OFFICE OF THE COMMISSIONER OF CENTRAL EXCISE
NO.1 WILLIAMS ROAD, CANTONMENT, TRICHIRAPPALLI-620 001.
Trade Notice No.24 /2003 (S.Tax) Dated : 17-11-2003.
Sub: Service Tax – Communication of Board’s Circular No.64/2003, 65/2003, 66/2003 and 67/2003 dated 28-10-03, 5-11-03, 5-11-03 and 10-11-2003 respectively-Reg.
Copy of the Board ‘s Service Tax Circular No. 64/13/2003-ST dtd 28-10-2003 issued under F.No. 168/01/2003-CX.4 , Circular No. 65/14/2003-ST dtd 5-11-2003 issued under F.No. B3/7/2003-TRU (Part), Circular No.66/15/2003-ST dtd 5-11-03 and Circular No.67/16/2003-ST dtd 10-11-2003 are communicated herewith for information, guidance and necessary action.
The contents of this Trade Notice may be brought to the knowledge of all constituent members of the Trade Associations and Chamber of Commerce.
(Issued from the C.No.IV/16/901/2003-S.Tax)
Copy of the Board’s Circular No. 64/2003, 65/2003, 66/2003 and 67/2003 dated
CIRCULAR NO: 64/13/2003-ST, Dated: Oct 28, 2003
The representations have been received in this office with regard in the leviability of Service Tax under the category of Advertising Agency Services in respect of persons agencies engaged in canvassing for advertisements for which they get commission from the publishers. The persons involved do not provide any service like making, preparing, displaying and exhibiting and only undertake canvassing for the advertising.
2. The term canvassing may merely involve contacting potential advertisers and persuading them to give advertisement to a particular newspaper/ periodical / magazine. The making and preparation of the advertisement namely, drafting of the text, preparation of layout is left either to the advertiser or to newspaper/ periodical / magazine. Such a service is known as 'space selling'. In such cases, since the agency undertakes the job of merely bringing the order for an advertisement and does not undertake any further activity, it would not fall within the definition of advertising agency and will not be subjected to service tax.
3. On the other hand, 'canvassing' may involve such agency approaching a customer, receiving the texts of the advertisement (including photographs, monograms etc. of the customs), estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, informing the general layout of the advertisement, that would finally appear in such newspaper etc. In such cases the term 'canvassing' would certainly fall within the phrase 'any service provided in any manner connected to making preparing, displaying and exhibiting' and would be taxable service.'
4. In view of above, I have been directed to say that if the canvassing is limited to space selling then such services would not be liable to any service tax. However, if canvassing is involving receiving the text of advertisement, estimating the space that such advertisement would occupy in the newspaper/periodical/magazine, negotiating the price, forming the general layout of the advertisement that would finally appear in the newspaper then such activity would be liable to service tax under the category of Advertising Agency Services.
Deputy Secretary to the Government of India.
CIRCULAR NO 65/14/2003, Dated : Nov 5, 2003
F. No. B3/7/2003-TRU (part)
Subject : Payment of service tax in case of advance
payment of value of services.
I am directed to say that some doubts have been raised regarding payment of service tax in cases where a lumpsum payment for a service to be provided in future over a certain period of time, is made in advance before the date on which the particular service came under the tax net, but the entire or part of such service is provided after the date on which it became taxable. The doubt appears to have arisen as Rule 6(1) of Service Tax Rules, 1994, provides for payment of tax on the value of service received during a month/quarter, and in the instant case, no payment is received after the date on which the tax came into force (for example a case where payments for coaching service is received before 1-7-2003 i.e. the date on which this service became taxable, but the entire or part of coaching is provided after that date).
2. In this regard it may be noted that rule 6 only prescribes the procedure of payment of tax. The liability to tax is created by section 66 of the Finance Act, 1994 as amended from time to time. The liability to pay tax is fastened on the service provider by section 68 of the said Act. These two sections read together imply that service tax is payable by the service provider on the value of taxable services. Thus if a service provided is taxable, tax has to be paid on its value. Section 67 also clarifies value of service as the amount charged for the taxable service by the service provider. In other words, an amount becomes value of taxable service only when it has a nexus with the service provided. That is the reason why the expression used in rule 6 is “value of taxable services” and not amount. The implication is that the tax has to be paid on the value of taxable services attributable to the service provided in a month/quarter as and when it is received. Thus, rule 6(1) can not be read in isolation. When read alongwith the provisions of the Act, it becomes clear that where the value of taxable service has been received in advance for a service which became taxable subsequently, service tax has to be paid on the value of service attributable to the relevant month/quarter which may be worked out on pro rata basis.
3. In this context, attention is invited to para 2.3.1 of circular No.59/8/2003 dated 20-6-2003 wherein it was clarified that in view of the notification 11/2003-ST dated 20-6-2003, no service tax would be payable where maintenance contracts are entered into before 1-7-2003, provided the invoices are raised and paid prior to 1-7-2003. It was further mentioned in the circular that similar would be the situation in case of continuing services. By continuing services what was meant was continuing maintenance services where there is an ongoing contract under which regular periodical payments are made. That para 2.3.1 was only in the context of maintenance and repair service is also quite clear from the heading, “MAINTENANCE AND REPAIR SERVICES” of para 2.3 in that circular. No similar exemption has been granted to any other service in case of advance payments.
Joint Secretary (TRU)
CIRCULAR NO: 66/15/2003-ST, Dated : Nov 5, 2003
Subject : Applicability of service tax on commission income earned on distribution and marketing of units of mutual fund.
I am directed to say that some doubts have been raised regarding application of service tax on the activity of Mutual FUnd Distribution as to whether
1) the comission receivd by distributors on mutual fund distribtion as liable to Service Tax under the category of Business Auxiliary Services ?
2) the services provided is exempt from service tax in terms of Notification No. 13/2003 dated 20.6.2003?
In this connection, it is clarified that the services provided as reffered above are primarily in nature of the services of commission agent in relation to clause (ii) and (iv) of the category of services mentioned in the defintion of Business Auxiliary Services and hence should be leviable to service tax under this category. This activity does not get covered under exemption Notification No 13/20003-ST dt 20.6.2003 as this is not in relation to sale or purchase of goods. The exemption provided under Notification 13/2003-ST is applicable only for commission agents dealing in goods.
Under Secretary CX IV
CIRCULAR NO : 67/16/2003-ST, Dated : Nov 10, 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 Ship/Vessel 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 carried out to the vessels. However, the benefit of notification no. 12/2003-ST dated 20.6.2003 would be available.
2. A clarification issued by the Board in this matter vide letter of even number dated 1.7.2003 is also enclosed for information.
Under Secretary to the Govt. of India