India Widens Service Tax Net

by Lorys Charalambous, Tax-News.com, Cyprus

01 May 2006

Fifteen new service categories will become taxable from May 1, 2006 as a result of changes brought about by the Finance Act 2006, which received the assent of the President of India, Dr A.P.J. Abdul Kalam, on the 18th April, 2006.

The changes mainly affect Section 65 of the Act, which defines taxable services and various terms used in relation to taxable services, and Section 66, which is the charging section and provides for levy of service tax on taxable services.

Fifteen services which are specifically mentioned in the category of taxable services are:

• Service provided by a Registrar to an Issue;
• Service provided by a Share Transfer Agent;
• Automated Teller Machine operations, maintenance or management;
• Service provided by a recovery agent;
• Sale of space or time for advertisement, other than in print media;
• Sponsorship services provided to any body corporate or firm, other than services in relation to sponsorship of sports events;
• Transport of passengers embarking on international journey by air, other than in economy class ;
• Transport of goods in containers by rail provided by any person other than Government railway;
• Business support services;
• Auctioneers’ service, other than in relation to auction of property under directions or orders of a court of law or auction by the Government;
• Public relations service;
• Ship management service;
• Internet telephony service;
• Transport of persons by cruise ship; and
• Credit card, debit card, charge card or other payment card related services.

An additional amendment has been made to the Act which substitutes the term ‘commercial concern’, in relation to seventeen taxable services, with ‘person’. These amendments enable the levying of service tax on those services provided by any person who is not necessarily a commercial concern.

Also, reinsurance services have been included in the Act under general insurance and life insurance services.

The services tax amounts to about 12.24%, and under the new rules will apply to services supplied from outside India via a reverse charge mechanism as well as to domestic services.

Recommended