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All India Chartered Accountants’ Society

Join the All India Chartered Accountants Society Workshop on Service Tax to gain insights into the concepts of Sale vs Service, Classification of Service, and Interpretation of Service Tax Law. This workshop will cover topics such as the characteristics of service, composite and bundled services, and the interpretation of service tax laws. Don't miss this opportunity to enhance your knowledge in this area. Register now!

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All India Chartered Accountants’ Society

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  1. All India Chartered Accountants’ Society Workshop on Service Tax 2ndJuly, 2011 P. K. Sahu, Advocate

  2. PRESENTATIONBYP. K. SAHU, AdvocateD-247 (SF), Defence ColonyNew Delhi - 110024pksahu@msn.comCell: 9810008892 P. K. Sahu, Advocate

  3. Sale vs. Service Classification of Service Composite and Bundled Services Interpretation of Service Tax Law Contents 3 P. K. Sahu, Advocate

  4. SALE VS. SERVICE P. K. Sahu, Advocate 4

  5. Sale vs. Service Sale • Independent existence of the thing, ownership of which is to be transferred for a consideration • Hindustan Shipyard Ltd. vs. State of A.P. (2000) 6 SCC 579 (SC) 5 P. K. Sahu, Advocate

  6. Sale vs. Service Service • Economist’s Concept vs. Legal Concept • Characteristics of Service • Work and Labour • Intangible • Variability of Services - Significant Human Component • Perishable • No Transfer of Ownership 6 P. K. Sahu, Advocate

  7. Sale or Service • Handing Over of Portrait • Printing and Supply of University Question Papers or Currency Notes • Lease of Immoveable Property • Sale of Flat by Builder Against Instalment Payments • Sale of Recharge Coupons 7 P. K. Sahu, Advocate

  8. Sale vs. Service • Notification 12/2003-ST, Dated 20.06.2003- Exemption to value of goods sold • “sale” or “purchase” with their grammatical variations and cognate expressions, means any transfer of possession of goods by one person to another in the ordinary course of business for cash or deferred payment or other valuable consideration – Section 2(h) of C.E. Act. 8 P. K. Sahu, Advocate

  9. CLASSIFICATION OF SERVICE P. K. Sahu, Advocate 9

  10. Section 65A • Rule of Classification – Section 65A(1) • Classification shall be determined according to the terms of the sub-clauses of Section 65(105) • Rule of classification – Section 65A(2) • Clause which provides the most specific description • In case of composite service, which gives essential characteristics • Clause which occurs first 10 P. K. Sahu, Advocate

  11. How to Classify • Services by director of company • Joint Venture: Ports Railways, Franchise, Joint Development of Real Estate • Section 65(19)(vi) - Provision of service on behalf of the client • Broker vs. commission agent • Services of club/association • Fabrication of structure • Subsequent entry 11 P. K. Sahu, Advocate

  12. Commercial Parlance Test • Bus ferrying employees/students - Tour operator? • Celebrity in advertisement clip - Advertising agency? • Air hostess training - Commercial training or coaching? • Deputation of employees - Manpower supply ? 12 P. K. Sahu, Advocate

  13. COMPOSITE AND BUNDLED P. K. Sahu, Advocate 13

  14. Composite or Multiple Composite Contract • Customer is interested in the final outcome • Constituent elements are integrally connected and interdependent • Constituent service forms part of main supply and is not an aim in itself Bundled Service • Customer is expecting several independent outcomes • Lump sum payment for multiple services • Constituent elements are economically dissociable • Breach of conditions for one segment does not lead to breach of contract for the entire bundle of services 14 P. K. Sahu, Advocate

  15. Composite Contract... • State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., (1958)9 STC 353 (SC)– No sale of building materials in construction contract • Sultan Brothers (P) Ltd. v. C.I.T, 1964(51)-ITR 353 (SC) – Two leases for building and furnitures & fixtures treated as one • Sentinel Rolling Shutters and Engg. Co. (P) Ltd. v. CST, (1978) 4 SCC 260 - Progressive release of payment not decisive 15 P. K. Sahu, Advocate

  16. Composite Contract... • BSNL vs. UOI (2006) 3 STT 245 (SC) – Nature of composite contract should be decided on the basis of dominant nature test • BSES Ltd. vs. Fenner India Ltd., (2006) 2 SCC 728 – Four contracts with bank guarantees and one wrap up agreement to perform contractual obligations on a turnkey basis-composite contract executable on a turnkey basis • Customs and Excise Commissioners v British Telecommunications plc [1999] STC 758– Purchase of car and transportation from manufacturer's factory treated as sale of delivered car 16 P. K. Sahu, Advocate

  17. Composite or Bundled ? • CCE vs. BSBK Pvt. Ltd., 2010(18) STR 555 (Tri.-LB) • Alstom Projects India Limited vs. CST, [2011] 31 STT 270 • SayaJi Hotels Ltd vs. CCE, Indore, [2010] 29 STT 195 • Multimodal Transport • Grant of Representational Right Along With Business Know-How 17 P. K. Sahu, Advocate

  18. Interpretation of Service Tax Law P. K. Sahu, Advocate 18

  19. Interpretation of Service Tax Law • Peculiar Nature of Service Tax • Not a Full-fledged Statute - Application of Central Excise Provisions • Scattered Provisions of Law • Unstable Law • Credit Mechanism - Value Added Tax – Input and Input Services 19 P. K. Sahu, Advocate

  20. Interpretation of Service Tax Law • Interpretation of Definition Clause • Section 73 and 78 - Tax Paid and Informed to Department Before SCN • Rule 6(3) of CCR • Export of Service –Microsoft Case 20 P. K. Sahu, Advocate

  21. Interpretation of Service Tax Law • Territorial Jurisdiction • Reimbursement of Expenses • Reimbursement of Service Tax Paid, But Not Contracted • Excise Mindset - Principle of Equivalence 21 P. K. Sahu, Advocate

  22. Thank You ! 22 P. K. Sahu, Advocate

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