Declared Services Under Finance Act

The phrase "Declared Services" is defined by Section 66 E (the definition includes 10 services given below) of the Finance Act as. Declared services are taxable services that have been specifically included in "service" to remove any ambiguity on the tax ability of such transactions and to ensure uniformity of taxation on these transactions throughout the country. The following are declared services in India as per Section 66 E of the Finance Act, 1994.

Renting of Immovable Property

Renting of immovable property is included in "Declared Services". It is chargeable to service tax. It is specifically included in declared services only to remove any uncertainty on its tax ability in future. Renting has been defined as "allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing or other similar arrangements in respect of immovable property."

Construction of a Complex, Building, Civil Structure

This section was taxable even prior to July 01, 2012, when negative list of service tax was not implemented. It is specifically included in declared services only to remove any uncertainty on its taxability. Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to buyer, wholly or partly, except where the entire consideration is received after issuance of certificate of completion by a competent authority is taxable and is a declared service. The term “construction” includes additions, alterations, replacements or re modelling of any existing civil structure.

Temporary Use of Intellectual Property Rights

Intellectual property emerges from application of intellect, which may be in the form of an invention, design, product, process, technology, book, goodwill etc. Temporary transfer or permitting the use or enjoyment of any intellectual property right viz. know-how, patents, copyrights, trade-marks, licences, designs, franchises; or any other business or commercial rights of similar nature. Granting temporary use of intellectual property rights is a declared service attracting tax.

Development, Enhancement & Implementation of Software

Development, design, programming, customisation, adaptation, up-gradation, enhancement, implementation of information technology software is considered declared services. The term 'information technology software 'has been defined as any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment'.

However, packaged information technology software is being exempted from service tax provided either the customs duty or excise duty has been paid on the entire amount received from the buyer.

Agreeing To Do or Not to Do an Act

Agreeing to the obligation, or to the act to refrain from an act, or to tolerate an act or a situation, or to do an act. In such agreements, the non-compete fees or free prescribed under the agreement to do or agreement not to do would be taxable.

Supply of Property Without Transfer of Right to Use

Transfer of goods by way of hiring, leasing, licencing "without transfer of right to use such goods" is declared service and chargeable to service tax. VAT or CST is nor applicable in this case, as there are no "sale" or "deemed sale". Conversely, transfer of right to use goods for any period for a consideration is "deemed sale" and subject to VAT or CST.

Delivery of Goods on Hire Purchase

Activities in relation to delivery of goods on hire purchase or any system of payment by instalments have been included as part of taxable services. Accordingly, the delivery of goods on hire purchase or any system of payment on instalment is not chargeable to service tax because as per Article 366(29A) of the Constitution of India such delivery of goods is deemed to be a sale of goods. However, activities or services provided in relation to such delivery of goods are covered in this declared list entry.

Works Contract

Works contract has been defined in section 65B of the Act as a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property. Works contract has been included under declared services.

Services of Supply of Food or Drinks

Services portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as part of the activity. It shall also include where services are provided during provision of food or drinks for human consumption as in the case of restaurants, or outdoor catering etc. In terms of article 366(29A) of the Constitution of India supply of any goods, being food or any other article of human consumption or any drink (whether or not intoxicating) in any manner as part of a service for cash, deferred payment or other valuable consideration is deemed to be a sale of such goods. The service portion of supply of food or drinks falls under declared services.

Right to Use Spectrum

“Assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof” has been declared as a service amendment made by the Finance Act, 2016. This amendment has been made to make it clear that assignment of right to use the spectrum is a service leviable to service tax.

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Frequently Asked Questions

Common questions about Declared Services Under Finance Act 1994 Taxability.

Declared Services are taxable services that have been specifically included in the definition of "service" under Section 66E of the Finance Act, 1994, to remove any ambiguity on their taxability and ensure uniform taxation throughout the country.

The Declared Services under Section 66E of the Finance Act include renting of immovable property, construction of buildings and civil structures, temporary use of intellectual property rights, software development and implementation, agreeing to do or not do an act, supply of property without transfer of right to use, delivery of goods on hire purchase, works contracts, supply of food or drinks, and the right to use radio-frequency spectrum.

Certain services are specifically included as Declared Services to remove any uncertainty or ambiguity regarding their taxability in the future, even if they were already taxable prior to the implementation of the negative list of service tax.

Yes, renting of immovable property is included in Declared Services and is chargeable to service tax. It has been specifically included to remove any uncertainty on its taxability in the future.

Yes, the construction of a complex, building, civil structure, or a part thereof, including those intended for sale to buyers, is taxable and included in Declared Services, except where the entire consideration is received after the issuance of a completion certificate by a competent authority.

Yes, activities related to the development, design, programming, customization, adaptation, upgradation, enhancement, and implementation of information technology software are considered Declared Services and are taxable.

"Agreeing to do or not to do an act" refers to agreements where a party agrees to an obligation, refrains from an act, tolerates an act or situation, or agrees to do an act. Any fees or charges prescribed under such agreements are taxable under Declared Services.

Delivery of goods on hire purchase or any system of payment by installments is not chargeable to service tax, as it is considered a deemed sale of goods. However, activities or services provided in relation to such delivery of goods are covered under Declared Services.

The inclusion of the "assignment by the Government of the right to use the radio-frequency spectrum and subsequent transfers thereof" as a Declared Service, through an amendment in the Finance Act, 2016, clarifies that the assignment of the right to use the spectrum is a service leviable to service tax.

Yes, the service portion of an activity wherein food, drinks (alcoholic or non-alcoholic), or any other article of human consumption is supplied, such as in restaurants or outdoor catering, falls under Declared Services and is taxable.