All India Chartered Accountant’s Society

1. All India Chartered Accountant’s Society 4th Workshop on Service Tax (Session XX I) Date: 23 July, 2011 Dr. Sanjiv Agarwal New Delhi FCA, FCS, ACIS(UK) Jaipur

2. This Session Covers • Design Services w.e.f. 1.6.2007 [Section 65 (105) (zzzzd)] • Development & Supply of Content Services w.e.f. 1.6.2007 [Section 65 (105) (zzzzb)] • Rent – a – Cab Operator’s Services w.e.f. 1.4.2000 [Section 65 (105) (o)] • Tour Operator Services w.e.f. 1.4.2000 [Section 65 (105) (n)]

3. Designing Services w.e.f. 1.6.2007 Section 65(105) (zzzzd) What is Design Services? Design services includes services provided in relation to designing of furniture, consumer products. industrial products, packages, logos, graphics, websites and corporate identity designing and production of three dimensional models. [Section 65 (36 b)]. • Inclusive but wide definition • Does not include trade mark • Means only the features of shape, configuration, pattern or ornament applied to any article by any industrial process or means, whether manual, mechanical or chemical, separate or combined, which in the financial article appeal to and are judged solely by the eye [Designs Act, 1911]

4. Designing Services What is Design Services? • Means a plan or scheme conceived in the mind of something to be done; a scheme formed to the detriment of another; a drawing or sketch. To produce a scheme or plan for the making of anything; purpose or intention, combined with plan in the mind; aim; purpose; object; end in view, scheme, intention to be carried into effect. (Advanced Law Lexicon) • Context referred is architecture, engineering, applied art, creative ventures etc.

5. Designing Services To include activity in relation to design of articles or things, which could be – • Furniture (fixtures not covered) • Consumer products (all) • Industrial products (all) • Packages (all types of packages - labels, bottles, pouch, imprinting etc.) • Logos (marks, designs, trademarks, logos, emblems etc.) • Graphics (any type of graphic designing) • Websites (only designing, not content provisioning) • Corporate identity designing (corporate advertisement designing, corporate image designing, colour scheme etc.) • Production of three dimension models (excluding digital films) • Only the act of designing in relation to above shall be covered in the scope and that designing of the aforesaid only shall be covered.

6. Designing Services Taxable Services [Section 65 (105) (zzzzd)] Taxable service means any service provided or to be provided to any person, by any other person in relation to design services, but does not include service provided by ­ • an interior decorator referred to in sub-clause (q); and • a fashion designer in relation to fashion designing referred to in sub-clause (zv). Basic Tests for Taxability • service should be provided or to be provided by any person to any other person (i.e., both can be any person), • service should be in relation to design services, • design must relate to specified items in the definition, • service provider should not be a fashion designer or an interior decorator.

7. Designing Services Taxable Service Excludes • Services in relation to conceptualizing, outlining, creating the designs and preparing patterns for costumes, apparels, garments, clothing accessories, jewellery or any other articles intended to be worn by human beings are leviable to service tax under fashion designing service [section 65(105)(zv)] • Services in relation to planning, design or beautification of spaces is leviable to service tax under interior decorator's service [section 65(105)(q)). Taxable Service Include • services, other than the above specifically mentioned taxable services, like furniture design, aesthetic design, consumer or industrial products, logos, packaging, production of three dimensional models, etc.

8. Designing Services Person liable Any person other than fashion designer or an interior decorator providing designing services to the customer or client shall be the person liable to pay service tax.

9. Development &Supply of Content Services W.e.f. 1.6.2011 Section 65(105) (zzzzb) Meaning of Development & Supply of Content Service [Section 65 (36c)] Development and supply of content includes development and supply of mobile value added services, music, movie clips, ring tones, wall paper, mobile games, data, whether or not aggregated, information, news and animation films. • Inclusive definition • Includes both – development and supply

10. Development &Supply of Content Services What is included Development and supply of – • mobile value added services • music • movie clips • ring tones • wallpaper • mobile games • data (aggregated or otherwise) • information • news, and • animation films Development & supply of above shall only be covered.

11. Development &Supply of Content Services Content means the substance and style of a communication's subject matter. Content provider is one who provides the content, consisting of information of various kinds, such as financial, news, intended for terminal users; the person providing material for transmission and other similar services on the internet (P. Ramanatha Aiyar's Advanced Law Lexicon) By development is meant the act, process or result of developing or growing or causing to grow; the state o! being developed; happening; the application of research findings of other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services prior to the commencement of commercial production or use. (P. Ramanatha Aiyar's Advanced Law Lexicon) The word 'supply' has to be understood literally or as the term is known in business.

12. Development &Supply of Content Services Data [defined in section 65 (36)] As per information Technology Act, 2000 A representation of information, fact, knowledge, concepts or instructions which are being prepared or have been prepared in a formalised manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network and may be in any form (including computer printouts, magnetic or optical) storage media, punched cards, purchased tapes) or stored internally in the memory of the computer.

13. Development &Supply of Content Services Information [defined in section 65 (53)] As per Information Technology Act, 2000. • Information is invisible under computer based environment • Includes data and data bases • Includes following modes of information storage / transmission • data, • text, • images, • sound, • voice, • codes, • computer programmes, • software, • data bases, • micro film, and • computer generated micro fiche.

14. Development &Supply of Content Services • Taxable Service [Section 65 (105) (zzzzb)] • Any service provided or to be provided to any person, by any other person in relation to development and supply of content for use in telecommunication services, advertising agency services and on-line information and database access or retrieval services. • It will become a taxable service under section 65(105) (zzzzb) only if such content is developed and supplied for use in anyone or more of the following – • telecommunication services, • advertising agency services, • online information & database access or retrieval services.

15. Development &Supply of Content Services Taxable services shall cover services provided by content developers in relation to development and supply of content for intended use by specified users i.e., • telecommunication service providers • advertising agencies • online information and database access or retrieval services which shall cover platforms like­ - • websites • internet • blogs, or • any electronic/telecom media

16. Development &Supply of Content Services To be a taxable service, following conditions should be satisfied – • Service should be provided or agreed to be provided by any person to other person. • The service provided should be any service in relation to development and supply d content. • 'Content' should be the subject matter of development and supply • The use of content should be for specified purposes only, i.e., for use in telecommunication services, advertising agency services and online data information and database access or retrieval services. • Taxable service shall not include services provided in relation to delivery of content of cinema in digital form after encryption electronically. • Also excludes KPO services, equity research, legal support, IPR research, industrial designs, publications, software etc.

17. Development &Supply of Content Services The taxable service has to undergo two-fold test • It has to be in relation to development and supply of content, • such content should be meant for use (actually used, or intended for such use) in telecommunication services, advertising services and online information and data base access or retrieval services.

18. Development &Supply of Content Services Interpretation of ‘AND’ • No clarification from CBEC • Following views available (C & F services) • Kulcip Medicines v.CCE (2005) 3 STJ 743 – Taxable when both are rendered • CCE v. Kulcip Medicines (2009) 14 STR 608 (P & H) – Affirmed Cestat’s order • Medpro Pharma Ltd. v. CCE (2006) 3 STR 355 – any one service also held to be taxable • CCE v. Adhunik Steels Ltd. (2006) 7 STJ 144 - any one service also held to be taxable.

19. Development &Supply of Content Services Person Liable • Any person providing services to any other person in relation to development and supply of content shall be liable to pay service tax.

20. Rent –a-cab Operator’s Services • W.e.f. 16.7.2007; 1.4.2000 Section 65 (105) (n) • Exempt during 1.3.1999 to 31.3.2000. • held to be constitutionally valid not coming under profession, trade or calling - Secretary, Federation of Bus Operators Association of Tamilnadu v. Union of India (2001) 134 ELT 618 (Madras)

21. Rent –a-cab Operator’s Services Rent a cab scheme operator [Section 65 (91)] Rent-a-cab-scheme operator means any person engaged in the business of renting cabs. • The operator must be a person • The person must be engaged in a specified business. • The business must be of renting cabs.

22. Rent –a-cab Operator’s Services Cab [Section 65 (20)] Amended w.e.f. 1.6.2007 Cab means— (i) a motor cab, or (ii) a maxi-cab, or (iii) any motor vehicle constructed or adapted to carry more than twelve passengers, excluding the driver, for hire or reward: Provided that the maxi-cab referred to in sub-clause (ii) or motor vehicle referred to in sub-clause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, shall not be included within the meaning of ‘cab’.

23. Rent –a-cab Operator’s Services Maxi cab [Section 65 (70)] • Defined in Motor Vehicles Act, 1988 • Any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward. • Criteria of No. of passengers which a cab carry – 6 to 12 [eg, matador, van, tempo etc.]

24. Rent –a-cab Operator’s Services Motor cab [Section 65 (71)] • Defined in Motor Vehicles Act, 1988 • Any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward.

25. Rent –a-cab Operator’s Services Taxable Service [Section 65 (105) (o)] Any service provided or to be provided to any person, by a rent a cab scheme operator in relation to the renting of a cab. • Following conditions must be satisfied for taxability of service — • it should be provided (includes to be provided) to any person • it should be in relation to specified service • such specified service should be in relation to renting of cab. • Cab could be – • motor cab • maxi cab • motor vehicle (w.e.f. 1.6.2007)

26. Rent –a-cab Operator’s Services Renting • Use of vehicle for hire / reward • Rent – an act to let out or allow use of something (house, car, properties) for a consideration • Renting of cab / car / vehicle • Consideration based on per hour, month or any contracted time • Rent is allowing use of something one owns in exchange of payment [R.S. Travels v. CCE (2008) 12 STR 27 (Cestat, New Delhi)]

27. Rent –a-cab Operator’s Services Taxability Issues • Taxability for educational purposes Service Educational Commercial Renting of motor cab Taxable Taxable Renting of maxi-cab Not taxable Taxable Renting of motor vehicle Not taxable Taxable • Motor Vehicle used as Ambulance • Not covered under cab [Circular No. 334/1/2007 – TRU dated 28.2.2007] • Ambulance also held to be not taxable in Bachan Singh Salooja v. CCE (2007) 10 STT 482 (Cestat, New Delhi) • Renting a cab with driver for specific destination / at hirer’s disposal – covered. [Shiva Travels v. CCE Meerut (2006) 7 STJ 161; (2006) 4 STR 388 (Cestat, New Delhi); Ghanshyam Lodhinal v. CCE, Jaipur-I (2010) 24 STT 434 (Cestat, New Delhi)]

28. Rent –a-cab Operator’s Services Taxability Issues • Providing cab with driver for a specific destination paid on per Km. basis (taxi use)- not covered. [Surya Tours & Travels v. CCE (2009) 16 STT 147 (Cestat, New Delhi); CCE, Rohtak v. Miglani Taxi Service (2009) 15 STR 566 (Cestat, New Delhi) ; R.S. Travels v. CCE (2009) 12 STR 27 (Cestat, New Delhi) • Renting of cabs on monthly basis covered [Anil Kumar Agnihotri v. CCE (2007) 11 STT 59 (Cestat, New Delhi); Dharmabhakti Travels v. CCE (2007) 9 STT 322 (Cestat, Ahmedabad)] • Sub contractors also covered – Sai Cars Travels v. CCE (2006) 6 STT 136 (Cestat, Mumbai) • Bharat Travels Company v. CST. Ahmedabad (2011) 32 STT 30 (Cestat, Ahmedabad) Provision of vehicle to other tour operators; no written agreement with customers that vehicle rented for any specified period; charges not collected on per hour / per Km. basis- held not a rent a cab service – vehicle to be handed over to customer to be at his disposal for specified period of time and charges are not entirely dependent upon only Kms. or hours of use.

29. Rent –a-cab Operator’s Services Valuation / Exemptions • Notification No. 9/ 2004-ST dated 9.7.2004 and Notification No. 1/2006-ST dated 1.3.2006 – 60% abatement from taxable value if cenvat credit is not availed on inputs / capital goods / inputs service or benefit of Notification No. 12 /2003 not taken. • Notification No 40/2010-ST dated 28.6.2010- Services provided within an airport or port are exempt to the extent of 60%

30. Rent –a-cab Operator’s Services Export of Service Based on performance – partly or fully out side India Import of Service Based on performance – partly or fully in India Cenvat Credit • Rule 5 – refund allowed to exporter of service can claim refund of cenvat credit for duty / service tax paid on inputs / input services used in providing services which are exported. • w.e.f. 1.4.2011, rent -a -cab service will not be treated as input service except in case of courier, tour operator, rent a cab, cargo handling, outdoor catering and pandal & shamiana services.

31. Tour Operator’s Services W.e.f. 1.4.2000 Section 65(105) (n) Tour [Section 65 (113)] “tour” means a journey from one place to another irrespective of the distance between such places. • Journey from one place to other • Distance traveled immaterial • Any type of journey covered (local / upcountry) • Even a journey from home to office is covered • May exclude tours for educational body

32. Tour Operator’s Services Tour operator [Section 65(115)] (Revised w.e.f. 16.5.2008) tour operator” means any person engaged in the business of planning, scheduling, organising or arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours in a tourist vehicle or a contract carriage by whatever name called, covered by a permit, other than a stage carriage permit, granted under the Motor Vehicles Act, 1988 or the rules made thereunder. Explanation.— For the purposes of this clause, the expression “tour” does not include a journey organised or arranged for use by an educational body, other than a commercial training or coaching centre, imparting skill or knowledge or lessons on any subject or field;

33. Tour Operator’s Services Tour operator to satisfy following conditions- • tour operators can be any person, • tour operator should be engaged in business, • such business can be of planning, scheduling, organising or arranging tours, • tours shall include arrangements for accommodation, sight seeing or other similar arrangements, • tour can be undertaken by any mode of transport, • tour operator shall include any person engaged in operation of tours in a tourist vehicle or contract carriage covered by a permit but excluders stage carriage, • tour excludes journey organized or arranged for use by educational body imparting skills or knowledge or lessons on any subject or field (other than commercial coaching or training centre).

34. Tour Operator’s Services Tour operators services shall have following exclusions- • Tours undertaken in a vehicle having stage carriage permit. • Journey from one place to another in tourist vehicle having contract carriage permit for use by educational institutions (schools, collegesetc) but not by commercial training or coaching centers.

35. Tour Operator’s Services CBEC Clarification (TRU Letter dated 29.2.2008) Tour in a vehicle covered by following permits leviable to service tax- • Contract Carriage permit granted under section 74 of the MVA, 1988 and authorization certificate issued under Motor Vehicles (All India Permit for Tourist Transport Operators) Rules, 1993; and • Permit granted under section 88(9) in accordance with the provisions of section 74 of the MVA, 1988 in respect of tourist vehicles, for the purpose of promoting tourism.

36. Tour Operator’s Services Tourist vehicle [Section 65(114)] A contract carriage constructed or adapted and equipped and maintained in accordance with the specifications

37. Tour Operator’s Services Essential ingredients of tourist vehicle • It must be a motor vehicle; • It is a contract carriage; • It carries a passenger or passengers on hire or reward; • It includes a maxi-cab and motor cab; • It plies under a contract for fixed set of passengers and does not allow any other passenger to board or alight at will; and • It does not include stage carriages.

38. Tour Operator’s Services Three Tests • Person must be engaged in the business of operating tours • Tour must be conducted using a vehicle • Vehicle must be under the grant of permit under MVA.

39. Tour Operator’s Services Contract Carriage Contract carriage means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether expressed or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorized by him in this behalf on a fixed or an agreed rate or sum — (a) on a time basis, whether or not with reference to any route or distance; or (b) from one point to another, and in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes — (i) a maxi-cab; and (ii) a motor cab notwithstanding that separate fares are charged for its passengers.

40. Tour Operator’s Services Contract Carriage –Basic Ingredients • It carries passengers for hire or reward; • It is engaged in contract whether expressed or implied for use of such vehicle as a whole; • The contract must be entered into by the person with the holder of permit in relation to such vehicle or with any person authorized by him; • The agreed consideration can either by on time basis or one point to another; • The vehicle should not stop to pick up or set down passengers not included in the contract anywhere during the journey; • It includes maxi-cab or motor-cab.

41. Tour Operator’s Services State Carriage Stage carriage means a motor vehicle constructed or adapted to carry more than six passengers excluding the drive for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey.

42. Tour Operator’s Services Permit Permit means a permit issued by a State or Regional Transport authority or an authority prescribed in this behalf under this Act authorizing the use of a motor vehicle as a transport vehicle.

43. Tour Operator’s Services Taxable Service [Section 65 (105) (n)] taxable service means any service provided for to be provided to any person, by a tour operator in relation to a tour.

44. Tour Operator’s Services Taxable service shall include – • Conducting / arranging tours – planning, scheduling organizing etc. • All domestic and inbound tourist services • Package tours • Journeys /tours undertaken or providing transport services • Lodging / boarding arrangements • Guide services • Sight seeing services/ assistance • Value added services – reservation, ticketing , entertainment etc

45. Tour Operator’s Services Taxability Issues • No service tax on college / school buses- transportation of school children in school bus,; in case of hired buses, service tax would be attached • In case of cabs, transportation of school children is not taxable (Circular No 137 dated 15.12.2008]. • Haj & Umrah Pilgrimage – considered as export (partly performed inside / outside India . • Delivery and handling of itinerary is part of tour operator’s services- Taanya Tours,, Travels & Freight Forwarders Pvt Ltd v CCE , Chennai (2011) 22STR 530 (Cestat, Chennai) • Department can not ignore definition of stage carriage and tourist vehicle – SCN to spare bus permit holders held to be bad – M Sugantni v Asstt. CCE (2011) 23 STR 7 (Madras).

46. Tour Operator’s Services Exemption / Abatements (a) Services provided in relation to a tour by a tour operators — (i) In case of package tour (bill to indicate that it is inclusive of charges for such tour) 60% exempt (ii) In case of other than package tour (bill to indicate that amount charged in bill is gross amount charged for such tour) 60% exempt (Notification No. 1/2006-ST, dated 1-3-2006 refers) (b) Services provided in relation to tour where services 90% exempt are solely of arranging or booking accommodation for any person (bill to indicate such fact and bill contains the value of such booking or accommodation) (Notification No. 1/2006-ST, dated 1-3-2006 refers) (c) Taxable services provided by tour operators, operating 60% exempt under a contract carriage permit for transport of passengers for the period 1-4-2000 to 4-2-2004. (Refer Notification No. 15/2007-ST, dated 4-1-2007)

47. Tour Operator’s Services Exemption / Abatements Exemption from service tax has been provided to interstate or intra-state transportation of passengers in a vehicle bearing contract carriage permit with specified conditions vide Notification No 20/2009-ST dated 7.7.2009. Finance Act, 2011 Changes (Section 72) Retrospective effect to the notification of the Government of India No 20/2009-ST G.S.R 492(E), dated the 7th July, 2009, from the 1st day of April, 2000, so as to allow the exemption to a tour operator having a contract carriage permit for inter-state or intra –state transportation of passengers, excluding tourism, conducted tour, charter or hire service

48. Tour Operator’s Services Export • When service is performed outside India – partly or fully • Haz & Umrah Pilgrimage – treated as export (Circular No 117 dated 30.10.2009)

49. THANK YOU FOR YOUR PRECIOUS TIME AND ATTENTION Dr. Sanjiv Agarwal FCA, FCS, Jaipur asandco@gmail.com sanjivservicetax@gmail.com