FAQs on Taxability of Services provided by Govt. to
Business Entities
1.
Which
services provided by Government 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.
Earlier only support services provided by them to business entities were
taxable.
2.
Which
services provided by Government covered under the negative list?
Services provided by Government are covered
under the negative list. But following services are not covered under the 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.
3.
Which
services have been exempted from service tax under Mega-exemption 25/2012?
Following services
are exempt under Mega-exemption 25/2012:
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.
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.
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.
6.
Who
is liable to pay tax on services provided by Government or Local Authority?
The recipient of services are required
to pay service tax on services received from Government or a Local Authority
under reverse charge basis.
7.
On
basis of which documents can Cenvat Credit be availed in respect of services
provided by Government or a Local Authority?
Cenvat
Credit can be availed on the basis of challan evidencing payment of Service Tax
by the service recipient.
