Service Tax Applicability – Whether It Applies to you – Territorial Application – Section 64

Taxable Service

As per the provisions of Service Tax, all the services provided by one person to another person in the taxable territory for which consideration has been charged are taxable.

But the services which are specified in the Negative List as per Section 66D are not taxable services and are not liable to service tax.

Other than the negative list services there are some services which are exempt from whole of the services tax by way of exemption notification issued by Central Government (i.e., notification No. -25/2012 ST).

 

Now the question arises that what comes under Taxable territory?

The services provided under the taxable territory are only liable to service tax.

And taxable territory means the whole of India except the State of Jammu & Kashmir.

 

As per Finance Act, 1994"India" means,––

• The territory of the Union as referred to in clauses (2) and (3) of article 1 of the Constitution, i.e., the States and Union Territories;
• its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976

1. Territorial Water- a belt of coastal waters extending at most 12 nautical miles (22.224 Km) from the baseline of a coastal state.
2. Continental Shelf- 24 nautical miles (44.448 KM) from the coast.
3. Exclusive Economic - not more than 200 nautical miles (370 km) out from its coastal baseline.

• the seabed and the subsoil underlying the territorial waters;
• the air space above its territory and territorial waters; and
• the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for prospecting or extraction or production of mineral oil and natural gas and supply thereof.

Analysis:-

1. If the place of provisioning of service (i.e., place of consumption) is Jammu & Kashmir, then service is not taxable.

Eg: A service provider of Delhi provides services in Jammu & Kashmir then no services tax liability arises.
 

2. If the location of service provider is Jammu & Kashmir but service is provided outside Jammu & Kashmir, then that will be taxable.

Eg: Ram a service provider located in Jammu & Kashmir a service in Mumbai to Mohan located in Mumbai then this will be as the service in the taxable territory irrespective of the fact that services provider is of Jammu & Kashmir.

 

Conclusion

For applicability of service tax:-

• Service must be outside the ambit of Negative list;
• Not be an exempted service;
• Is a taxable service and
• Is provided within the taxable territory, i.e., the consumption of service is within India except in the State of Jammu & Kashmir.

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