry dock and repairs to the ship, are taxable which should include not only the minor repairs provided by ship chandlers but also the dry dock facilities and any repairs carriedoutto the vessels. However, the benefit of Notification No. 12/2003-ST dated 20.6.2003 would be available.