At the cost of reiteration, it should be stated that service tax has leapfrogged over the last decade into one of the stellar revenue providers for the government. On its part, the Government has been adding new services and issuing hordes of clarifications and circulars, even as the CESTAT and courts are working overtime to pass judgments on critical issues. The time for stocktaking has come and the Department is keen to clean up old and repetitive circulars. While the circulars and notifications are a hassle, there is also the concept of researching what a taxable service is. Instead of meandering into lengthy definitions of services, would it not be less cumbersome to tax all services and exempt only a few?

Revenue leakage

While this process is on and revenue collections spiral, there could be some revenue leakage within the Department itself. Customs and excise officers realise a fee for physical supervision and sealing of export cargo. The exporter has an option of not getting them supervised by the officers, and for the service provided by the Department, a fee is collected and this is normally known as Merchant Over Time (MOT). A question arose over an Internet discussion forum whether this would be leviable to service tax.

As per Section 65 (105) (zzzq), `taxable service' means any service provided or to be provided to any person, by any other person, in relation to support services of business or commerce, in any manner.

As per Clause 104(c), `support services of business or commerce' means services provided in relation to business or commerce and includes evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.

It is clear from these that services provided in relation to business or commerce by any person to any other person is taxable. Therefore, the service of supervision of export cargo is in relation to business and commerce and is liable for tax. One does not see any specific exemption for such services in the Finance Act, 1994. Apart from this head, we also have the ubiquitous `business auxiliary service' that is constantly referred to tax such one-off services. This is only a sample of the sort of services that could go untaxed till discovered much later.

With income-taxes, excise and Customs duties and fringe benefit taxes expected to remain steady for some time to come without any innovations, maybe 2007 could be the year for a thorough makeover of the Finance Act, 1994 vis--vis service taxes.

Mohan R. Lavi
(The author is a Hyderabad-based chartered accountant.)