Services by Government or a local
authority excluding the following services to the extent they are not covered
elsewhere—Section 66D
(i) services by the Department of
Posts by way of speed post, express parcel post, life insurance and agency
services provided to a person other than Government;
(ii) services in relation to an
aircraft or a vessel, inside or outside the precincts of a port or an airport;
(iii) transport of goods or
passengers; or
(iv) [*][any
service], other than services covered under
clauses (i) to (iii) above, provided to business entities;
[*] Substituted by the Finance
Act, 2015 w.e.f. 14.05.2015, Earlier it read as under: “support services”
With effect from
14.05.2015
“Government” means the Departments of
the Central Government, a State Government and its Departments and a union
territory and its departments but shall not be include any entity, whether
created by a statute or otherwise, the accounts of which are not required to be
kept in accordance with article 150 of the Constitution or the rules made
theirunder
“Local Authority” means-
(a) a Panchayat as
referred to in clause (d) of article 243 of the Constitution;
(b) a Municipality as
referred to in clause (e) of article 243P of the Constitution;
(c) a
Municipal Committee and a District Board, legally entitled to, or entrusted by
the Government With, the control or management of a municipal or local fund;
(d) a Cantonment Board as
defined in section 3 of the Cantonments Act, 2006 (41 of 2006);
(e) a regional council or
a district council constituted under the Sixth Schedule to the Constitution;
(f) a
development board constituted under article 371 of the Constitution; or
(g) a regional council
constituted under article 371A of the Constitution;
Departmental
Clarifications
(A) D.O.F. No.
334/5/2015-TRU, Dated 28.02.2015
5.1 (iii) Presently, services provided by a
Government or a local authority, excluding certain services specified under
clause (a) of section 66D , are covered by the Negative List. Service Tax
applies on the “support services” provided by the Government or local authority
to a business entity . An enabling provision is being made, by amending section
66D to exclude all services provided by the Government or local authority to
the business entity from the Negative List. Consequently , the definition of
“support service” [ section 65B(49)] is being omitted. Accordingly, as and when
this amendment is given effect to, all services provided by the Government or
local authority to a business entity, except the services that are specifically
exempted , or covered by any another entry in the Negative List, shall be
liable to service tax.
(B) D.O.F. No. 334/5/2015-TRU, Dated
19.05.2015
3. Presently, services provided by
Government or a local authority, excluding certain services specified under
clause (a) of section 66D , are covered in the Negative List. An enabling
provision has been made, by an amending section 66D(a)(iv) , to exclude all
service provided by the Government or local authority to the business entity
from the Negative List [section 109(1) of Finance Act, 2015] . Consequently,
the definition of “support service” [section 65B (49)] is also to be omitted
from 14.05.2015 [ section 107(h) of Finance Act ,2015].
Person responsible for discharge of
Service Tax Liability in respect of above specified Services
Relevant Service
|
Person responsible for discharge of Service
Tax
|
Specified
services provided by Derpartment of Posts
|
Department
of Posts
|
Services in
relation to vessel
|
Concerned
Government Department. For instance, Port Authorities
|
Services in
relation to an Aircraft
|
Concerned
Government Department. For instance, Airport Authority of India
|
Transport
of Goods and/or passengers.
|
Concerned
Government Department. For instance, Indian Railways , Delhi
Transport Corporation.
|
Any Service
[ other than those covered by clauses (i) to (iii) to above] to business
entities.
|
The Concern
business entity by virtue of Reverse Charge Mechanism given under section
68(2) of the Act read with clause 6 of Notification No.
30/2012-S.T. dated 20.06.2012
|
Departmental
clarification-Taxation of services- An Education Guide, Dated 20.06.2012
4.1.1 Are All Services provided by
the Government or Local Authority Covered in the negative list?
No. Most services provided by the
central or state Government or local authorities are in the negative list
except the following:
(a) Services provided by the
department of posts by way of speed post, express parcel post, life insurance
and agency services carried out on payment of commission on non-Government
business;
(b) Services in relation to a vessel
or an aircraft inside or outside the precincts of a port or an airport;
(c) Transport of goods and/or
passengers ;
(d) Support Services,
other than those covered by clause (a) to (c) above , to business entities
4.1.2 Would the taxable services
provided by the Government be charged to tax if they are otherwise exempt or
specified elsewhere in the negative list?
No. If the services provided by the
Government or local authorities that have been excluded from the negative list
entry are otherwise specified in the negative list then such services would also
not be taxable.
4.1.3 ‘Government’ has not been
defined in the Act. What is the meaning of Government?
The Phrase ‘Government’ has not been
defined in the Act. As per clause (23) of section 3 of the General Clauses Act,
1897 ‘Government’ include both Central Government and any state Government As
per clause (8) of section 3 of the said Act ‘Central Government’, in relation
to anything done or to be done after the commencement of the constitution ,
mean the President. As per article 53 of the constitution the executive power
of the Union shall be vested in the President and shall be exercised by him
either directly or indirectly through officers subordinate to him in accordance
with the Constitution. Further in term of article 77 of the Constitution all executive
actions of the Government of India shall be expressed to be taken in the name
of the President. Therefore , the Central Government means the President and
the officers subordinate to him while exercising the executive powers of the
union vested in the President and in the name of the President.
Similarly as per clause (60) of
section 3 of the General Clauses Act, 1897 ‘State Government’, as respects
anything done after the commencement of the Constitution, shall have been, in a
State the Governor, and in Union Territory the Central Government Further as
per article 154 of the Constitution the executive power of the state shall be
vested in the Governor and shall be exercised by him either directly or
indirectly through officers subordinate to him in accordance with the
Constitution. Further, as per article 166 of the Constitution all executive
actions of the Government of state shall be expressed to be taken in the name
of Governor. Therefore, State Government means the Governor or the officers subordinate
to him who exercise the executive power of the state vested in the Governor and
in the name of Governor.
4.1.4 Are various corporations formed
under Central Acts or State Acts or various Government companies registered
under the Companies Act, 1956 or autonomous institutions set up by a special
Acts covered under the definition of ‘Government’ ?
No. A statutory body, corporation or
an authority created by the Parliament or a State Legislature is neither
‘Government’ nor a ‘Local Authority’ as would be evident from the meaning of
these terms explained in point nos. 2.4.7 and 2.4.8 above respectively. Such
Statutory body, corporation or an Authority are normally created by the
Parliament or a state Legislature in exercise of the powers conferred under
article 53(3)(b) and article 154(2)(b) of the Constitution respectively . It is
a settled Position of law Government (Agarwal Vs Hindustan Steel AIR
1970 Supreme Court 1150) that the manpower of such statutory authorities or
bodies does not become officers subordinate to the president under article
53(1) of the Constitution . Such a Statutory Body, corporation or an authority
as a juristic entity is separate from the state and cannot be regarded as
central or state Government and also do not fall in the definition of ‘Local
Authority’.
Thus regulatory bodies and other
autonomous entities which attain their entity under an act would not comprise
either Government or Local Authority.
4.1.5 What entities are then covered
under ‘Government’?
‘Government’ would include various
departments and offices of the Central or State Government or the U.T.
Administrations which carry out their functions in the name and by order of the
President of India or the Governor of a State.
4.1.6 Would a department
of the Government need to get itself registered for each of the services listed
in answer to Q. No. 4.1.1 above?
For the Support services provided by
the Government, other than where such support services are by way of renting of
immovable property , to business entities, Government departments will not have
to get registered because service tax will be payable on such services by the
service receiver i.e. the business entity receiving the service under reverse
charge mechanism in terms of the provisions of section 68 of the Act and the
notification issued under the said section as well Service Tax Rules, 1994. For
Services mentioned at (a) to (c) of the list (point 4.1.1 above refers) tax
will be payable by the concerned department Conditions of Service) Act, 1971
(such services are performed by CAG under the statue and cannot be performed by
the business entity themselves and thus do not constitute support services.)
4.1.8 Will the services provided by
Police or security agencies to PSUs or corporate entities or sports events held
by private entities be taxable?
Yes. Services provided by Government
security agencies are covered by the main portion of the definition of support
service as similar services can be provided by private entities. In any case it
is also covered by the inclusive portion of the definition. However the tax
will be actually payable on reverse charge by the recipient.
4.1.9 What is the meaning
of Local Authority?
Local Authority is defined in clause
(31) of section 65B and means the following:-
(i) A Panchayat as
referred to in clause (d) of article 243 of the Constitution
(ii) A Municipality as
referred to in clause (e) of article 243P of the Constitution
(iii) A Municipal committee and a
District Board , legally entitled to, or entrusted by the Government with, the
control or management of a municipal or local fund
(iv) A Cantonment Board as defined in
section 3 of the Cantonment Act ,2006
(v) A regional Council or
a district council constituted under the sixth Schedule to the Constitution
(vi) A development board
constituted under article 371 of the Constitution , or
(vii) A regional council constituted
under article 371A of the constitution
4.1.10 Are all local
bodies constituted by a state or central law are local authorities?
No. The definition of ‘Local
Authority’ is very specific as explained above and only those bodies which fall
in the definition comprise ‘local authorities’. It would not include other
bodies which are merely described as a local body by virtue of a local law.
However it may be noted that services
by a Governmental Authority by way of any activity in relation to any function
entrusted to a municipality under article 243W of the constitution are
specifically exempt under the mega exemption. ‘Government Authority’ has been
defined in the said mega exemption as a board, or an authority or any other
body established with 90% or more participation by way of equity or control by
Government and set up by an Act of the Parliament or a state Legislature to carry
out any function entrusted to a municipality under article 243W of the
Constitution. Thus some of these local bodies may comprise Governmental
authorities
Author’s Note: The definition of term
‘Government Authority’ has been amended with effect from 30.01.2014 vide Notification No. 02/2014-ST dated 30.01.2014.
4.1.11 Department of Posts provides a
number of services. What is the status of those services for the purpose of
levy of service tax?
As per sub-clause (i) of clause (a)
of section 66D services provided by the department of posts by way of speed
post, express parcel post , life insurance, and agency services carried out on
payment of commission on non-Government business are excluded from the negative
list. Therefore , the following services provided by department of Posts are
not liable to service tax.
Basic mail services known as postal
services such as post card , inland letter, book post, registered post provided
exclusively by the Department of Posts to meet the universal postal
obligations.
Transfer of money through money
orders , operations of savings accounts issue of postal orders, pension
payments and other such services
4.1.12 Would agency or intermediary
services on commission basis (distribution of mutual funds, bonds, passport
applications, collection of telephone and electricity bills), which are
provided by the Department of Posts to non-Government entities be liable to
service tax?
Yes. Agency services carried out on
payment of commission on non-Government business are excluded from the negative
list entry relating to services provided by Government or a Local Authority”
RELATED EXEMPTIONS IN NOTIFICATION NO. 25/2012
1. Entry No. 12 of Notification No. 25/2012-ST, Dated 20.06.2012 (As amended
by Notification No. 06/2015-ST, Dated 01.03.2015)
With effect from 01.04.2015
Services provided to the Government,
a local authority or a governmental authority by way of construction, erection,
commissioning, installation , completion, fitting out , repairing ,
maintenance, renovation or alteration, of –
(a) omitted;
(b) a historical monument
, archaeological site or remains of national importance , archaeological
excavation, or antiquity specified under the Ancient Monuments and
Archaeological Sites and Remains Act, 1958(24 of 1958);
(c) omitted;
(d) canal, dam or other
irrigation works;
(e) pipeline, conduit or
plant for (i) water supply (ii) water treatment , or (iii) sewerage treatment
or disposal ; or
(f) omitted
2. Entry 25 of Notification No. 25/2012-ST, Dated 20.06.2012 (Amended by Notification No. 03/2013-ST, Dated 01.03.2013 and Notification No. 6/2014-ST, Dated 11.07.2014
With effect from 11.07.2014
Services provided to Government, a
local authority or a governmental authority by way of –
(a) water supply, public
health, sanitation conservancy, solid waste management or slum improvement and
up-gradation; or
(b) repair or maintenance of a vessel
3. Entry 34(a) of Notification No. 25/2012-ST, Dated 20.06.2012
provide exemption from levy of
service tax to Services received from a service provider located in a
non-taxable territory by the Government, a Local Authority , a
Governmental Authority or an individual in relation to any purpose other than
commerce , industry or any other business or profession.
4. Entry 39 of Notification No. 25/2012-ST, Dated 20.06.2012
provides exemption from levy of
service tax to Services by a Government Authority by way of any activity in
relation to any function entrusted to a municipality under Article 243W of the
Constitution.
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