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Charging under Negative List Regime

 

New Charging Section [66B]

 

  • Levy of tax @ 12%
  • On value of all services, other than specified in negative list
  • Provided or agreed to be provided
  • In the taxable Territory
  • By one person to another

 

Agreed to be provided” includes:

  • Amount received as advance
  • Advance retained on cancellation of contract

 

Taxable Territory means:

  • Excludes J&K
  • Place of Provision of Service Rules,2012 introduced
  • Relevant as tax is levied on services received in taxable territory

 

 

Service Defined [65B(44)]

 

  • Any activity
  • Carried out by a person for another
  • For consideration
  • Includes declared service

 

Does not include

  • Transfer in title of goods or immovable property
  • “Deemed Sale” under clause 366(29A) of Constitution
  • Transaction in money or actionable claim
  • Provision of service by employee to employer
  • Fees payable to court or tribunal under a law

 

Explanation

  • Unincorporated association or body of persons treated as distinct from its members
  • Transaction in money excludes conversion of money/ currency in another form where separate consideration is charged
  • Establishment in taxable territory is treated as separate from establishment in non-taxable territory.
  • Branch carrying business in a territory shall be treated as having establishment in that territory

 

Activity

 

Activity can either be active or passive or forbearance of an act. For eg.amount charged for following will be treated as service:

  • Non-compete agreements
  • Vacating of plot

 

Activity done without express or implied contractual reciprocity of consideration would not be an “activity for consideration”

 

  • Activity without consideration: Artist performing on street receiving money from passerby [outside the purview as the listeners are “under no obligation” to engage or pay]
  • Consideration without activity: Pocket money, gift, amount paid as alimony.

 

By a person for another

  • Service provided to self is not taxable eg. Service provided by one branch of company to another.
  • Person includes legal entities, unincorporated associations and government.

 

Consideration

  • Can be either “Monetary or non-monetary”
  • Donation or gift is not consideration
  • Non-Monetary
  • Supply of goods/ service in return
  • Refraining or to do an act
  • Value determined as per Valuation Rules
  • Fines and penalties are not consideration

 

Transfer of title in goods or Property

 

  • A transfer simpliciter is excluded from service tax
  • Transfer of title means change in ownership and not merely transfer of custody or possession over goods or immovable property