FAQs on Taxability of Services provided by Govt. to Business Entities

1
Customer Care No. 91-11-45562222
FAQs on Taxability of Services provided by Govt.
to Business Entities
www.taxmann.com
2

• Budget 2016 has enhanced the scope of taxability
  of services provided by Government or Local
  Authority to business entities. Earlier i.e. pre
  amendment, only support services provided by
  Government or Local Authority to business
  entities were taxable.
• With effect from April 1, 2016 all services
  provided by Government or a Local Authority to
  business entities are taxable. However, pre as
  well post amendment the provisions are same in
  relation to services provided to a person other
  than business entity.
• Following FAQs will give an overview of the post
  amendment scenario in relation to services
  provided by the Government or a Local Authority
  to business entities.

Customer Care No. 91-11-45562222
www.taxmann.com
3

• 1. Which services provided by Government or Local
  Authority to business entities are taxable?
• With effect from April 1, 2016 all services
  provided by a Government or a Local Authority to
  business entities are taxable (except those
  services which are specifically covered under
  negative list or exempted by way of any exemption
  notification).
• 2. Which services provided by Government or Local
  Authority are covered under the negative list?
• All the services provided by Government or Local
  Authority are covered under the negative list
  except the following services. In other words,
  service provided by Government or a Local
  Authority except following are not taxable by
  virtue of negative list.
• i) Specified services by Department of Post,
• ii) Services in relation to aircraft or vessel,
• iii) Transport of goods or passengers,
• iv) Services provided to business entities (pre
  amendment it was support services provided to
  business entities).
• 3. Which services have been exempted from service
  tax under Mega-exemption 25/2012?
• Following services are exempt under
  Mega-exemption 25/2012

Customer Care No. 91-11-45562222
www.taxmann.com
4

• i) Services provided by Government or a local
  authority to a business entity with a turnover
  upto rupees ten lakhs in the preceding financial
  year.
• ii) Services provided by Government or a local
  authority to another Government or a local
  authority.
• iii) Services provided by Government or a local
  authority to an individual by way of grant of
  passport, visa, driving license, birth or death
  certificate.
• iv) Fines or liquidated damages payable to
  Government or a local authority for
  non-performance of contract.
• v) Services provided by Government or a local
  authority by way of registration required under
  the law or testing, safety check or certification
  relating to safety of consumers, etc.
• vi) Services in nature of allocation of natural
  resources to individual farmers or in relation to
  any function entrusted to Panchayat.

www.taxmann.com
Customer Care No. 91-11-45562222
5

• Note Services provided by Government or a local
  authority would be exempted from service-tax if
  the gross amount charged for such service does
  not exceed Rs.5000. This exemption does not cover
  
• i) Specified services by postal department.
• ii) Services in relation to aircraft or vessel.
• iii) Transportation of goods or passengers
• 4. What would be the Point of taxation of
  services provided by Government or Local
  Authority?
• In case of services provided by Government or a
  local authority, the point of taxation shall be
  the date
• i) when payment in part or full in respect of
  such services become due or,
• ii) when payment for such services is made
• - whichever is earlier.

Customer Care No. 91-11-45562222
www.taxmann.com
6

• 5. How services provided by Government should be
  valued?
• The amount charged by Government or a local
  authority for providing services will be
  considered as a value of taxable service. It has
  been specifically provided that amount of
  interest or any consideration charged for
  allowing deferred payment is includible in value
  of service.

Customer Care No. 91-11-45562222
www.taxmann.com