TAX ON SERVICES BUT WHAT IS SERVICE ?
Service tax has been levied on services i.e., taxable services as per section 65(105) of the Finance Act, 1994 but the term 'service' has not been defined in Act/Rules or by way of any explanation. What constitutes taxable service is very often a subject matter of dispute. Its literal meaning is an act of helpful activity, rendering of assistance or help. Service is a transformation of the user or user's goods, as a result of the voluntary intervention by the producer of services. It is generally an intangible commodity in the forms of external efforts and excludes sale of goods or property or commodities. It pre-supposes existence of a service provider. For service tax purposes, if there is no taxable service, there is no tax.
What is Service ?
Service has been defined differently under various laws and dictionaries. Under Income Tax Act, 1961, service means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding and lodging.
Service means service of any description which is made available to potential users and includes the provisions of facilities in connection with banking financing, insurance, chit fund, real estate, transport, processing, supply of electrical or other energy, board or lodging or both, entertainment, amusement or the conveying of news or other information but does not include the rendering of any service free of charge or under a contract of personal service.
Explanation.— For the removal of doubts, it is hereby declared that any dealings in real estate shall be included and shall be deemed always to have been included within the definition of 'service'. [Monopolies and Restrictive Trade Practices Act].
Service means service of any description which is made available to potential users and includes the provisions of facilities in connection with banking, financing, insurance transport processing, supply of electrical or other energy, board or lodging or both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service. [Consumer Protection Act, 1986].
Service means service of any description which is made available to potential users and includes the provisions of facilities in connection with banking financing, insurance, medical assistance, legal assistance, chit fund, real estate, transport, processing, supply of electrical or other energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service fee of charge or under a contract of personal service. [Foreign Exchange Management Act, 1999].
Service means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising. [Trademarks Act, 1999 and Competition Act, 2002].
Service means something provided, usually for a fee, that may not be classed as manufacturing or production in any form (such as legal advice, brokerage, agency services and financial advice). [International Accounting; Business; Insurance].
Thus, literally, service can be said to have the following salient features—
— Act of helpful activity
— Act of doing something useful
— Rendering of assistance/help
— Anything which does not involve supply or transfer of goods is service
— Transformation of user/user goods as a result of voluntary intervention of service provider
— Intangible commodity in form of human effort
— Excludes sale of goods/commodities/property
— Existence of service provider
However, following judgements may create controversy between sale of goods and services -
• Sale of sim card and activation of mobile service is a taxable service [Escotel Mobile Communications Ltd. v. Union of India 2005 -TMI - 185 - HIGH COURT OF KERALA]
• Sale of sim cards by a company engaged in providing cellular telephone services to its subscribers fall within the taxable services [Aircell Digilink India Ltd. v. CCE Jaipur 2005 -TMI - 161 - CESTAT, NEW DELHI; Bharti Cellular Ltd. v. CCE Delhi 2005 -TMI - 197 - CESTAT (NEW DELHI)]
• Provision of telephone connection constitutes a sale, as it involves the transfer of right to use goods attracting sales tax, notwithstanding the fact that service is subject to service tax. [State of Uttar Pradesh & Others v. Union of India & Others 2005 -TMI - 143 - SUPREME COURT]
• Transfer of intellectual property, say software, though a medium which is bought and sold as goods (like in case of floppies, discs, CD Rom, punch cards, magnetic tape etc.) would constitute sale purchase of goods and not that of IPR. In one of the cases of sales tax in Tata Consultancy Services v. State of Andhra Pradesh (2008 -TMI - 4143 - Supreme Court) , Supreme Court has held that software may be intellectual property but as the property contained in a medium is bought and sold, it is an article of value and as such, software can be described as goods subject to sales tax.
Supreme Court observed in TCS case (supra) to distinguish between goods and services as under—
"The music is produced by the artistry of musicians and in it is not a good, but when transferred to a laser-readable disc, it becomes a readily merchantable commodity. Similarly, when a professor delivers a lecture, it is not a good, but when transcribed as a book, it becomes a good".
What constitute 'goods' and is sold by the service provider can not be subjected to service tax which is also evidenced by Notification No. 12/2003-ST dated 20.6.2003 whereby cost of goods or material sold by the service provider to the receiver of services during the course of provision of taxable services is exempt from levy of service tax. Certain abatements also justify this logic.
Anything which is not a good will be called a service. To be a service, some action or rendition of service on the part of service provider is also necessary.
In Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes (2008 -TMI - 2576 - Supreme Court of India), it has been held that payment of service tax and VAT are mutually exclusive. In a composite contracts, both sales and service component can be present.
About the Author: -
Dr. Sanjiv Agarwal
Article Section
List article
TAX ON SERVICES BUT WHAT IS SERVICE ?
Service tax has been levied on services i.e., taxable services as per section 65(105) of the Finance Act, 1994 but the term 'service' has not been defined in Act/Rules or by way of any explanation. What constitutes taxable service is very often a subject matter of dispute. Its literal meaning is an act of helpful activity, rendering of assistance or help. Service is a transformation of the user or user's goods, as a result of the voluntary intervention by the producer of services. It is generally an intangible commodity in the forms of external efforts and excludes sale of goods or property or commodities. It pre-supposes existence of a service provider. For service tax purposes, if there is no taxable service, there is no tax.
What is Service
Service has been defined differently under various laws and dictionaries. Under Income Tax Act, 1961, service means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding and lodging.
Service means service of any description which is made available to potential users and includes the provisions of facilities in connection with banking financing, insurance, chit fund, real estate, transport, processing, supply of electrical or other energy, board or lodging or both, entertainment, amusement or the conveying of news or other information but does not include the rendering of any service free of charge or under a contract of personal service.
Explanation.— For the removal of doubts, it is hereby declared that any dealings in real estate shall be included and shall be deemed always to have been included within the definition of 'service'. [Monopolies and Restrictive Trade Practices Act].
Service means service of any description which is made available to potential users and includes the provisions of facilities in connection with banking, financing, insurance transport processing, supply of electrical or other energy, board or lodging or both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service. [Consumer Protection Act, 1986].
Service means service of any description which is made available to potential users and includes the provisions of facilities in connection with banking financing, insurance, medical assistance, legal assistance, chit fund, real estate, transport, processing, supply of electrical or other energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service fee of charge or under a contract of personal service. [Foreign Exchange Management Act, 1999].
Service means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising. [Trademarks Act, 1999 and Competition Act, 2002].
Service means something provided, usually for a fee, that may not be classed as manufacturing or production in any form (such as legal advice, brokerage, agency services and financial advice). [International Accounting; Business; Insurance].
Thus, literally, service can be said to have the following salient features—
— Act of helpful activity
— Act of doing something useful
— Rendering of assistance/help
— Anything which does not involve supply or transfer of goods is service
— Transformation of user/user goods as a result of voluntary intervention of service provider
— Intangible commodity in form of human effort
— Excludes sale of goods/commodities/property
— Existence of service provider
However, following judgements may create controversy between sale of goods and services -
• Sale of sim card and activation of mobile service is a taxable service [Escotel Mobile Communications Ltd. v. Union of India 2005 -TMI - 185 - HIGH COURT OF KERALA]
• Sale of sim cards by a company engaged in providing cellular telephone services to its subscribers fall within the taxable services [Aircell Digilink India Ltd. v. CCE Jaipur 2005 -TMI - 161 - CESTAT, NEW DELHI; Bharti Cellular Ltd. v. CCE Delhi 2005 -TMI - 197 - CESTAT (NEW DELHI)]
• Provision of telephone connection constitutes a sale, as it involves the transfer of right to use goods attracting sales tax, notwithstanding the fact that service is subject to service tax. [State of Uttar Pradesh & Others v. Union of India & Others 2005 -TMI - 143 - SUPREME COURT]
• Transfer of intellectual property, say software, though a medium which is bought and sold as goods (like in case of floppies, discs, CD Rom, punch cards, magnetic tape etc.) would constitute sale purchase of goods and not that of IPR. In one of the cases of sales tax in Tata Consultancy Services v. State of Andhra Pradesh (2008 -TMI - 4143 - Supreme Court) , Supreme Court has held that software may be intellectual property but as the property contained in a medium is bought and sold, it is an article of value and as such, software can be described as goods subject to sales tax.
Supreme Court observed in TCS case (supra) to distinguish between goods and services as under—
"The music is produced by the artistry of musicians and in it is not a good, but when transferred to a laser-readable disc, it becomes a readily merchantable commodity. Similarly, when a professor delivers a lecture, it is not a good, but when transcribed as a book, it becomes a good".
What constitute 'goods' and is sold by the service provider can not be subjected to service tax which is also evidenced by Notification No. 12/2003-ST dated 20.6.2003 whereby cost of goods or material sold by the service provider to the receiver of services during the course of provision of taxable services is exempt from levy of service tax. Certain abatements also justify this logic.
Anything which is not a good will be called a service. To be a service, some action or rendition of service on the part of service provider is also necessary.
In Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes (2008 -TMI - 2576 - Supreme Court of India), it has been held that payment of service tax and VAT are mutually exclusive. In a composite contracts, both sales and service component can be present.
About the Author: -
Dr. Sanjiv Agarwal
asandco@gmail.com
FCA, FCS, ACIS(UK)
Tuesday, July 29, 2008
Monday, July 28, 2008
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Warren Buffet 's Golden Rule of Invetment
CONITNUED FROM YESTARDAY......
Right Decision at the right time:-
“Buffett’s reputation grew, more people asked him to manage
their money. For the partnership, Buffett bought controlling interests
in several public and private companies, and in 1962 he began buying
shares in an ailing textile company called Berkshire Hathaway.
Tainted by a scandal involving one of its clients, American Express
saw its shares drop from $65 to $35 almost overnight. Buffett had
learned Ben Graham’s lesson well: When stocks of a strong company are
selling below their intrinsic value, act decisively. Buffett made the bold
decision to put 40 percent of the partnership’s total assets, $13 million,
into American Express stock. Over the next two years, the shares tripled
in price, and the partners netted a cool $20 million in profit.”
Embraces the simple and avoids the complications:-.
Warren Buffett is not easy to describe. Physically, he is unremarkable,
with looks often described as grandfatherly. Intellectually, he is considered
a genius; yet his down-to-earth relationship with people is
truly uncomplicated. He is simple, straightforward, forthright, and
honest. He displays an engaging combination of sophisticated dry wit
and cornball humor.
Avoid Risk of Being Wrong
“No matter how careful you are, the one risk no investor can ever
eliminate is the risk of being wrong. Only by insisting on what
Graham called the “margin of safety”—never overpaying, no matter
how exciting an investment seems to be—can you minimize
your odds of error.”
Develop Discipline And Courage
“how your investments behave is much less important than how
you behave.The secret to your financial success is inside yourself. If you
become a critical thinker who takes no stock market “fact” on faith,
and you invest with patient confidence, you can take steady
advantage of even the worst bear markets. By developing your
discipline and courage, you can refuse to let other people’s mood
swings govern your financial destiny.”
Learn From Past
“Those who do not remember the past are condemned to repeat it.”
TO BE CONTINUED TOMORROW.......
“ENJOY TODAY ,WAIT FOR BEAUTIFUL TOMORROW ”
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Initial Offering: SEBI roots
Initial Offering: SEBI roots for investors' rights
27 Jul, 2008, 0715 hrs IST, ET Bureau
MUMBAI: Capital markets regulator, Securities and Exchange Board of India (SEBI), is all set to kick off a pilot project by August 2008, which will enable retail investors, investing in an initial public offering, to pay money for buying shares only to the extent of shares allotted to them. This is a major departure from the current practice of retail investors paying upfront the full amount for the shares they have bid for, while large institutional investors need to put up only 10% of the money. The system in vogue now is seen as discriminating against retail investors and the regulator’s move is aimed at ensuring parity between retail and institutional investors. SEBI’S move implies that a retail investor can participate in a public or rights issue, without the application money actually leaving his bank account, thus eliminating the refund process. The bank will mark a lien on the customer’s account to ensure that the requisite sum is locked in until the allotment process is finalised. The money will be transferred to the company only when the actual allotment takes place. In case the allotment does not take place, the money gets automatically unlocked and is at the investor’s disposal.
In May this year, the SEBI board had approved the concept of providing an alternative mode of payment in issues whereby the application money remains in the investors’ account till finalisation of basis of allotment in the issue. The payment system, called Application Supported by Blocked Amount (ASBA), will require retail investors bidding at a cut-off price, to apply through self-certified syndicate banks (SCSBs) in which they have accounts. ASBA will require SCSBs to accept applications from investors, block the required funds for the bid payment and then upload the details in the electronic bidding system. Once the basis of allotment is finalised, the SCSB will release the required amount and release the unblocked amount. If there is no adequate balance for blocking the amount in the IPO applicant’s account, the application will be rejected. “This is only an alternative mode of payment and the present system will continue to exist,” said Prithvi Haldea, chairman, Prime Database MD. In other words, the ASBA process is an additional mode of making payment in primary issues, by retail individual investors who have bid at cut-off with single option.
CBDT relaxes scrutiny norms
CBDT relaxes norms for scrutiny of company tax returns
New Delhi, July 27: In what could be a major relief to the corporate sector, the revenue department has decided not to scrutinise the tax returns of over 1000 top companies, provided no major disputes are pending against them they had been complying with laws. "The annual returns of tax complying companies would be not be scrutinised this year. The decision has been taken by the Central Board of Direct Taxes (CBDT) to encourage better tax compliance among the corporate," a senior finance ministry official said. Last year, the CBDT took a decision to scrutinise tax returns of about 200 'A' group companies listed on the Bombay Stock Exchange BSE, 500 National Stock Exchange companies and all non-banking finance companies. The tax returns of all the banks and public sector units were also checked by the income tax officials. The decision to relax scrutiny norms follows Finance Minister P Chidambaram's announcement after the annual meeting of Chief Commissioners of Income Tax Department that government would ensure that tax complying taxpayers are not harassed by the Income Tax Department. Under the scrutiny, the assessing official would issue notices to the taxpayer within a year of filing the return and probe any tax evasion by verifying claims about tax exemptions, amount in bank accounts, cash reserves, details of loans, gifts and credit cards. If the department has not raised tax demand of Rs 10 lakh or more in addition to deposited tax and if the department has not won any tax suit against the firm, the officials would not open returns for scrutiny. However, the department may consider to open the tax returns of companies, if they infused fresh capital of Rs 50 lakh or more during last fiscal or filed for tax exemptions for the first time under any scheme. According to the income tax department, in 2007-08 the scrutiny of about 3.2 lakh tax returns, including about 51,000 filed by the corporate, resulted in additional tax demand of Rs 73,200 crore, out of which Rs 28,700 crore has already been realised. However, considering the improvement in tax compliance and electronic filing and payment of returns by the corporate, the department has relaxed norms of scrutiny, the Finance Ministry official add
zee news
July 29, 2008
Sunday, July 27, 2008
GOLDEN RULES OF INVESTMENT
CONITNUED FROM YESTARDAY......
Greatest lesson to be learnt from Warren Buffet:-
The greatest lesson you can glean from Warren Buffett?
To learn from him without desiring to be like him.
It is important to use these articles to learn, but don’t use these articles to
be like Warren Buffett. You can’t be Warren Buffett and, if you try, you
will suffer. Use these articles to understand Buffett’s ideas and then take
those ideas and integrate them into your own approach to investing.
It is only from your own ideas that you create greatness.
The insights in this these articles are only useful when you ingest them into your own persona rather than trying to twist your persona to fit the insights.
The Warren Buffett Way describes what is, at its core, a simple approach.
There are no computer programs to learn, no two-inch-thick Investment manuals to decipher. Whether you are financially able to purchase 10 percent of a company or merely a hundred shares, this book can help you achieve profitable investment returns.
If you’re a young reader, the greatest investment lesson is to
find who you really are. If you’re an old reader, the greatest lesson is
that you really are much younger than you think you are and you
should act that way—a rare gift. Were that not possible, then Mr. Buffett
wouldn’t still be ably evolving at what for most people is postretirement
age. Think of Warren Buffett as a teacher, not a role model,
and think of these articles as the single best explanation of his teachings,
well stated and easily learned. You can learn an enormous amount from
these articles and that can be the foundation for developing your own successful
investment philosophy.
GOAL OF INVESTOR
“Your goal as an investor should be simply to purchase, at a rational
price, a part interest in an easily understood business whose earnings are
virtually certain to be materially higher, five, ten, and twenty years from
now. Over time, you will find only a few companies that meet those
standards—so when you see one that qualifies, you should buy a meaningful
amount of stock.”
Be small man with a big mind
Mr. Buffett evolved as investor without compromising any of his core principles.
Every decade, Mr. Buffett has done things no one would have predicted
from reading about his past, and done them well. Within professional investing,
most people learn in craft-like form some particular style of investing
and then never change. They buy low P/E stocks or leading tech
names or whatever. They build that craft and then never change, or
change only marginally. In contrast, Warren Buffett consistently took
new approaches, decade-after-decade—so that it was impossible to predict
what he might do next.
TO BE CONTINUED TOMORROW.......
“ENJOY TODAY ,WAIT FOR BEAUTIFUL TOMORROW ”
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