Relevant Facts of the case
·
A charitable organisation took technical support
and assistance, in return for monetary consideration, from a firm to make an educational
animation film.
·
The contract was entered into in the Financial
Year 2011-12.
·
A major portion of the consideration in return
for services received was paid in the period from March 2012 to 30th
June 2012. However, some payments have also been made after 30th
June 2012.
Applicability w.e.f. 1st
July 2012
With effect from
1st July 2012, all services, except those which are specifically
stated in the negative list are chargeable to service tax. Therefore, the
services of making a 3D animation film for the charitable institution will be
chargeable to service tax after 01.07.2012.
Applicability prior to 1st
July 2012
Section 65(36c) of the Finance Act,
1994 as amended: "Development and supply of content"
includes development and supply of mobile value added services, music, movie clips, ring tones, wall paper,
mobile games, data, whether or not aggregated, information, news and animation films.
Section 65(105) (zzzzb) of the Finance Act, 1994 as amended: “Taxable
service” means any service provided or to be provided to any person, by any
other person in relation to development and supply of content for use in
telecommunication services, advertising agency services and on-line information
and database access or retrieval services.
From the above
definition of “taxable service”, it seems that the intent of the government in
introducing this service is to tax the value added services provided only by
telecom service providers, advertising agencies, on-line information and
database access or retrieval services such as internet or web-site service
providers.
Point of Taxation
Notification No. 18/2011-ST, dated 1st March 2011 brought the Point of
Taxation Rules 2011, which came into force from 1st April 2011, and
state:
For the purposes of these rules,
unless otherwise stated, “point of taxation‟ shall be determined in the
following manner, namely:-
(a) a provision of service shall be
treated as having taken place at the time when service is provided or to be
provided; and
(b) if, before the time specified in
clause (a), the person providing the service issues an invoice or receives a
payment, the service shall, to the extent covered by the invoice or the payment
made thereof, be deemed to have been provided at the time the invoice was
issued or the payment was received, as the case may be, whichever is earlier.
Explanation- For the purposes of
this rule, wherever any advance, by whatever name known, is received by the
service provider towards the provision of taxable service, the point of
taxation shall be the date of receipt of each such advance.
Explanation 2- For the purposes of
this rule, in respect of services taxable under section 66A of the Act, the
point of taxation under clause (b) shall be the date on which the invoice is
received, or the payment is made, as the case may be, whichever is earlier.
Therefore, it is clear that the time of provision of service will be the earliest of the
following dates:
1.
date
on which service is provided (or to be provided)
2.
date
of invoice
3.
date
of payment received
Conclusion
Since the
contract was entered into in the Financial Year 2011-12, and it is assumed that
the invoice for the full amount was raised before 1st July 2012, in
our opinion, the technical assistance and support services provided in relation
with making a 3D animation film are not chargeable to service tax.
Such
opinion is provided on the following basis:
1.
Service tax was not chargeable on the abovementioned
service before 1st July 2012.
2.
The earlier of the following two events
occurred on a date before 1st July 2012:
a.
Invoice raised of full amount against the
services provided.
b. Providing of whole of such service for which
payment is being made.
