Steps to determine the taxability of a service under Charge of Service Tax [Section 66B] :
After having understood the definition of service and the provisions of charging section 66B, these simple steps can be followed to identify whether an activity is a ‘taxable service‘.
Step 1: To determine whether an activity is a “service‟
The following questions need to be asked to determine if the activity is a service:
|1||Whether the activity is being done (including, but not limited to, an activity specified in section 66E of the Act) for another person*?||Yes|
|2||Whether the activity is being done for a consideration?||No|
|3||Does this activity consist only of transfer of title in goods or immovable property by way of sale, gift or in any other manner?||No|
|4||Does this activity constitute only a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause(29A) of article 366 of the Constitution?||No|
|5||Does this activity consist only of a transaction in money or actionable claim?||No|
|6||Is the consideration for the activity in the nature of court fees for a court or a tribunal?||No|
|7||Is such an activity in the nature of a service provided by an employee of such person in the course of employment?||No|
|8||Is the activity covered in any of the categories specified in Explanation 1 or Explanation 2 to section 65B(44)?||No|
[*if business is being done through an establishment located in the taxable territory and another establishment located in non taxable territory OR an association or body of persons or a member thereof, then please see Explanation 3 to section 65B(44) of the Act before answering this question]
If the answers to the above questions are as per the answers indicated in column 2 of the table above, THEN the activity is a ‘service‘.
Step 2: To determine whether the service is taxable If the activity is a service (Step 1), then following further questions need to be asked to determine if the said service is ‘taxable‘-
|1||Has the service been provided or agreed to be provided?||Yes|
|2||Has the service been provided or agreed to be provided in the taxable territory?||Yes|
|3||Is this activity entirely covered in any of the services described in the negative list of services specified in section 66D of the Act?||No|
If the answers to the above questions are also as per the answers given in column 2 of the table above, THEN the activity is taxable.
However, even if a service is taxable, that would not necessarily mean that service tax will be payable on the same. Service tax will be payable only if the said service is not exempted under any of the exemption notifications.