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Sr provider Nature of Service Taxable or Not Taxable Value


1. Mr A Mr A has entered into a contract with ABC Ltd under which it will locate Taxable (Service of sale or marketing of = Commission
buyers for products of ABC Ltd. and will get commission @5%. goods of client) received

2. Mr A UTI Mutual Fund has appointed Mr A as his agent for distribution of Mutual Taxable (Service of sale or marketing of = Commission
Fund Units. Mr A will be paid a commission @1%. goods of client – ‗Mutual Fund Units are also received
[Remember: Concept of ‘Reverse Charge’ is applicable in this case] ‗goods‘ – CBEC Circular)
3. Mr A Super Tech (Renowned Builder of Ghaziabaad) has entered into an agreement Not taxable under this category (as Flats are
with Mr A under which Mr A will promote and market the residential flats not goods – being immovable property)
constructed by it in Greater Noida. Mr A will get a commission @10%.
[However, this service will be taxable under
category of ‗Real Estate Agent‘s Service]
4. SKY ABC Ltd (manufacturer of Sauna Slimbelt) has entered into an agreement with Taxable (Service of sale or marketing of = 10 lakhs
Teleshopping Sky Teleshopping under which Sky Teleshopping will promote and market the goods of client –)
product of ABC Ltd [Suana Slimbelt] for a consideration of Rs 10 lakhs.

5. Sachin Sachin Tendulkar has entered into a contract with TOSHIBA under which Taxable (Service of sale or marketing of = 2 crores
Tendulkar Sachin will be advertising home appliances (TV, Fridge etc) in different media goods of client)
(television or print media). Sachin will be paid Rs 2 crore.

6. Shah Rukh Shah Rukh Khan has entered into a contract with manufacturer of ‗Lux Cozi‘ Taxable (Service of sale or marketing of = Consideration
Khan under which Shah Rukh Khan will be advertising ‗Lux Cozi (undergarments)‘ goods of client) received
in different media (television or print media).

7. M.S.Dhoni M.S.Dhoni has entered into a contract with REEBOK (I) ltd. Under the Taxable (Service of sale or marketing of = 5 crores
contract, Reebok would launch ‗DHONI TRAINER KIT (Shoe + T-shirt + goods of client)
Deo + Bag)‖ and Dhoni would be advertising it in different media (television
or print media). Dhoni will be paid a consideration of Rs 5 crore.
8. IPL BCCI has appointed Big B (Amitabh Bachan) as its BRAND AMBASSDOR Not Taxable under this category (However,
for promoting or marketing of forthcoming CHAMPION LEGUE. Big B will by FA, 2010 it has been made taxable under
be paid Rs 20 crore for it. category of ‗Promotion of Brand Service‘)

9. Wings Ltd ICICI has entered into a contract with Wings Ltd under which Wings ltd will Taxable (Promotion of services of ICICI = Comm Income +
both promote and market home loans, personal loans and credit cards services Bank) 500/ credit card
of ICICI Bank. Wings Ltd will get a commission @3% for every loan customer
transaction which they materialized and a fixed amount of Rs 500/- for every
credit card customer they bring.
[BRIDGESTONE FINANCIAL SERVICES -2007-TRIBUNAL]

10. Mr X Mr X is registered as sub-broker with SBI and acting on behalf of Taxable (Promotion of Services of Stock- ---
SMC (NSE Stock Broker). For all the transactions of sale or Broker) -- but exempted at present (E/N 31,
purcahse of listed securities, SMC will share 50% brokerage with 2009)
Mr X.
‗ ‖

Earlier, service of SUB-BROKER was taxable under the category of ―STOCK-


BROKER SERVICE‖ as the term ―stock-broker was defined to include sub-broker too.
This definition of STOCK-BROKER has been amended by FA, 2009 to delete the words
―SUB-BROKER‖. Thus, SUB-BROKER would not be liable to service tax under
―STOCK BROKER SERVICE‖ w.e.f. 1 st Sep, 2009. However, sub-broker get
commission from main broker and hence could have been subjected to tax as
commission agents under ―BUSINESS AUXILIARY SERVICE‖ Hence, services
provided by sub-broker to main broker in respect of sale or purchase of securities listed
on a recognized stock-exchange have been fully exempted under Business Auxiliary
Service (vide E/N 31/2009)

11. Roshan Roshan Motor Ltd is an authorized dealer of Maruti. It entered into agreement = Taxable (Promotion of Services of Finance = Comm Income
Motor Ltd with certain finance companies for the purpose of arranging finance for the Companies)
buyers of the vehicles. The prospective buyers were introduced by the assesse
to the finance companies for which commission @10% paid by the finance
company to Roshan Motors Ltd.
[ROSHAN MOTORS LTD -2009-TRIBUNAL]

12. Silicon Assessee provided “TABLE SPACE” to certain financial institution and Not Taxable under this category (as there is
Honda charged rent for same – Dept produced no evidence of financial institutions no promotion of services of Finance
giving any Commission to the assessee – Companies) – However, this will be taxable
[SILICON HONDA – 2008- TRIBUNAL] under ‘Renting of Immovable Property
Service’

13. Martin State of Sikkim issues lottery – which it sells with the help Taxable (Conducting Lottery has been = Comm Income
Lottery of agents and distributors. It has appointed MARTIN deemed as ‗Provisioning of Service of Games
Agencies Ltd LOTTERY AGENCIES LTD as its agents to sell lottery of Chance by Government‘- and agent is
tickets in lieu of which it will get commission @3%. promoting/ marketing of Service of Govt.)

MARTIN LOTTERY AGENCIES – 2009- SC


[CA (FINAL), MAY 2010]
 Lottery tickets held as not ―goods‖ and amounts to transfer of actionable
claim by Constitution Bench of Supreme Court –
 Organizing lottery by the State is to raise revenue - Raising revenue by
State by itself not amounts to rendition of service –
 Explanation appended to Section 65(19)(ii) of Finance Act, 1994 not a
simple clarification as it introduces new concept of organizing lottery
as a form of entertainment, having Constitutional implication -
Parliament entitled to bring new concept of imposition of tax and also
entitled to raise legal fiction but explanation widening tax net and hence,
not retrospective in operation -Impugned explanation not clarificatory or
declaratory in nature.
[Students appearing in May, 2011 Exams- shall also refer to NEW SERVICE (1)
introduced by FA, 2010]

14. ABC Ltd ABC Ltd is running a call centre for Bharti Airtel for a consideration of Rs 30 = Taxable (Customer Care Service) = 30 lakhs
lakhs per month.
‗ ‖

15. Premier Premier Garment Processing entered into Contract with Indian Railway under = Taxable (Customer Care Service) = Consideration
Garment which it will supply/provide bed rolls on behalf of Railway for train Received
Processing passengers of AC-2 Tier / 3-tier.
[PREMEIR GARMENT PROCESSING -2008-TRIBUNAL]

16. Mr A Mr A, a job-worker, is carrying out following activities on JOB-WORK:


(Job-Worker) i) He is manufacturing shirt out of fabric supplied by ABC ltd. [Job-work = Non-taxable (Job-work is BAS only when
Charges @ 100/- per shirt] it is not manufacture as per CEA – if it is
mfd, then Excise is leviable, not ST)

ii) He is doing re-packing of spices (say, powdered Mirch) from bulk packs = Non-taxable (Job-work is BAS only when
to small packs. The process of re-packing from bulk-pack to small packs it is not manufacture as per CEA– if it is mfd,
amounts to manufacture within the meaning of Sec 2(f)(ii) of Central then Excise is leviable, not ST)
Excise Act. [Job-work Charges = 5,000/-]

iii) He is manufacturing Papads out of raw-material supplied by ABC Ltd = Non-taxable (Job-work is BAS only when
[Job-work charges – Rs 20,000] – However, papad at present is it is not manufacture as per CEA – Excise
exempted from ED (100% Excise Exemption u/s 5-A). Duty leviable - it is immaterial whether ED is
actually payable or not)

iv) He is doing processing of raw-material supplied by supplier (processing =Taxable under this category (as processing
is not in nature of manufacture) [Job-work (processing) charges= Rs is not ‗manufacture‘) – However, fully
20,000/-]. The goods have been returned to supplier. The supplier has exempted [E/N 8/2005]
further processed such goods resulting into manufacture of product ‗X‘.
Product ‗X‘ is liable to ED@10%.

v) He is doing process of spray painting on cycles parts manufactured by =Taxable under this category (as processing = (30% of 20,000)
ABC Ltd. [Process of spray painting is not manufacture]. Job-work is not ‗manufacture‘) – However, 70% = 6,000/-
(processing) charges= Rs 20,000/-. The said parts after spray painting are abatement benefit available [E/N 1/2006] –
returned to ABC Ltd who then sells them into market. credit shall not be availed
ST liability of Mr A: [Alternatively, it can claim benefit of full
exemption 42/2009 – if it is satisfying
conditions]
vi) He is doing X process on CYCLES PARTS manufactured by ABC Ltd.
[X Process does not amount to manufacture]. Job-work (processing) =Taxable under this category (as processing = (30% of 20,000)
charges= Rs 20,000/-. The said parts after processing are returned to is not ‗manufacture‘) – However, 70% = 6,000/-
ABC Ltd who then sells them into market. [The goods worth Rs 10,000 abatement benefit available [E/N 1/2006] –
have been used in doing X process which have been purchased by Mr A credit shall not be availed
(Job-worker) on his own. The cost of these goods is included in job- [Alternatively, it can claim benefit of full
charges which he has charged from ABC Ltd. No credit has been claimed exemption 42/2009 – if it is satisfying
on these goods] conditions]
ST liability of Mr A:

vii) He is manufacturing Alcoholic Liqour for Human Consumption (Wine,


=Taxable under this category (though
Beer etc) out of raw-material supplied by United Breweries (India) Ltd.
processing is in nature of ‗manufacture‘, but = 2,00,000/-
[Job-Charges: Rs 2,00,000/-]. [While the process carried out by Mr A
it is not resulting into manufacture of
amounts to manufacture within the meaning of Sec 2(f) of CEA, 1994 (it
‗Excisable Goods‘ in terms of Sec 2(d) of
is manufacture on first principle itself) but the resultant product is not
‗ ‖

‘Excisable Goods’ within the meaning of Sec 2(d) of CEA, 1944] CEA, 1944)

The amendment now specifies that the exclusion is


applicable only in respect off an activity that
amounts to manufacture of Excisable Goods (and
Excisable goods shall have the same meaning as set
out in Sec 2(d) of Central Excise Act, 1944). This in
turn would mean that for the purpose of exclusion
not only the activity shall amount to manufacture but
the goods shall also be excisable goods within the
meaning of Sec 2(f) of Central Excise Act, 1944.
 The impact of the amendment would be that now the
manufacturers of Alcoholic Liqour will have to pay both State
Excise Duty and Service Tax. [Double taxation]

viii) He is manufacturing Alcoholic Liqour for Human Consumption (Wine, =Taxable under this category (though = 10,00,000/-
Beer etc) for United Breweries (India) Ltd. [Job-Charges: Rs 10,00,000/- processing is in nature of ‗manufacture‘, but
(including cost of material)]. [Raw-material has not been supplied by it is not resulting into manufacture of [However, he can
United Breweries He has purchased the requisite inputs on his own.] ‗Excisable Goods‘ in terms of Sec 2(d) of claim benefit of
CEA, 1944) E/N 39/2009-
TV= (10,00,000 –
Value of Inputs
purchased and used
in mfd of A/Liqour]
[Condition- He shall
not any Credit]

ix) He is manufacturing Pharmaceutical Products (containing Alcohol) out =Taxable under this category (though
of raw-material supplied by Ranbaxy. [Job-Charges: Rs 2,00,000/-]. processing is in nature of ‗manufacture‘, but ---
[While the process carried out by Mr A amounts to manufacture within it is not resulting into manufacture of
the meaning of Sec 2(f) of CEA, 1994 (it is manufacture on first principle ‗Excisable Goods‘ in terms of Sec 2(d) of
itself) but the resultant product is not ‘Excisable Goods’ within the CEA, 1944)—but fully exempted at present
meaning of Sec 2(d) of CEA, 1944. The pharmaceutical product [E/N 32/2009]
(containing alcohol) is not covered under CEA, 1944, rather upon them
ED is chargeable under special Act – Medicinal & Toilet Preparation
Act ]

Definition of ―Business Auxiliary Service‖ has


been amended w.e.f. 1st Sep, 2009 to the effect that
this service DOES NOT INCLUDE ―any activity
that amounts to manufacture of EXCISABLE
GOODS‖.
The intention was to cover job-work of Alcoholic Beverages (as
indeed clarified by Ministry in its Explanatory Matter). However, the
fallout of the amendment was that job-work of certain Pharmaceutical
Products or Toilet Preparations containing
alcohol where excise duty is not payable under Central Excise Act but
under Medical and Toilet Preparations (Excise Duties) Act, 1955 (or
other Act) would have become liable to service tax under Business
Auxiliary Service, as the goods are not ―Excisable Goods‖ within the
‗ ‖

meaning of Sec 2(d) of Central Excise Act, 1944. Since this was never
the intention, exemption has been granted to Business Auxiliary Services
in relation to manufacture of Pharmaceutical products, medicines,
perfumery, cosmetics or toilet preparations containing alcohol which are
charged to excise duty under Medical and Toilet Preparations (Excise
Duties) Act, 1955 have been fully exempted under from ST (vide N/N
32/2009)
 This exemption will ensure there is no double taxation on
pharmaceutical products.

Sr provider Nature of Service Taxable or Not Taxable Value


1) M/s Employ Apollo Hospital has approached it for getting trained nurses. Apollo Taxable (service of recruitment) = 20,000/-
Me Hospitals has paid Rs 20,000 as commission for this service.

2) M/s Employ „Top Securities Ltd‟ has approached it for recruitment of trained security Taxable (service of recruitment) = (2,00,000 +
Me personnel. As per contract, M/s Employ Me will perform the following 50,000 + 5,00,000)
functions: = 7,50,000/-
a) It will invite prospective candidates on a particular day on a particular
venue, will preliminary screen the candidates (in terms of literacy and [Refer ‘Explanation’
physical fitness) – Charges for this Rs 2,00,000 to definition of
b) It will also verify the credentials of candidates, and authencity of taxable service]
documents submitted by candidates who passed preliminary-screening
stage- Charges for this Rs 50,000/-
c) Selected candidates will be referred to „Top Securities ltd‟ who will
further take interviews of candidates and then will make final
selection. For each candidate selected by client, M/s Employ Me will
get a commission of Rs 10,000/-. [50 candidates were finally selected by
Top Securities ltd]

3) M/s Employ Mr A has approached it for getting a medical attendant for an expected Taxable (service of recruitment) = (2,000 + 5,000) –
Me period of 6 months. Mr A has paid Rs 2,000/- as commission for this it is immaterial
service. [M/s Employ Me has also taken 1 month salary (Rs 5,000/-) from the whether received
Medical Attendant for getting him employment] from employer of
employee
4) M/s Employ Mr Karim has approached it for getting him employed in Dubai (Golf Taxable (service of recruitment) = 50,000/-
Me Countries). Mr Karim has paid it Rs 50,000/-.

5) ICAI Infosys has approached it for recruitment of Newly Qualified CAs in Taxable (service of recruitment) - service = 3,50,000/-
Campus Interviews organized by ICAI. Infosys paid Rs 3,50,000/- for that. has been provided (selection of candidate is
None of the candidate was ultimately selected by Infosys. not relevant)
‗ ‖

6) M/s Employ M/s Employ Me is running a very popular job-portal (job-search engine). Taxable (as it is in relation to recruitment of = 25,000/-
Me Kingfisher Airlines has approached it for recruitment of Air Hostess. In manpower)
terms of contract, M/s Employ Me will do the following:
i) Its responsibility will only be limited allowing access to its database of
prospective candidates. [Database of 500/- candidates will be provided
@ 50/- per candidate]
ii) M/s Employ Me will not be conduction any interviews of the
prospective candidate. Service Receiver will on its own conduct
interview and select the candidate.
iii) M/s Employ Me will not be entitled to any consideration in respect of
any candidate selected by the service recipient. Neither, the amount
already paid will be refundable in the event of non-selection of any
candidate out of the database provided.

7) M/s Employ M/s Employ Me is running a very popular job-portal (job-search engine). Taxable (as these are relation to recruitment = [(100 * 10,000) +
Me  Any candidate seeking employment can get himself listed with its of manpower) (500*500)]
portal by paying a fee of Rs 100/- [termed as „Listing Fee‟]. 10,000 = 3,50,000/-
candidates had listed themselves with it for FY 2010-11.
 Any employer seeking candidate can get itself listed with its portal by
paying a fee of Rs 500/- [termed as „listing fee‟]. 500 companies had
listed themselves with it for FY 2010-11.

8) M/s Employ DMRC (Delhi Metro Rail Corporation] has approached it for getting 100 Taxable in all the cases (as supply of
Me contract labour for Metro Project. As per terms of contract, the labour manpower is also covered – Contract
supplied will work directly under control and supervision of DMRC. Labourer is also covered presently – as
discussed above)
Case-A) DMRC will pay following consideration for it to M/s Employ Me: = 2,00,000 + Labour
i) Commission for supply of labour @ 2,000/- per labour – Total Charges @500/- per
2,00,000/ (100 labours @ 2,000/- per labour) labour per day
ii) Wages of Worker @500/- per day [M/s Employ Me is paying
contract labour @400/- per day] = 2,00,000 + Labour
Charges @400/- per
Case-B) DMRC will pay following consideration for it to M/s Employ Me: labour per day
i) Commission for supply of labour @ 2,000/- per labour – Total [Labour Exp is not
2,00,000/ (100 labours @ 2,000/- per labour) in capacity of pure
ii) Wages of Worker @400/- per day [on actual basis] agent (though
recovered on actual
basis) – as labour
has been used by
service provider
(contract labourer)
in providing the
manpower supply
service]

= 2,00,000 + Labour
Case-C) DMRC will pay to M/s Employ Me its Commission for supply of Charges @400/- per
labour @ 2,000/- per labour – Total 2,00,000/ (100 labours @ labour per day
2,000/- per labour). Wages of Worker @400/- per day [on actual
basis] will be paid directly to the worker.
‗ ‖

CBEC Clarification: Service tax is to be charged on the full amount of


consideration for the supply of manpower, whether full-time or part-time. The
value includes recovery of staff costs from the recipient e.g. salary and other
contributions. Even if the arrangement does not involve the recipient paying
these staff costs to the supplier (because the salary is paid directly to the
individual or the contributions are paid to the respective authority) these
amounts are still part of the consideration and hence form part of the gross
amount.
9) M/s Employ NDMC (New Delhi Municipal Corporation) has approached it seeking help Not taxable under this category (as it is not
Me in construction of roads (Laxmi Nagar to ITO) for Commonwealth games. case of supply of manpower – Basically, M/S
M/s Employ Me will use get lay down the road by employing its contract Employ Me is now acting as sub-contractor
labour. It will get a consideration of Rs 10 lakhs for his service. of Construction Work – Further, it shall be
noted that even this service will not be
taxable under category of ‘Commercial or
Industrial Construction Service’ as
construction of road has been specifically
excluded from that category]
10) M/s Employ TCS and Infosys have entered into agreement with it under which it will Taxable = 10 Lakhs
Me skilled personnel to them for their software projects. Personnel will work
either at site of clients of TCS/Infosys or in premises of TCS/Infosys. M/s
Employ Me will get consideration @500/- per man-hour. [Receipts from
Month of April are 10 lakhs]

FUTURE FOCUS INFOTECH INDIA (P) LTD – 2010-TRIBUNAL


None of the software projects undertaken by TCS/Infosys from their
respective clients was sub-contracted to the appellant nor appellant was
working on any such projects on its own. The appellant was getting the
payment in terms of man-hour for persons deputed to work. The appellant is
liable to pay tax under category of „Manpower Recruitment or Supply
Agency Service‟.

Sr provider Nature of Service Taxable or Not Taxable Value


1) Credentials ICICI has entered into a contract with Credentials Ltd under which Taxable (it is not BAS service as Credentials = 1,00,000/-
Ltd Credentials Ltd will do verification of information furnished by Ltd is not promoting services of ICICI Bank
prospective customers who had applied to ICICI bank for credit cards, – it is BSS as it is evaluation of prospective
home loans and auto loans. ICICI will pay a fixed amount of Rs 1,00,000 customers)
per month to Credentials Ltd for this service.
[.R. KALYANA KRISHNAN -2008-TRIBUNAL]

2) Wings Ltd ICICI has entered into a contract with Wings Ltd under which Wings ltd Not taxable under this category (- However,
will both promote and market home loans, personal loans and credit cards this will be taxable under Business Auxiliary
services of ICICI Bank. Wings Ltd will get a commission @3% for every Service (service of promoting services of
loan transaction which they materialized and a fixed amount of Rs 500/- for ICICI Bank)
every credit card customer they bring.
‗ ‖

[BRIDGESTONE FINANCIAL SERVICES -2007-TRIBUNAL]


3) Supreme BSES has entered into contract with Supreme Ltd under which Supreme Taxable (it being in nature of outsourced = 2,00,000/-
Ltd. Ltd will carry out meter reading, preparation of electricity bills, delivery of activity)
bills etc for a consideration of Rs 2,00,000 per month.
[JAYRAM & ASWAHJITH -2008-TRIBUNAL]
4) Radission Radission Hospitality Services ltd has provided ABC Ltd ready to use Taxable (it being provisioning of = 2,00,000/-
Hospitality office with all the related facilities- reception personnel, secretarial infrastructural support – provisioning of
Services personnel, internet and telephone facilities, pantry facilities and security Office Space with utilities)
Ltd too. The service charges are @ 2,00,000 per month.

5) M.P. Power M.P.Power Trading Co has purchased electricity for sale to DISCOM Taxable (it being in nature of management of
Transmiisio (Distribution Companies) which in turn will sell the electricity in retail to distribution) – However, full exemption has
n Co, Ltd various consumers. M.P.Power Transmission CO ltd has entered into a been granted recently in Year 2010 [E/N
contract M/s M.P.Power Trading Co. for arranging smooth transmission of 11/2010]
electricity in a manner that transmission losses are minimal and energy of
suitable voltage reach istribution points owned by DISCOMS.
M.P.POWER TRADING CO shall be paying Rs 10 Crores to M.P.Power
Transmission Co..
[M.P. POWER TRANSMISSION CO. LTD -2008-TRIBUNAL]

4.
 Case-Study [Expected]

Solution:
FRANCHIS0R FRANCHISEE

M/s Safe Courier M/s ABC

Customers
‗ ‖

SPEED & SAFE COURIER SERVICE- 2008-TRI


 That services provided by FRANCHISEES was courier service, which was liable to service tax on the gross amount
received from the customers; and
 The services provided by M/S. SAFE COURIER to its franchisees was ‗franchise service‘ which was liable to service tax
on the amount received by M/s. Safe Courier from the franchisees.

Thus, in terms of this decision


Taxable Classifiable under Category of TV
M/s ABC (Franchisee) Yes Courier Service =40,00,000

M/s Safe Courier Yes Franchise Service = [2,00,000 + 16,00,000]


(Franschisor) = 18,00,000

In that case, it was held that “On a very careful reading of the ingredients of ‘Franchise Services’ as given in Section 65 of the Finance Act, 1994, and also the
‘Franchise Agreement’, it is very clear that the appellant has entered into franchise agreement with various persons for providing courier service. It is difficult to hold
that franchisees are agents of the appellants. No doubt, the franchisees are rendering courier services and service tax liability has been discharged on the amount
collected by the franchisee. However in terms of the agreement, for example, Paragraph 12 of the agreement, the commission which is given to the franchisee is
mentioned and the balance of the amount collected by the franchisee is payable to the franchisor. This amount which is received by the franchisor is obviously for the
receipt for rendering the franchise service. Since franchise service has been brought under the service tax net, the appellant is clearly liable for discharging the
service tax liability on this and demanding this amount cannot be objected by the appellants on the ground that it amounts to double taxation. There is no double
taxation at all. What is sought to be taxed now is the gross receipt of the appellants for the franchise services rendered

―it is clear that under franchise agreement, the franchisor gives a right to the franchisee to do business in a representative manner by
using franchisor’s trade mark or trade name. In such case, the franchisee is to make payments to the franchisor for using their name, trade
mark etc., in respect of the goods sold or the service rendered. In this case, in fact, the agent/franchisee is not doing independent
business but is only acting as agent for collection and delivery of parcel as agent in the courier service. Apart from appointing the
agent/franchisees, the appellants are not rendering any service to the franchisees. In fact, franchisee gets paid only for the work done for
the franchisor, i.e. In the courier service by acting as agent for collection and distribution of articles for customers. The only provision
under which tax can be levied for the entire transaction involving the appellant and franchisees/agents is the tax on courier service.

We therefore hold that the assessment and demand of tax from M/s Safe Courier under ‗Franchise Service‖ is untenable/invalid.
Consequently, we allow the appeals by vacating the impugned orders of the Tribunal. However, it would be open to the department to cross
check the amounts received by the appellant from agents/franchisees and verify whether all the franchisees who have made payments have
remitted service tax for entire courier service charges collected as stated by the appellants based on which we have allowed the appeals.


1) Case is border-line case.
2) Even if Kerala HC view is followed, then Booking Agent (Franchise) have discharged liability of M/S Safe Courier (as courier service). In that case, the booking
agent will be liable to pay tax on his income under category of ‘Business Auxiliary Service’. Thus, such booking agents will be liable to pay tax on that too.
3) We shall wait for final words from Hon’ble SC.
‗ ‖

Please Compare the above example with following:

FRANCHIS0R FRANCHISEE

NIIT M/s ABC

Students

Thus, in terms of this decision


Taxable Classifiable under Category of TV
M/s ABC (Franchisee) Yes CTCC =40,00,000

NIIT (Franschisor) Yes Franchise Service = [2,00,000 + 16,00,000]


= 18,00,000

[M/s Speed and Safe Courier’s decision shall not be applicable to this situation. – reason being that, M/s ABC (Franchsiee) is himself providing the service of
coaching on principal to principal basis. (unlike above case, where franchisee was not actually couriering the goods but was only forwarding the parcels)]
‗ ‖

FRANCHIS0R FRANCHISEE

Sukh Sagor / Edu com M/s ABC

Students

[M/s Speed and Safe Courier’s decision shall be applicable to this situation. – reason being that, M/s ABC (Franchsiee) is not himself providing the service of
coaching on principal to principal basis – it is simply telecasting the lectures. (just like above case, where franchisee was not actually couriering the goods but
was only forwarding the parcels)]--

5.
Sr provider Nature of Service Taxable or Not Taxable Value
1) SBI Mr A has approached SBI Bank for taking home loan of Rs 10,00,000/-. SBI Taxable Processing Fee – Shall form part
has sanctioned the loan and charged a processing fee of Rs 2% (i.e., 20,000). of TV
Mr A has repaid the loan with interest. Recovery of Principal Amount:
Shall not form part of Taxable
Value
Interest Income: Shall not form
CBEC Circular (2008): ―Pre-Closure / Fore-Closure Charges” collected on part of TV [Rule 6(2) of STVR,
account of early repayment of loan by the customer are not in the nature of 2006]
interest. These are not excludible and hence, ST leviable thereon

2) SBI ABC ltd has approached SBI Bank and has got overdraft sanctioned upto a Taxable TV = 40,000 + Interest
limit of Rs 20 lakhs. Bank has charged a processing fee of 2% (i.e., 40,000). However, interest is exempted
Mr A has paid interest amount of Rs 50,000/- on the overdraft limit used by it (see E/N 29/2004)
in April, 2010. Thus, TV chargeable to ST =
40,000
3) SBI ABC Ltd has approached SBI with some Bill of Exchange of Rs 50 lakhs due Taxable – However, service fully TV= 2,00,000 (Discount Income)
for payment 3 months later and requested the bank to discount the same. SBI exempt (E/N 29/2004) service fully exempt (E/N
has discounted the same for Rs 48 lakhs. 29/2004)

4) SBI Mr A has approached SBI bank to open up CURRENT ACCOUNT for its All (except ATM card service) TV= [(1,000 + 300 + 300 + 500
proprietorship business. Mr A deposited a sum of Rs 2 lakhs with the bank taxable under this category + 5,000]
(Minimum Balance required is Rs 25,000/-). Bank has charged following to
‗ ‖

Mr A: [ATM service is taxable under


a) Rs 1,000/- for issuance of Cheques [200 cheques (@5/- per cheque)] separate specific category – Card
b) Rs 300/- for obtaining bank statements (which he handed over to Auditor (ATM/Credit Card) Services]
during audit)
c) Rs 300/- for tele-banking facilility
d) Rs 500/- for e-banking facility (taken because e-payment of taxes
become mandatory for him). Further, Rs 5,000/- for electronic transfer of
money [100 e-payment transaction charged @50/- per transaction]
e) Rs 500/- for issuance of ATM Card (Debit Card)

5) Axis Bank Mr A has approached Axis bank to open up SAVING ACCOUNT for its Taxable Service NO ST payable – since free
proprietorship business. Mr A has opened ‗Priority Account‘ with Axis Bank service are not chargeable to ST
which require him to maintain a minimum balance of Rs 5 lakhs with the (Please refer Valuation Chapter)
Bank. As a priority customer, Mr A can obtain unlimited number of cheques
without any charge. Further, regular monthly transaction statements shall be
sent to client without any charge. Additionally, no charges taken for issuance
of ATM Card. E-banking and tele-banking facility also provided free of
charge.
6) Kotak ABC Ltd has entered into a ‗Finance lease‘ with the bank. Bank has charged Taxable Service TV = Leasing Fee + Interest
Mahindra leasing fee of Rs 50,000/-. The lease rentals include repayment of ‗cash cost However, after applying
of asset‘ as well as ‗interest element‘. exemption 4/2006
TV= Leasing Fee + 10% of
Interest
7) Mr A, For- Client approached For-ex Broker to help him in getting For-ex [let say, Taxable Service (Mr A has rendered TV= Comm Income
Ex broker $500 US]. For-ex Broker takes him to the ‗persons authorized by RBI to Forex Broking Service)
buy/sell For-Ex [Authorized Dealer / Money-Changer] and get the transaction
materialized. He acts as an intermediary and for that service, he gets his
commission/brokerage.
Authorized Dealer / Money Changer: Sale or purchase of For-Ex can be
done by person authorized under FEMA to deal in For-ex and having license
issued by RBI. Such authorized dealers are known as ‗Money Changers /
Authorized Dealers of For-Ex‘.
8) Authorized Mr X is going for a visit to USA in next month. He needs US $ to carry with Taxable Service (Sale of Forex – TV= [$500 * 40] * 1%
Dealer / him in USA. He approached Authorized Dealer / Money Changers for (money changing) is covered)
Money purchase of $500 USD. Authorized dealer sold $500 at the prevailing rates
Changer [Selling Rate:- 1 USD = Rs 40] and charged 1% as commission.
9) Authorized Mr X is returning to India after visiting USA for a month. He is left with 100 Taxable Service (Purchase of TV= [$500 * 38] * 1%
Dealer / USD which he sells to Authorized Dealer at airport. Authorized Dealer Forex – (money changing) is
Money purchased it at prevailing rates [Buying Rate: 1 USD = Rs 38] and charged covered)
Changer 1% as commission.

10) Scheduled Mr X is going for a visit to USA in next month. He needs US $ to carry with
Bank (SBI) him in USA. He approached SBI Scheduled Bank (also authorized to
purchase or sell For-Ex) for purchase of $500 USD. SBI purchased For-Ex
from XYZ Bank (Scheduled Bank) and then sell it to Mr X.
a) XYZ Bank sells 500 USD @ 40 to SBI charging commission @1%. Taxable (Sale of Forex – (money
changing) is covered) – However,
service is fully exempt vide E/N
‗ ‖

19/2009

b) SBI sells 500 USD to Mr X @ 42.


Taxable (Sale of Forex – (money TV= [$500 * (42- 40)]= Rs 1,000
changing) is covered)
However, an optional manner of
payment of ST is also available
under which
ST = [($500 * 42) * 0.25%]
[EC & SHEC extra]

[Refer Chapter of ‗Special


Manner of Payment of ST‘]
11) Axis Bank Mr X, a salaried employee, is having saving bank account with Axis Bank. Taxable (Bank is providing Mr A TV= 500/-
He gets his salary credited into the bank. He has instructed bank to make service of Cash Management –
direct payment of utility bills (electricity bills / telephone bills etc). The which is now covered)
balance gets transferred to Mr X ATM (Debit Card). For this service of
managing cash of assessee, bank charges a flat annual fee of Rs 500/-.

CBEC Clarification: Specifically exclusion of cash management is being


omitted. Consequently, cash management service will now be leviable to ST.
Cash management services include services of Collection of receivables,
Execution of payment, Management of liquidity, Providing customized MIS
report to the client (corporate clients).

12) Axis Bank Tata Telesevices Ltd has entered into an agreement with Axis Bank under Taxable (Bank is providing Mr A TV= Comm Income
which Axis Bank will be collecting telephone bills directly from telephone service of Cash Management –
subscriber. In respect of such collection, it will get a commission @1% of the which is now covered)
amount so collected and remitted to Tata Tele Services Ltd.

FEDERAL BANK LTD – 2010- KERALA HC:


This service will more appropriately be classifiable under category of
‘Banking & Other Financial Service’ (being of nature of Cash management
Service)

13) ICICI CG (CBDT) has notified ICICI Bank as one of the designated bank for the Taxable (Bank is providing Mr A
purpose of collection of Income Tax. Taxpayer will deposit their tax dues in service of Cash Management –
ICICI Bank. ICICI bank will collect the tax dues and will forward the same to which is now covered) --- However,
CG. CG will pay it commission @0.25% on the amount so collected and fully exempted vide E/N 13/2004
remitted by ICICI Bank.