Analysis of Entry (a): Services by Government or Local Authority, entry (o): Transportation of passengers & entry (p): Transportation of goods in negative list

Analysis of Entry (a): Services by Government or Local Authority, entry (o): Transportation of passengers & entry (p): Transportation of goods in negative list :

All the services provided by the Government or a local authority are not chargeable to service tax.

Government means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder [Section 65B(26A)].

Local authority means—

(a) Panchayat as referred to in clause (d) of article 243 of the Constitution.

(b) Municipality as referred to in clause (e) of article 243P of the Constitution.

(c) Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund.

(d) Cantonment Board as defined in section 3 of the Cantonments Act, 2006.

(e) Regional council or a district council constituted under the Sixth Schedule to the Constitution.

(f) Development board constituted under article 371 of the Constitution.

(g) Regional council constituted under article 371A of the Constitution [Section 65B(31)].

Exceptions: However, the following services, even if provided by the Government or local authority, are taxable:-

(i) Services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government;

(ii) Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(iii) Transport of goods or passengers; or

(iv) Support services, other than services covered under clauses (i) to (iii) above, provided to business entities.

I. SERVICES BY THE DEPARTMENT OF POSTS PROVIDED TO A PERSON OTHER THAN GOVERNMENT

Following services provided to a person other than Government, by the Department of Posts are taxable:-

(a) Speed post: provides time-bound and express delivery of letters, documents and parcels across the nation and around the world. Now-days, speed posts can be tracked on a daily basis with the help of speed post tracking service started by Postal Department of India.

(b) Express parcel post: Express Parcel Post is fast and relaible service for sending the parcels upto 35 kg within India. It provides convenience to the customers by picking up from customer‘s premises and delivering to consignee.

(a) Postal Life Insurance

(b) Rural Postal Life Insurance.

(d) Agency services: includes distribution of mutual funds, bonds, passport applications, collection of telephone and electricity bills, which are provided by the Department of Posts to non-Government entities.

Services provided by Department of Posts NOT liable to service tax: Therefore, the following services provided by Department of Posts are not liable to service tax:-

Basic mail services known as postal services such as post card, inland letter, book post, registered post provided exclusively by the Department of Posts to meet the universal postal obligations.
Transfer of money through money orders, operation of savings accounts, issue of postal orders, pension payments and other such services.

II. SERVICES IN RELATION TO AN AIRCRAFT OR A VESSEL, INSIDE OR OUTSIDE THE PRECINCTS OF A PORT OR AN AIRPORT

Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport provided by Government or local authority are taxable.

1. Aircraft means any machine which can derive support in the atmosphere from reactions of the air, other than reactions of the air against the earth’s surface and includes balloons, whether fixed or free, airships, kites, gliders and flying machines [Section 65B(7)].

2. Airport means a landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome**[Section 65B(8)].

**Aerodrome means any definite or limited ground or water area intended to be used, either wholly or in part, for the landing or departure of aircraft, and includes all buildings, sheds, vessels, piers and other structures thereon or appertaining thereto.

3. As per section 65B(38), port covers two types of ports:-

(i) Major ports as defined under section 2(q) of the Major Port Trusts Act, 1963:

Port means any major port to which this Act applies within such limits as may, from time to time, be defined by the Central Government for the purposes of this Act by notification in the Official Gazette, and, until a notification is so issued, within such limits as may have been defined by the Central Government under the provisions of the Indian Ports Act.

(ii) Other ports as defined under section 3(4) of the Indian Ports Act, 1908. Port includes also any part of a river or channel in which this Act is for the time
being in force.

4. Vessel includes anything made for the conveyance, mainly by water, of human beings or of goods and a caisson [Section 65B(53)].

III. TRANSPORT OF GOODS OR PASSENGERS

Services of transport of passengers and goods have been specifically dealt with in clause (o) and (p). Here we are discussing the complete taxability of transport of passengers and goods. As a result of the combined study of the clause (o), (p) and this part of entry (a), the taxability of transport of passengers and goods is under:-

A. Transport of passengers

Transport of passengers by Government or local authority is generally taxable. However, following services of transportation of passengers,(whether provided by Government or otherwise) with or without accompanied belongings are not taxable:—

(i) Transport of passengers by a stage carriage: Vehicles which can carry more than six passengers shall be included here. In other words, carriages running under public transport shall not be taxable.

It may be noted that transport of passengers by vehicles under contract carriage is outside the purview of this entry. However, specific exemption under mega exemption notification (discussed in Chapter -5) is available to services of transport of passengers by a contract carriage for transportation of passengers, excluding tourism, conducted tours, charter or hire.

Stage carriage means a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey [Section 65B(46)].

(ii) Transport of passengers by railways in a class other than—

(A) first class; or

(B) an air conditioned coach

Thus, journey by rail in 2nd class, sleeper class or general class is not taxable.

Transport of passengers in railways in first class or an air conditioned coach is taxable.

(iii) Transport of passengers by metro, monorail or tramway: Transport of passengers by metro, monorail or tramway is not taxable.

(iv) Transport of passengers by inland waterways Inland waterways means:-

(i) National waterways as defined in section 2(h) of the Inland Waterways Authority of India Act, 1985, or

(ii) Other waterway on any inland water as defined in section 2(b) of the Inland Vessels Act, 1917 [Section 65B(29)].
National waterway means the inland waterway declared by section 2 of the

National Waterway (Allahabad-Haldia Stretch of the Ganga-Bhagirathi-Hooghly River) Act, 1982, to be a national waterway.

Explanation–If Parliament declares by law any other waterway to be a national waterway, then from the date on which such declaration takes effect, such other waterway–

(i) shall be deemed also to be a national waterway within the meaning of this clause; and

(ii) the provisions of this Act shall, with necessary modifications (including modification for construing any reference to the commencement of this Act as a reference to the date aforesaid), apply to such national waterway [Section 2(h) of the Inland Waterways Authority of India Act, 1985]. Inland water means any canal, river, lake or other navigable water [Section 2b) of the Inland Vessels Act 1917].

(v) Transport of passengers by public transport, other than predominantly for tourism purpose, in a vessel between places located in India: The words ‘other than predominantly for tourism purpose‘ qualify the preceding words “public transport”. This implies that the public transport by a vessel should not be predominantly for tourism purposes. Normal public ships or other vessels that sail between places located in India would be covered in the negative list entry even if some of the passengers on board are using the service for tourism as predominantly, such service is not for tourism purpose. However, services provided by leisure or charter vessels or a cruise ship, predominant purpose of which is tourism, would not be covered in the negative list even if some of the passengers in such vessels are not tourists.

For instance, services by way of transportation of passengers on a vessel, from Kolkata to Port Blair (mainland – island) or Port Blair to Rose Island (inter island), is covered in the negative list entry.

(vi) Metered cabs or auto rickshaws: Metered cab means any contract carriage on which an automatic device, of the type and make approved under the relevant rules by the State Transport Authority, is fitted which indicates reading of the fare chargeable at any moment and that is charged accordingly under the conditions of its permit issued under the Motor Vehicles Act, 1988 and the rules made thereunder but does not include radio taxi [Section 65B(32)].

B. Transportation of goods

Transport of goods by Government or local authority is generally taxable. However, following services of transportation of goods, (whether provided by Government or otherwise) are not taxable:-—

(i) Services by way of transportation of goods by road except the services of—

(A) a goods transportation agency; or

(B) a courier agency

Transportation of goods by road is not taxable. However, services of goods transportation agency and courier agency services are excluded from the negative list entry relating to transportation of goods by road thereby making these two services taxable.

(A) Goods transportation agency services: When the goods are transported by road by a goods transport agency, it is liable to tax. Further, the provisions relating to reverse charge, i.e. service tax is liable to be paid by the consigner or consignee in specified cases, are applicable even after the introduction of negative list.

Goods transport agency means any person who provides service in relation to transport of goods by road and issues consignment note, by whatever name called [Section 65B(26)].

(B) Courier agency: Courier agency services are liable to service tax.

Express cargo service: The nature of service provided by ‘Express Cargo Service‘ falls within the scope and definition of the courier agency. Hence, the said service is liable to service tax.

Angadia: ‘Angadia‘ undertakes delivery of documents, goods or articles received from a customer to another person for a consideration. Therefore, ‘angadias‘ are covered within the definition of a ‘courier‘ and services provided by angadia are liable to service tax.

Courier agency means any person engaged in the door-to-door transportation of time-sensitive documents, goods or articles utilising the services of a person, either directly or indirectly, to carry or accompany such documents, goods or articles [Section 65B(20)].

(ii) Services by way of transportation of goods by an aircraft or a vessel from a place outside India up to the customs station of clearance in India: Transportation of goods either by air or by sea for outside India upto custom station of clearance in India is not taxable.

2. Vessel includes anything made for the conveyance, mainly by water, of human beings or of goods and a caisson [Section 65B(53)].

3. Customs station means any customs port, customs airport or land customs station [Section 65B(21)].

(iii) Services by way of transportation of goods by inland waterways: Almost any water transport within India would be covered under the negative entry for transportation of goods by inland waterways.

IV. SUPPORT SERVICES, OTHER THAN SERVICES COVERED UNDER CLAUSES I TO III ABOVE, PROVIDED TO BUSINESS ENTITIES

Other support services provided by the Government or a local authority to the business entities are taxable services.

1. Business entity means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession [Section 65B(17)].

2. Support services means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves, but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis [Section 65B(49)].

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