We transport goods through Indian Railways. We understand that previously, service tax was levied only on transportation of goods in containers by rail. However, recently, all services in relation to transport of goods by rail have been made taxable. Please clarify.
You are correct in your understanding that only services in relation to transportation of goods in containers by rail were liable to service tax earlier. Vide Finance Act, 2009, transport of goods in any manner by rail was made liable to service tax. However, exemption was granted to the transport of goods by rail excluding the ?transport of goods in containers by rail?. Therefore, currently, no service tax is applicable on services in relation to transport of goods by rail, except services in relation to the transport of goods in containers by rail.
We are a trading firm and are evaluating the impact of GST on our operations. However, it appears that there are two different documents on GST. Please clarify which one would be applicable.
The Empowered Committee of State Finance Ministers has issued a discussion paper on GST. Separately, a report has also been issued by the taskforce of the 13th Finance Commission.
There are certain differences on the views advocated in the two reports on the structure of the GST and it is not clear which would prevail. The final structure of the GST would be based on a consensus among the Centre and the states.
We are a newly established company. We have appointed a managing director and other directors to whom we pay a sitting fee. Is there a service tax on the fee paid to our directors?
Vide Circular 115/09/2009 ? ST dated July 31, 2009, the Central Board of Excise & Customs has clarified that directors perform management functions and do not provide any consultancy or advice. Thus, the amount paid to directors for performing actual management services would not be taxable under the category ?management consultancy service?. Only in case a director provides any advice or consultancy to the company for which they are compensated separately, service tax is levied.
We are a company owning a cinema theatre in Delhi. We have entered into an agreement with a film distributor for leasing the hall for screening movies. The profit or loss from exhibiting the film is borne by the distributor. Please clarify if service tax would be applicable on the fixed rent payable by the distributor for the arrangement.
The applicability of service tax would depend on the arrangement between you and the distributor. It has been clarified vide Circular F. No. 137/186/2007 – CX. 4 , dated February 23, 2009 that where a hall is leased for screening a film for a fixed rent, such activity would be taxable under the category of ?renting of immovable property for furtherance of business or commerce?.
However, screening films under other arrangements such as a revenue sharing contract between the theatre owner and the film distributor or purchase of print/CD of the film by the theatre owner for screening would not be a taxable service.
In your case, since you receive a fixed rent for lease of the hall to the distributor, the rent should be liable to service tax under ?renting of immovable property service?. Please note that the Delhi High Court, in the case of Home Solutions Retail India Limited, has held that service tax is not applicable on renting immovable property. Based on this ruling, many assesses are not paying service tax on renting immovable property.
However, the government has filed an appeal against this decision in the Supreme Court and the matter is currently sub judice. The Central Board of Excise & Customs has also issued instructions to field formations directing them to collect service tax from assessees for renting immovable property.
Therefore, there would be further litigation on this issue before a final decision is taken.
Respondents are senior professionals at Ernst & Young. The replies do not constitute professional advice. Neither EY nor FE is liable for any action taken on the basis of these replies