[Section 65B(44)]
Service means
any activity for consideration
carried out by a person for another and
includes a declared service.
Service shall not include
- Sale/Gift etc of Immoveable property
- Sale/delivery/supply of goods ( moveable Property)
- Transaction in money/actionable claim*
- Service from employee to employer
- Court fees
Also it has provided in Explanation 1,that
- Functions of MP/MLA/Municipal Councillor etc not considwered service
- Duty performed by any person who holds a constituitional post is not regarded as service
Analysis
- Hence, Activity should be carried out for consideration. If not carried out for consideration, then not considered a service and no service tax will be levied on it
- Only service carried out from one person to another covered, service to self not covered
- (For example-No service tax on service provided to own branch)
-
It includes a declared service. Declared service means 9 services which have been specified in Section66E) Service tax will be levied on these.
- For example Renting of Immoveable Property.These will be studied in detail in CA Final)
QUESTIONS
Q1 What is actionable claim? Whether Service tax applicable on it?
View answer
Actionable Claim means
Claim to unsecured debt (secured debt not covered)
Or
Claim to any beneficial interest in moveable property
Examples of Actionable Claim
- A takes loan from B. B has actionable claim on A
- A takes loan from B on security of his house. Since loan is secured, B does not have actionable claim
- C manufactures goods as per directions of A, A has beneficial interest in goods, hence it is an actionable claim
No Service tax applicable on actionalble claim as it is not considered service
AMENDMENT
We know that Service does not include transactions in money or actionable claim
As per Newly inserted Explanation 2,
“transaction in money or actionable claim” shall not include––
1. Activity relating to use of money or its conversion from one form to another (Example- Money Changer Service )
2.Activity for FACILITATION OF transaction in money or actionable claim like
- l ottery distributor/Selling Agent of Lottery on behalf of Central Govt in relation to promotion,,marketing,selling of lottery or facilitating in organising lottery of any kind, in any other manner, in accordance with the provisions of the Lotteries (Regulation) Act, 1998.”(New Amendment)
- Chit fund (Foreman of Chit fund)
Hence, service tax will be imposed on Money changer service,lottery service/chit fuind service and it cannot be said that these are transaction in money/actionable claim and hence not taxable
Relevant Definitins:-
“Foreman of chit fund
shall have the same meaning as is assigned to the term
foreman in clause (j) of section 2 of the Chit Funds Act, 1982
“Lottery distributor or selling agent means
a person appointed or authorised by a State
for the purposes of promoting, marketing, selling or facilitating in organising lottery of any kind, in any manner,
organised by such State in accordance with the
provisions of the Lotteries (Regulation) Act, 1998.”
Q2 Whether Service tax applicable on Salary to Employees?
View answer
If employees working on payroll of company,
no service tax as a provision of service by an employee to the employer is not a service
If employees working on contract,it can be either
1.Direct Contract-
Person has direct contract with company. In this case,service tax is applicable, as that person is not technically an employee
2.Third Party Contract
Person works for third party agency on payroll and third party agency has contract with company
In this case, service tax is applicable on contract of third party with company. However no service tax on contract of person with third party agency.
3.Service of daily wager
No service tax on daily wager, as he is also a employee. No service tax on temporary employees also, as these also not considered a service.
Q3
Mention briefly the specific exclusions from the definition of the term 'service' as provided in section 65B(44) of the Finance Act, 1994.
View answer
Service shall not include
- Sale/Gift etc of Immovable property
- Sale/delivery/supply of goods ( movable Property)
- Transaction in money/actionable claim*
- Service from employee to employer
- Court fees
Also it has provided in Explanation 1,that
Functions of MP/MLA/Municipal Councillor etc not considered service
Duty performed by any person who holds a constitutional post is not regarded as service