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Definition and Meaning
Section 65(105) (zzb) - ‘Taxable service’ means any service provided or to be provided to any person, by any person in relation to business auxiliary service.
 
Levied
Services Provided Services provided or to be provided
01.07.2003 16.06.2005
 
Essential Ingredients
Services are provided or to be provided to a person.
Services are rendered by any person.
The services shall be in relation to business auxiliary services.
In 2004, service tax was imposed on the activity of production of goods on behalf of the client and in 2005, service tax was imposed on the processing of goods for and on behalf of the client, however activity amounting to manufacturing within Central Excise Act is not laible to service tax.
Section 65 (19)- Business Auxiliary Service - 'Business Auxiliary Service" means any service in relation to,-
 
Promotion or marketing or sale of goods produced or provided by or belonging to the client or
Promotion or marketing of service provided by the client; or Explanation.- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "service in relation to promotion or marketing of service provided by the client" includes any service provided in relation to promotion or marketing of games of chance, organised, conducted or promoted by the client, in whatever form or by whatever name called, whether or not conducted online, including lottery, lotto, bingo
Any customer care service provided on behalf of the client or
Procurement of goods or services, which are inputs for the client; or Explanation.- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client.
Production or processing of goods for, or on behalf of, the client or
Provision of service on behalf of the client or
A service incidental or auxiliary to any activity specified in sub-clauses (i) to
Such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any activity that amounts to manufacture of excisable goods.
Other financial services, namely, lending, issue of pay order, demand draft, cheque, letter of credit and bill of exchange, transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts
  Explanation.- For the removal of doubts, it is hereby declared that for the purposes of this clause,-
"Commission agent" means any person who acts on behalf of another person and causes sale or purchase of goods, or provision or receipt of services, for a consideration, and includes any person who, while acting on behalf of another person-
 
Deals with goods or services or documents of title to such goods or services or
Collects payment of sale price of such goods or services or
Guarantees for collection or payment for such goods or services or
Undertakes any activities relating to such sale or purchase of such goods or services
"Excisable goods" has the meaning assigned to it in clause (d) of section 2 of the Central Excise Act, 1944 (1 of 1944)
 
Person Liable to make payment of service tax (Service provider/ service recipient)
Any person providing the service would be liable to pay the service tax as service provider under the Act.
 
Abatement (If Any)
Notification No. 1/2006 ST dated 1-3-2006
Description of Taxable Service Condition Abatement
Business auxiliary service in relation to production or processing of parts and accessories used in the manufacture of cycles, cycle rickshaws and hand-operated sewing machines, for, or on behalf of, the client The gross amount charged from the client is inclusive of the cost of inputs and input services, whether or not supplied by the client 30%
Provided that this notification shall not apply in cases where, -
The CENVAT credit of duty on inputs or capital goods or the CENVAT credit of service tax on input services, used for providing such taxable service, has been taken under the provisions of the CENVAT Credit Rules, 2004 or
The service provide r has availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003[G.S.R. 503 (E), dated the 20th June, 2003.
 
Import of Services
Where the taxable service is provided from outside the country, the recipient of service would be treated as deemed service provider under the reverse charge mechanism and would be liable to apply for registration for paying tax on imported services.
Rule 3 of Taxation of services (provided from outside India) Rules, 2006 classifies taxable services into three categories. The Business Auxiliary services falls in the third category ie., ‘When the service is received by a recipient located in India for use in relation to business or commerce.’ (Rule 3 (iii))
 
Notifications / Circulars
D.O. F. No.334/13/2009-TRU, dated 06.07.2009 - The production or processing of goods for or on behalf of a client falls within the purview of this service. However, if any such activity amounts to manufacture within the meaning of section 2(f) of the Central Excise Act, the same is excluded from its purview. This exclusion has been modified to state that it would apply only if the activity results in manufacture of 'excisable goods'. Both the words/phrases i.e. 'manufacture' and 'excisable goods' would have the same meaning as defined under the Central Excise Act. The impact of this change would be that even if a process of manufacture is undertaken for the client, but the resultant product does not fall under the category of excisable goods, such as alcoholic beverages, the service tax would be attracted.
Circular No.96/7/2007-ST, dated 23.08.2007
Reference Code Issue Clarification
004.01 / 23.08.07
Persons / agencies canvass advertisements for publishing, on commission basis. Such persons / agencies do not provide any other services like making, preparation, display or exhibition of advertisement.
Whether merely canvassing advertisement for publishing on a commission basis by persons / agencies is classifiable as Advertising Agency service [section 65(105)(e)] or not?
Merely canvassing advertisements for publishing, on commission basis, is not classifiable under the taxable service falling under section 65(105)(e).
Such services are liable to service tax under business auxiliary service [section 65(105)(zzb)].
048.01 / 23.08.07
Whether commission received by distributors for distribution of mutual fund units is liable to Service Tax under business auxiliary service?
Distributors receive commission from mutual fund for providing services relating to purchase and sale of Mutual fund units. Services provided by such distributors are in the nature of commission agent and are, thus, liable to service tax under business auxiliary service [section 65(105)(zzb).
Notification no 8/2003-ST, dated 20.06.2003 (Rescinded w.e.f. 01.03.2006 vide notification No 2/2006-ST, dated 01.03.2006) - Exempts the Business Auxiliary service provided by a call centre or a medical transcription centre to a client from the levy of service tax.
Notification No 13/2003-ST, dated 20.06.2003 - Exempts the Business Auxiliary services provided by the commission agent in relation to sale or purchase of agricultural produce from the levy of service tax.
Board’s Circular No 66/15/2003-ST, dated 05.11.2003 - Commission received by Mutual Fund Distributors on mutual funds is liable to service tax under this category.
Notification No 14/2004-ST, dated 10.09.2004 - Exempts the Business Auxiliary services provided in relation to procurement of goods or service, which are inputs for the client, production or processing of goods for or on behalf of the client, provision of service on behalf of the client or a service incidental or auxiliary to any such activity, and provided in relation to agricultural, printing, textile processing or education, from the levy of service tax.
Notification no 8/2005-ST, dated 01.03.2005 - Exempts the service of production or processing of goods for on behalf of the client provided such goods are produced or processed using the raw materials or semi-finished goods supplied by the client and goods so produced or processed are returned back to the said client for use in or in relation to manufacture of any other goods falling under the first schedule to Central Excise Tariff Act on which appropriate duty of excise is payable.
Notification No 21/2005-ST, dated 07.06.2005 - Exempts the service to produce or processing of goods for or on behalf of the client in the course of manufacturing of cut and polished diamonds and gem stones or plain and studded jewellery of gold and other precious metals.
Board’s Circular No 87/05/2006-ST, dated 06.11.2006 - Automobile dealers helping the buyers of the vehicle in arranging the finance through financial companies and getting the commission from such financial companies, such gross commission received by the automobile dealers is subjected to service tax under this category. In case the Automobile dealer shares his commission with the customer, then also service tax would be charged on the gross amount received as commission by the dealer.
 
Case / Judgement
Larsen & Toubro Ltd Vs CCE - Mere procurement of orders for a principal on commission basis is taxable under Business Auxiliary services.
Glaxo Smithkline Pharmaceutical Ltd Vs CCE - Sharing staff costs and other expenses between two group companies would come within the purview of business auxiliary services and would be taxed accordingly.
Bharat Communications v. CCE - Service tax in not levied under the category of ‘business auxiliary services’ on the sale price of SIM Cards.
 
 
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