Indian Service Tax
Clarifications
BSNL Payments
Cir. No. 33/1/2001
Date: 29/01/2001
Sub:- Service Tax - Collection of Service Tax on Telephones Reg.
I am directed to refer to Service Tax Circular No. 5/5/94, dated 11/10/1994 wherein against Department of Telecommunications (DOT) it has been stipulated that there will be no payment by TR-6 Challan and it will be only by booking/ crediting under the appropriate Head and to say that owing to the Department of Telecom Services (DTS) being corporatised into Bharat Sanchar Nigam Ltd. (BSNL) w.e.f. 1/11/2000 it no longer remains a Govt. Department and therefore the payment of Service Tax by Book Transfer is not in order. In view of the above it has been decided that as in the case of the MTNL the payment of Service Tax along with interest and penalty, if any, by BSNL will be made under TR-6 Challans in the nominated nationalised banks by the dates prescribed in the Act.
There is no change in the remaining contents of the Circular.
Suitable instructions may be issued in this regard to all concerned in your juridication.
BSNL Services
CIR. No. 46/09/2002-ST
Date 08/08/2002
Sub:- Services provided by BSNL to basic/cellular telephone service providers -Regarding
I am directed to say that doubts have been raised regarding recovery of service tax on certain services provided by Bharat Sanchar Nigam Ltd. (BSNL) to Basic Telephone Service Providers (BSTP) and Cellular Mobile Service Providers (CMSP). References have been received from the Cellular Operators Association of India, New Delhi, and the Department of Telecom (DOT). The services relating to which doubts have been raised are the following:
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'Inter-connection link charges'. These are charges relating to interconnectivity provided between the basic/cellular telephone providers and the BSNL/MTNL exchanges. This enables the private basic telephone operators or the mobile service providers to access BSNL telephone lines and vice-versa. This interconnection can be through a cable owned by the BSNL; in which case a monthly/annual rent is charged. If the cable has been laid/provided by the private basic/cellular telephone service provider no rental is charged by BSNL.
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Rentals for junction links'. These relate to charges for using junction links of the BSNL/MTNL from one exchange to another.
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'Port charges'. These are something like entry charges for allowing access into the BSNL network.
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’Infrastructure charges’. Sometimes the basic as well as cellular telephone services providers need space to keep their own equipments to facilitate the interconnectivity. This space, when provided by the DOT, a rental is covered from them by the DOT.
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This issue had been examined earlier in the Board on 2 reference received from the BSNL and a clarifcation wa issued vide letter. F.No. 149/1/2000-CX.4 dt.14/3/2001 (addressed to BSNL with copies to all Chief Commissioners) that so far as BTSs are conncerned no service tax was leviable in respect of services listed at(i ), (ii) and (iv) above. The clarification did not mention anything about ‘port charges’.
It has been reported by the DOT that since Board’s clarification dt.14/3/2001 refered to BTSPs only, service tax continued to be collected by them on the same services if provided to the CMSPs.
The matter has been examined in the Board. So for as the above 4 services are concerned, no difference can be drawn between BTSPs and CMSPs.
It is clarified that in respect of services listed at (ii), (iii) and (iv), above no service tax is presently leviable.
So far ‘inter-connectivity lnked charges’ are concerened theser are nothing but charges for providing ‘leased circuits’. This services (leased circuits) has been brought under the coverage of service tax w.e.f. 16/7/2001. while issuing Board’s clarification dt.14/3/2001 it was inter-alia intimated that this service was not taxable. However, since ‘leased circuits’have become taxable.
However, since ‘leased circuits’ have become taxable w.e.f.16/7/2001 only, Board’s clarification dt. 14/3/2001 stands modified accordingly.
In short, no service tax is leviable in respect of services listed at (ii), (iii) and (iv) above both for BTSP's and CMSP's. However, service tax is leviable w.e.f. 15.7.2001, on 'inter-connection linked charges' recovered by BSNL from BTSP's as well as CMSPs.
BSNL Services - Corrigendum
F.No.149/2/2002-CX. 4.
Date: 16/08/2002
Sub:- Services provided by BSNL to Basic/Cellular telephone
service providers - Regarding.
Please refer to ST Circular No.46/09/2002-CX dated 8th August, 2002 issued under FNo.149/02/2002-CX.4 on the subject mentioned above.
The date given in para 7 of the said Circular may please be read as '16/7/2001' for '15/7/2001'.
BSNL Services - Telephone billing
[Pro Chief Controller of Accounts, CB.£.& C,Office Memorandum, dated 3/2/2003]
As per the procedure prescribed by Deptt. of Revenue vide FNo.149/1/99CX-4 dt. 29/1/2001, BSNL is required to make payments of Service Tax direct to the Central Excise & Customs Commissionerates through TR-6 challans in the nominated nationalised Bank as in the case of MTNL. It has been noticed that the prescribed procedure is not being followed by the BSNL. But on the basis of instructions issued by Deptt. of Telecommunications vide letter dated 18/12/2000, BSNL is making payment to DOT for booking in their accounts as per the old procedure followed, which is contrary to the prescribed procedure.
The Chairman, CBEC vide his D.O. dt. 1/11/2001 has also conveyed to Member (Finance), DOT that DOT cannot be made liable to collect and pay Service Tax through Book adjustment on behalf of BSNL as it would be inconsistent with the legal provisions relating to Service Tax. The Chairman has therefore asked Member (Finance), DOT, to withdraw their order dt. 18/12/2000, as it is contrary to the provisions of Service Tax Laws and the Ministry of Finance circular dt. 29/1/2001.
Commissioners, Central Excise & Customs are requested to take action and ensure that the BSNL circles under their jurisdiction strictly comply with legal provisions in the matter of payment of Service Tax. Cases of noncompliance may be intimated to this office.
This issues with the approval of Pr. Chief Controller of Accounts, CBEC. Cellular Telephones (1 to 2 circulars)
Cir. No. 22/2/97-ST
Date : 3/9/1997
Sub:- Service Tax on Cellular Telephone services.
Presently two consortiums are formed by two set of cellular operations to provide plastic or SIM card roaming to the subscribers. Under plastics roaming, a subscriber is provided with a single SIM card with a 10 digit number. While last 5 digits of the number remains Same in other circles, first five digits change according to area code.
A doubt has been expressed by the field formation as to whether the operator (Home Operator) with whom the customer have subscribed or the operator (Service Operator) where the customers is visiting will be liable to pay the Service Tax in cases of plastic roaming facility introduced by cellular phone compames.
Attention of trade is invited that the Cellular Telephone services come under the definition of Telegraph authority as defined under sub-section (42) of Section 65 of the Finance Act, 1994 (referred to as Service Tax Act) read with Service Tax Cir. No. 7/1/96, dated 29/2/1996. As per sub-section 41 to Section 65, taxable service means any service provided to a subscriber by the telegraph authority in relation to a telephone connection. For the purpose of collecting service tax, there should be a flow of service from the telegraph authority to the subscriber of the telegraph authority. In other words, the service tax should be collected from the subscriber by the cellular telephone company with whom the subscriber is registered and hence that cellular telephone company becomes the persons responsible for collecting service tax. The value of taxable services in relation to the cell phone connection provided to a subscriber is the gross total amount received by the cell phone company from the subscriber. Therefore, the cell phone company with whom the subscriber is registered should collect the tax from the subscriber irrespective of the adjustment or sharing of the bills with other companies whose services are utilized by the subscriber while roaming. In view of the above it is clear that in case of plastic roaming facility, the home operator (home network), i.e., where the subscriber belongs to and who arranges roaming facility in other metro cities through the arrangements with the service operators (visiting network) should collect and pay the service tax.
The Commissioner of Central Excise may require the cellular telephone company (Home Network) to produce before the assessing officer the bills raised by the service operators on him for the purpose of reconciliation.
Cellular Telephones (2 to2 Circulars)
Cir.No. 23/3/97-ST
Date : 13/10/1997
Sub:- Service Tax – Cellular telephone service – Clarification
I. Issue
Whether rent and access charges for providing junctions for mobile operation to cellular telephone operations by DOT will be subject to service tax.
Cellular telephone services operates between two subscribers holding cellular phone and also with persons holding local telephone. While the Company charges home network/air time charges on their subscribers using their network cellular phone facility, additionally they collected land line charges when the subscribers calls other ilian Cellular Phone numbers which are routed ilirough the DOT network for which they are provided with junctions. Cellular telephone operators are required to pay to DOT rent charges on junctions in addition to DOT charges collected at specific rate per unit from their customers.
Decision
Cellular phone operators are realising rent and access charges from their subscribers and as such when cellular companies pay service tax on ilie amounts received by them from their subscribers it includes rent and access charges and as such to charge again service tax on their charges by DOT will amount to double taxation. Board is of the view iliat no service tax is again chargeable on rent and access charges paid to DOT by cellular phone operators.
II. Issue
Whether ilie cost of Sim Card has to be excluded from activation charges to be collected from subscribers for the purposes of levy of service tax.
Decision
The value of taxable services in relation to telephone connection provided to subscribers is the gross total amount received by the telegraph authority from the subscriber. The Sim Card is essentially an activation device necessary for operating the cellular phone. The Sim Card as such does not have any significant intrinsic value unlike a telephone instrument. Moreover, the Sim Card unlike ilie telephone instrument cannot be purchased by the customer from elsewhere. The charges towards the Sim Card can essentially be viewed as processing charges for activating the cellular phone and as such gross total amount should necessarily include the value of the Sim Card. The a1110unt received by the cellular telephone company from subscribers towards Sim Card will form part of the taxable value for levy of service tax.
III. Issue
Whether cellular companies are correct in adjusting the tax paid earlier without filing any refund claim with the Department.
Cellular companies have adjusted service tax paid in excess earlier, in subsequent payments of service tax required to be made by them, without following the procedure of filing a refund claim in respect of excess payments made earlier.
Decision
There is no provision in the Finance Act, 1994 to adjust service tax against Lax already paid. The assessee has to file a refund claim under Section B is made applicable to service tax and cannot make adjustment while raising the bills.
IV. Issue
Whether the companies are right in not paying service tax on the free telephone provided to their employees and friendly users from whom they do not recover any charges, but pay service tax only on line laying charges which represents value of calls made through the network other than cellular phone.
Cellular telephone operators provides services to a category called "friendly users" which is mainly provided to its sister concerns and to their employees from whom they do not recover any air time charges and only recover "land line charges" which represents the value of the calls made through the network other than cellular phones (DOT Number).
Decision
The value of taxable services in relation to telephon.e connection provided to subscribers is the gross total amount received by the telegraph authority from the subscriber. In case the service is provided free and no amount is received by the telegraph authority, the question of service tax liability does not arise. Only land line charges will be liable for tax.
V. Issue
Whether the company can allow discount on their air time charges and in such cases are eligible to pay tax only on reduced amount. Cellular Companies gives discount to its customers on air time charges and also at times give other allowances to the customers.
Decision
The value of taxable services in relation to telephone connection provided to subscribers is the gross total amount received by the telegraph authority. In case where the telegraph authority has extended services at a discounted price, the service tax liability is only in respect of the discounted price so received.
Clarifications
[TN No. 8/96-ST, dated 3/1/1997 of the Rajkot Commissionerate]
Sub:- Service Tax – Collection of service Tax on Telephones.
Acopy of the Government of India, Ministry of Finance, Deptt. of Revenue, New Delhi’s Service Tax Circular No. 16/10/96 (Telephones) issued vide F.No. 149/5/95-CX4, dated 15thOctober, 1996 on the above subject is forwarded herewith for information, guidence and necessary action.
In this connection, certain difficulties have been pointed out the Commissioners regarding collection of service tax on telephones. After considering the matter, the following clarifications are being issued:
I.Issued
Difference between billed amount and amount actually of service tax be collected (based on biled amount) and service tax actually collected.
As per Section 67(b) and 68 of Service Tax Act* (Chapter V of Finance Act, 1994) the amount of service tax has to be levied on the value of the telephone bills received during the month and the amount of service tax collected should be paid to the credit of Central Government by 15th of the following month.
Decision
The amount of service tax may be collected on the value of taxable services, i.e. the telephone bills received during the month rather than billed. Department may not insist at this stage for reconciliation of the figures of such service tax billed and service tax collected and may place reliance on the financial control system of Telecom Department for the reconciliation of the telephone bills which would automatically mean reconciliation of service tax.
II. Issue
Actual date of crediting of service tax to the Book account of the Central Government.
As per Section 68(2), the service tax collected during any calendar month shall be paid to the credit of Central Government by 15th of the following month. Rule 6(1) of Service Tax Rules, 1994 says that Secondary Switching Area (SSA) shall deposit with the designated bank in Form TR 6 by 15th of the following month and collected by him on the value of taxable services. Under Sections 75 and 76 of the Act, an interest has to be charged at the rate of 1.5% of every month or part of the month by which such crediting of tax is delayed and a penalty. The field formations are in confusion as to the date of credit so as to arrive at the calculation of interest and penalty.
Decision
The first date on which the book transfer is made in the cash section of Secondary Switching Area (SSA) may be taken as the date of crediting to the Central Government. In this connection, a similar document as Annexure 'A' is hereby prescribed under Rule 7 of Service Tax Rules, 1994 to be filed along with ST 3 in case of payment through TR 6 in designated banks by substituting entries in Column No.7 (ChaUan No. & Date) by this Annexure so as to calculate the penalty and interest, if any, by the date given in this column.
Annexure' A'
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International Roaming facility
[TN NO. 2/99-st, dated 21/6/1999, ST Cir. No.28/2/99 4/6/1999 of the Rajkot Commissionerate]
I am directed to say that doubts have been raised whether Board’s Service Tax Circular No. 22/2/97, dated 3rdSeptember, 1997 would also apply to International roaming facility.
The matter has been examined by the Board. In the case of I nternational roaming the foreign visited network operator forwards the usage bills to the Home Network operator pertaining to the subscribers of Home Network operator who have made usage of visted network. On receipt of the usage bill from the foreign network operator the Home Network operator includes the said amount and roaming surcharge in the regular monthly bill of the subscriber. As the value of taxable service under section 67 (b) of the Finance Act, 1994 as amended is the gross total amount charge by the telegraph autority (here Home Network operator) from the subscribers, the Board is of the view that the service tax shall be chargeable on the comprehensive (gross) bill sraised by Home Network operator on its subscribers inclusive of foreign usage bill and roaming surcharge.
Accordingly it is held that the service Tax Circular N0. 22/2/97, dated 3/9/1997 would not only apply to plastic roaming facility but also apply mutatis mutandis to automatic roaming facility included International Automatic/plastic roaming facility provided by Cellular phone operators.
Internet telephony
Cir. No. 54/3/2004
21/4/2003
Sub:- Internet telephony services-Clarification-Reg.
Iam directed to say that doubts has been raised regarding the classification f the Internet Telephony Service, as to whether this service is covered under the category of ‘telephone service’ or ‘online information and databaseaccess and /or retrieval service Tax.
Transmission of two-way voice communication through the medium of Internet is callec Internet Telephony. Even if the licenses to Internet Telephony Service Providers are issued under section 4 of the Indian Telegraph Act, 1885,.the two way voice communication is made possible through data transfer over the Internet. As per Section 65(19), 1994, the term "on-line information and database access and/or retrieval" means providing data or information, retrievable or, otherwise, to a customer in electronic form through a computer network. Accordingly, it is to confirm that Internet Telephony Services fall under the category of online information and database access and /orretrieval services.
Surcharge
Cir. No.32/3/2000 –CX
Date: 20/12/2000
Sub:- Service Tax not leviable on surcharge collected on delayed payment of telephone bill.
I am directed to say that it has been brought to the notice of the Board that divergent practices exist in respect of levy of service tax on 'surcharge' collected for delayed payment of telephone bills.
The matter has been carefully examined by the Board. As per the provisions of Section 65( 48)(b) of Chapter V of the Finance Act, 1994, service tax is leviable on the service provided by the telegraph authority to a subscriber, in relation to a telephone connection. Further, under Section 67(b) of the said Finance Act, the value of taxable services has been defined to include only the amount charged for the services provided by the Telegraph authority to a subscriber. On a harmonious interpretation of the above provisions and also taking note of the fact that the amount of surcharge on delayed payment of a telephone bill does not alter the value of taxable services, it is hereby clarified that service tax is not leviable on the amount of surcharge collected for delayed payment of telephone bills. Consequently, Board's Service Tax Circular No.29/3/99,dated 15/7/1999 (issued from file F. No.149/5/97-CX.4) which is contrary to the above position stands withdrawn.
It is desired by the Board that pending disputes, if any, be finalised as per the instructions contained herein. Trade and field formations may also be informed suitably.
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