FREQUENTLY ASKED QUESTIONS (FAQ) ON SERVICE TAX
BASED ON THE MEETING HELD ON 19.08.2015
1. 1. What is service ?
‘Service’ has been defined in clause (44) of the new section 65B and means –
•carried out by a person for another
•and includes a declared service
2. 2. What is Negative List and Mega Exemption
Negative List under Section 66D specifies a list of services which are out of the ambit of Service Tax
Mega Exemption Notification No.25/2012-ST dated 20.06.2012 lists out services which have been specifically exempted from service tax
3. 3.List of Abatement in relation to Service tax
Notification No. 26/2012-ST lists services on which part of the taxable services are exempted (abated) subject to fulfillment of certain conditions
4. 4. What is Works Contract w.r.t. Service tax
Works Contract is defined under section 65B clause (54) as:
“(54) "works contract" means 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, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;”
It was clarified that for abated rates only service portion is chargeable for service tax.
5. 5. What is the taxability of specific services like Transportation of goods by road etc.
Taxability of various kinds of services viz Transportation of goods by road, linen washing, on board cleaning and the rates thereof are 4.2%, 14% and 8.4% respectively.
6. 6. What is original works and if it is taxable for Railways.
Original works means all types of alterations to abandoned /damaged structures, erection, commissioning or installation of plant, machinery or equipment or structure whether pre fabrication or otherwise. Original works is exempted from service tax, it was advised for all such works it may clearly be mentioned in the Tender Document so that the tenderer will factor the same while quoting the rates.
It is therefore pertinent that while framing of contract agreement the name and scope of work should be designed carefully so as to avail exemption under these categories of works.
7. 7. What is the value of service portion in the execution of works contract
Service tax is payable on 70% of the total amount for other than original works including Maintenance or repair etc.
8. 8.Whether Annual Maintenance Contracts (AMC) entered by Railways for its equipments maintenance i.e. computer, machinery etc. are liable to Service Tax?
The services of annual maintenance contracts for maintenance and repair etc. are liable to Service Tax. These would be taxable as works contracts treated as Declared Service u/s 66E (h) of the Finance Act, 1994. Being indirect tax, contractor will charge Service Tax to Railways, subject to the works contract entered into. However, in case when the turnover of the service provider is below Rs. 10 lakh (which is not likely to be in case of Railway contractors), service provider will not be liable to pay Service Tax. In such cases, service provider may or may not be registered under Service Tax.
FREQUENTLY ASKED QUESTIONS (FAQ) ON SERVICE TAX
BASED ON THE MEETING HELD ON 07.08.2015
1.On what services provided by Railways are liable to pay Service tax?
Service tax is payable only on transport of goods or passengers (only transport of passengers in (A) first class or(B) an air conditioned coach are taxable) and renting of immovable property (ATM, Advertisement, Catering, Shoe Shine, Cloak Room etc)
2.What is reverse charges with reference to Service tax
The general principle is that liability to pay Service Tax is on the service provider. However, the provisions of Section 68(2) of the Finance Act, 1994 read with rule 2(1(d) of Service Tax Rules, 1994 and Notification No. 30/2012-ST dated 20.06.2012 provide for service receiver to be one of the persons liable to pay Service Tax in certain cases. The liability of payment of Service Tax could, therefore be discharged by any one of the following -
• Service provider in ordinary course
• Service receiver under reverse charge cases
• Jointly by service provider and service receiver (partial reverse charge)
Thus, for specified services as per Notification No. 30/2012-ST dated 20.06.2012 and conditions stipulated therein, the liability to deposit the Service Tax to the credit of Central Government shall be on service receiver to the extent notified.
3.What information needs to be readily available w.r.t. audit of Service tax.
In each contract, information with regard to the exact rate of Service Tax applicable, what is the amount of ST received, if not received ‘why?’, etc. should be readily available with us because the ST Deptt has got the mandate to conduct Audit of these contracts.
4.What information needs to be available for bundle of activities.
As regards contracts which are finalised for a bundle of activities, it is advisable to work out the ST liabilities and provide for the same in the contract/tender document. If not done, it will be difficult to bifurcate the ST from the items of earnings which will inflate our earnings.
5.Is Service tax applicable on Licence Feereceived on Parking activities
Service Tax is not applicable for services rendered directly by the Railways to the users. Parking service rendered to public through a contractor is a support service and taxable under “Renting of Immovable Property”.
6.Are Railways responsible for payment/collection of service tax on catering services rendered through agencies other than IRCTC
No. Collecting service tax is not our responsibility as the vendor will collect the same and pay to the ST Department.
7.Whether Catering Licensee should collect ST from the passengers?
8.Is service tax payable in Hoarding for advertisement
If only space in hoarding is provided (where Railways owns hoarding), service tax will not apply. (Service Tax may be payable under Reverse charge mechanism by the receiver if service is support service for the receiver).
If immovable property is rented for advertisement hoardings, service tax will apply under “Renting of immovable property”.
If movable property is rented for advertisement hoardings, service tax will not apply (Service tax may be payable under Reverse charge mechanism by the receiver if service is “support service” for the receiver).
9.Is Service tax applicable on ATMs
Yes under renting of immovable property service
10.Is service tax is payable when Boundary Walls being erected from outsiders and in return if the party uses it for advertising
ST is payable since this is on a barter system.As such, both the parties are liable to pay the service tax.
11.What is to be done if Service tax is applicable on running contracts where ST was not levied
Either insist on the contractor to pay the Service tax or short close the contract and initiate process for fresh contract, duly incorporating the ST provisions.
12.Whether the maintenance charges collected by Railways from private parties to maintain their private sidings are taxable? If yes, whether there is any specific abatement on the same?
The charges collected by Railways for maintenance of private sidings shall be taxable and there is no specific abatement or exemption for the same. Thus, Service Tax is required to be paid @ 14% (current tax rate) on maintenance services rendered by Railways.