Customer Care No.

91-1145562222

FAQs on Taxability of
Services provided by Govt.
to Business Entities
www.taxmann.com

Budget 2016 has enhanced the scope of taxability

of services provided by Government or Local
Authority to business entities. Earlier i.e. pre
amendment, only support services provided by
Government or Local Authority to business
entities were taxable.
With effect from April 1, 2016 all services
provided by Government or a Local Authority to
business entities are taxable. However, pre as
well post amendment the provisions are same in
relation to services provided to a person other
than business entity.
Following FAQs will give an overview of the post
amendment scenario in relation to services
provided by the Government or a Local Authority
to business entities.

Customer Care No. 91-11-

www.taxmann.com

3
1. Which services provided by Government or Local Authority to business entities are taxable?
With effect from April 1, 2016 all services provided by a Government or a Local Authority to business
entities are taxable (except those services which are specifically covered under negative list or exempted
by way of any exemption notification).
2. Which services provided by Government or Local Authority are covered under the negative list?
All the services provided by Government or Local Authority are covered under the negative list except the
following services. In other words, service provided by Government or a Local Authority except following
are not taxable by virtue of negative list.
i) Specified services by Department of Post,
ii) Services in relation to aircraft or vessel,
iii) Transport of goods or passengers,
iv) Services provided to business entities (pre amendment it was support services provided to business
entities).
3. Which services have been exempted from service tax under Mega-exemption 25/2012?

Customer Care No. 91-11-

www.taxmann.com

4
i) Services provided by Government or a local authority to a business entity with a turnover upto rupees
ten lakhs in the preceding financial year.
ii) Services provided by Government or a local authority to another Government or a local authority.
iii) Services provided by Government or a local authority to an individual by way of grant of passport,
visa, driving license, birth or death certificate.
iv) Fines or liquidated damages payable to Government or a local authority for non-performance of
contract.
v) Services provided by Government or a local authority by way of registration required under the law or
testing, safety check or certification relating to safety of consumers, etc.
vi) Services in nature of allocation of natural resources to individual farmers or in relation to any function
entrusted to Panchayat.

Customer Care No. 91-11-

www.taxmann.com

5
Note : Services provided by Government or a local authority would be exempted from service-tax if the
gross amount charged for such service does not exceed Rs.5000. This exemption does not cover
i) Specified services by postal department.
ii) Services in relation to aircraft or vessel.
iii) Transportation of goods or passengers
4. What would be the Point of taxation of services provided by Government or Local Authority?
In case of services provided by Government or a local authority, the point of taxation shall be the date:
i) when payment in part or full in respect of such services become due or,
ii) when payment for such services is made
- whichever is earlier.

Customer Care No. 91-11-

www.taxmann.com

5. How services provided by Government should be valued?

The amount charged by Government or a local authority for providing services will be considered as
a value of taxable service. It has been specifically provided that amount of interest or any
consideration charged for allowing deferred payment is includible in value of service.

Customer Care No. 91-11-

www.taxmann.com