Monish Bhalla: August 2010

Sunday, August 22, 2010

Service Tax Online

ISSUE 1: Whether commission received by distributors for distribution of mutual fund units is liable to Service Tax under Business Auxiliary Service?

ANSWER 1: Distributors receive commission from mutual fund for providing services relating to purchase and sale of Mutual fund units. Services provided by such distributors are in the nature of commission agent and are, thus, liable to Service Tax under Business Auxiliary Service [section 65(105)(zzb)].

ISSUE 2: Persons / agencies canvass advertisements for publishing, on commission basis. Such persons / agencies do not provide any other services like making, preparation, display or exhibition of advertisement. Whether merely canvassing advertisement for publishing on a commission basis by persons / agencies is classifiable as Advertising Agency service [section 65(105)(e)] or not?

ANSWER 2: Merely canvassing advertisements for publishing, on commission basis, is not classifiable under the taxable service falling under section 65(105)(e). Such services are liable to Service Tax under Business Auxiliary Service [section 65(105)(zzb)].

Service Tax Online

SERVICE TAX SIMPLIFIED:GOVERNMENT OFFICE RENTAL NON TAXABLE

Renting of Immovable properties was brought under the ambit of Service Tax In June 2007 and since then it has always been a root cause of various ambiguities giving birth to some major future litigations. Service has to have an essential character of any activity and rent is merely a passive function similar to earning interest from bank deposits. However vide Section 65 (105) zzzz, Renting of Immovable properties has been declared as an taxable service. As defined under Section 65 (90 a) "renting of immovable property" includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce. However there is an exclusion Clause whereby renting of immovable property by a religious body or to a religious body; or to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre are excluded from Service Tax. As per the explanation to the said Section the phrase, "for use in the course or furtherance of business or commerce" includes use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings. Recently as per the Ministry’s letter F No. 280/46/2007-CX8 A dated 24.04.2008 the Director (Legal) CBEC informed that various Writ Petitions have been filed in High Courts all over the Country challenging the Constitutional validity of subsection (90a) of Section 65 read with Section 65 (105) (zzzz) of the Finance Act, 1994 seeking to levy Service Tax on renting / leasing of immovable property. The Board has already filed a transfer petition in the Hon'ble Supreme Court of India, inter-alia praying, for transfer of 15 writ petitions filed in the Hon'ble High Courts of Mumbai, Chennai, Punjab & Haryana, Kerala & Kolkata for determination and authoritative pronouncement on the question of law involved, by the Hon'ble Supreme Court. As regards the case where the immovable property which have been given on rent to Government offices the Central Board of Excise and Customs vide their communication dated 17.12.2007 issued from F. No. 137/280/2007CEX4 clarified that Central Government offices do not fall under the domain of furtherance of Business and Commerce as they are engaged in an activity of performing statutory function. As these statutory functions are performed by a public authority it cannot be termed as an activity of Business or Commerce. Therefore it is not under the purview of a taxable service category of renting of immovable property.

Monish Bhalla

Monday, August 23, 2010

Service Tax Online

Sunday, August 22, 2010

Service Tax Online

Service Tax Online

Blog Archive

About Me

SERVICE TAX SIMPLIFIED:GOVERNMENT OFFICE RENTAL NON TAXABLE