We are an Indian food and beverage manufacturing company. We are entering into a joint-venture agreement with a foreign company for setting up a chain of food outlets in India. We are considering filing an application to the Authority of Advance Ruling on a particular issue. We wish to understand whether the order would be binding upon us.
Advance Rulings are binding on the applicant and such rulings cannot be appealed against under the service-tax laws. Such rulings remain binding unless there is a change in law or there are changes in the facts on the basis of which the ruling was given.
We are engaged in marketing IT products manufactured by our parent company located outside India. We organise various conferences and seminars as part of our business operations. The conference is essentially for IT developers, IT professionals and architects. We charge participation fees from the persons who attend the conference. We would like to know that whether service tax would be applicable on such participation fees charged by us as convention services.
Convention services include services in relation to holding a formal meeting which is not open to the general public and which is not for amusement. It has been clarified that any service provided for holding a conference will be taxable under convention services.
The service could be in the nature of providing of halls or other facilities such as video-conferencing, equipment such as overhead projectors, apart from providing space for holding a convention.
In the current case, you will be engaged in organising a conference that would be for a specific audience.
Since, you are not engaged in providing services in relation to the provision of facilities for a conference, the participation fees received by you should not be liable to service tax under the taxable service category of ‘convention services’.
It is relevant to note that on a reading of the Ministry’s letter issued in this respect, it appears that the activity of holding a conference itself would attract service tax under the ‘convention services’.
The letter appears to go beyond the definition of the taxable service category of ‘convention services’. Therefore, the tax authorities may seek to collect service tax on the participation fees received.
We are owners of various storage houses that we rent out to customers for storing their products. We charge a monthly fixed rent from our customers for storing their products. Presently, we are registered under the category of Storage and Warehousing Services and are charging service tax on the rental invoices issued to our customers. However, few of our customers are objecting to payment of service tax, as according to them this is a pure rental arrangement and not a warehousing service. Please advice us on the correct position.
Under the service-tax legislation, any service provided by the storage and warehouse keeper in relation to the storage of goods would be taxable under the category of storage and warehousing service. Also, as per the clarification issued by the Tax Research Unit, mere renting of space cannot be said to be in the nature of services provided for storage and warehousing goods which includes stacking, loading, unloading and security of goods in the storage area. From your query, it appears that your agreement with the customers is purely a rental arrangement and you are only engaged in providing the storage space on rent. Hence, the said services might not be taxable under storage and warehousing services. However, with effect from June 1, 2007, the above services are likely to be taxable.
Our company is engaged in leasing heavy equipment on a monthly rental basis and charging lease tax. We understand that the rentals might be subject to service tax as well under the category of banking and other financial services as the definition covers the activity of equipment leasing. However, at present we are not paying service tax on the same. Is this position correct?
It has been clarified that service tax in case of financial leasing including equipment leasing will be leviable only on the lease management fee, processing fee, documentation charges and on the finance, interest charges recovered in EMIs and not on the principal amount. Besides, this year’s Budget has clearly defined financial leasing. As your company receives only rentals from customers and no other charges are collected, on a reading of the clarification, it can be argued that service tax should not apply on the rentals received.
?Respondents are senior professionals at Ernst & Young. The replies do not constitute professional advice, but are based on interpretation of facts available in readers? queries to the professionals. Neither Ernst & Young nor this publication are liable for any action taken on the basis of this information