Negative list-based service tax: Issues & wish list for Budget

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Rajeev Dimri: Feb 21 2013, 02:18 IST

the words “database access or retrieval” or in other words, is the service recipient paying to service provider for making the software available “online” or “online” is only a way of delivering the software. Further, given that electronic download of software attracted service tax prior to July 01, 2012, by way of a specific entry, the taxpayers have a genuine concern that the service tax authorities are unlikely to accept non-levy of service tax on electronic download of software under the new regime. We hope that an appropriate clarification may be issued in this regard by the government since this issue would have a huge bearing upon the entire IT sector in India. In fact, this would also have impact on other download-based services like books, movies, games and music and hence appropriate clarity becomes more important.

Another critical issue requiring immediate clarity is the interpretation of the word ‘intermediary’. Under the Place of Provision of Service Rules, 2012, the place of provision of services qualifying as “intermediary services” would also be the location of the service provider. “intermediary” has been defined as “….who arranges or facilitates a provision of a service (hereinafter called the ‘main’ service) between two or more persons….”. It is not clear as to whether mere intention to arrange or facilitate a main service by way of introduction of a prospective vendor and customer (irrespective of whether the vendor or customer fructifies or not) is sufficient to qualify as ‘intermediary’ – if yes, then a host of

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