Leaf No:  Supplement 
Month:  June 
Year:  2010
port & airport services
Any service rendered inside the port or airport has been made taxable with effect from 01-07-2010, except those services such as repair of ships or boats belonging to the Government of India, repair of ships or boats which amounts to manufacture, supply of water, electricity, health services, education services, fire service and pollution control service.                     (Click here for Notification No. 31 / 2010 - ST dt 22/6/2010).
commercial training or coaching centre 
An explanation has been inserted in the definition of the taxable service  of commercial training or coaching centre to the effect that the status of the concern rendering the commercial training or coaching or absence of profit motive is not relevant for determining the liability.
sponsorship service 
Taxable service as per Section 65 (zzzn) has been substituted to the effect that service provider can be any person and not necessarily be a body corporate or a firm, as was the case before amendment. Specific exemption has been provided for sponsorship provided to tournaments or championships provided by the National Sports Federations and Affiliated bodies, Association of Indian Universities, Central Civil Services Cultural and Sports Board, Indian Olympic Association etc.                                                (Click here for Notification No. 30 / 2010 - ST dt 22/6/2010)
air travel services
Taxable service has been amended to tax any service provided by Aircraft operator in relation to scheduled or non scheduled air transport of passenger embarking in India for domestic or international journey. Prior to amendment the liability was only on international journey.
The following exemptions have however been granted:

 cenvat credit rules, 2004

Definition of Capital goods under Rule 2(a) of Cenvat Credit Rules, 2004, has been amended to include dumpers or tippers falling under Chapter 87 and registered in the name of an output service provider for provision of services under Site formation and Clearance, and Mining service


port & airport services

With this amendment in place the confusion over taxability of services which are not authorised by Major Port Trust Act, 1963 or Airport Authority of India Act , 1994 has come to an end. The amendment is to overcome decisions as Velji P. & Sons Agencies vs. CCE 2007 8 STR 236 (Tri-Ahm), Homa Engineering works vs. CCE 2007 7 STR 246 etc, wherein, it was held that only those services authorised Section 43 of Major Port Trust Act, 1963 can be classified as Port service and on this ground services such as stevedoring etc, were held as not taxable under port service. The taxability of services as cargo handling rendered inside the port has been referred to larger bench in the case of Western Agencies Private Ltd vs. CST 2008 12 STR 739 (Tri-Che) and yet to be disposed off.

commercial training or coaching centre 

The amendment is to overcome the much followed precedent set by Great Lakes Institute of Management vs. CST 2008 10 STR 202 (Tri-che). The CBEC has attempted to overcome the ratio even before Finance Bill 2010 by issuing Circular 107/1/2009-ST dated 28-01-2009 which stated that the presence or absence of profit motive is irrelevant for determining the taxability under commercial training or coaching centre service.
construction services
The issue of levy of service tax on construction of residential complex is as sticky and murky as the cement and concrete and this budget has added further to it. There are broadly two types of transactions involving residential complex. (Click here to read a teaser by G. Natarajan, advocate)

 port & airport services -  a curse in disguise ???

Though with this amendment, it is believed that the classification principles as provided under Section 65A of the Finance Act,1994 will be ousted in respect of the services rendered inside a port or an airport, the googly is that, what would be the status of the various services, which presently enjoy various abatements and concessional rate , if such services are rendered within the port / airport now. 

For example, if an erection, commissioning & insatallation service (ECI) is rendered within a port / airport,  they are to be classified as port / airport services hereafter, as per the present amendment. Till date, the ECI service enjoys an abatement under Notification 1/2006 - ST dated 1/3/2006, as amended. Now with no prescription of any abatement under the port / airport service , what would be the status of such services, if rendered within a port / airport? Similarly, what would be the rate of service tax for the works contract services, if rendered within a port / airport?  

air travel services -  an intentional miss or an ignorant bliss ???

Notification No. 26/2010 - ST dated 22/6/2010, exempts "air travel services" from so much of service tax, as is in excess of,-

(a) ten percent of the gross value of the ticket or rupees one hundred per journey, whichever is less, for passengers travelling in any class, within India;

(b) ten percent of the gross value of the ticket or rupees five hundred per journey, whichever is less, for passengers embarking in India for an international journey in economy class:

This exemption is with a condition that no CENVAT credit on inputs used for providing such service has been taken under the Cenvat Credit Rules, 2004.

Now the googly is what about the Cenvat Credit on "input services?" Infact, for air travel services, the input services are considerably high !!!

construction services


What is the relevance of all these abatements, when all such construction activities are carried out as works contracts and shall be classified only under works contract service and not under these construction services?


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 editor's desk

Dear Readers,

Greetings from Team SA.

The new taxable services and the various provisions of the Finance Act, 2010 related to service tax matters shall come into force with effect from July 1, 2010.

(Click here for Notification 24/2010 - ST dt 22/6/2010)

For ready reference, a table consisting of the new services and what is sought to be taxed under such new services is made for the readers.

(Click here for the table)

Levy of clean energy cess also will come into effect from July 1, 2010 Notifications have  also been  issued to clarify the scope and extent of levy, applicability of provisions of Excise Act, exemption from levy of E Cess and SHE Cess etc. on ‘clean energy cess' and also notified Clean Energy Cess Rules, 2010.

(Ref : Notification Nos. 1 - 6 /2010 - Clean Energy Cess, dtated 22/6/2010)

The service tax on the transport of goods by rail has been further deferred and now to be effective from January 1, 2011.

(Click here for Notifications 33 & 34 /2010 - ST dt 22/6/2010)

Budget'10 had a major impact on the construction industry and the changes :
• Insertion of an explanation to the definition of construction of commercial and residential complex service ;
• Abatement of 75% in cases, where land value is included in gross amount;
• Special services provided by builder brought under service tax;
• Exemption to constructions of complex when Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana;

It is really interesting to probe in to the intention of government which brought major changes in construction of commercial complex service and construction of residential complex service by inserting an explanation to taxable service and providing abatement of 75% in cases where land value forms part of total consideration.

The explanation provides that the construction of a new complex or building intended for sale wholly or partly by a builder or person authorised by him before during or after construction shall be deemed to be a service. The only exception is when the builder is receiving entire amount after obtaining completion certificate issued by competent authority.

The explanation is intended to overcome situations where the builder is entering in to an agreement to sell and receive amounts from prospective buyer in which event it was clarified by circular 108/2/2009 dated 29-01-2009 that there is no transfer of possession or ownership and the service is therefore treated as provided to oneself.

(Click here for Notifications 28 & 29 /2010 - ST dt 22/6/2010)

Further, the Board has also issued few notifications exempting certain activities from levy of service tax in public interest. The prominent among them being (i) exemption from levy of service tax on transportation of persons by air from or to the north eastern states in India; (ii) exemption from levy of service tax on construction service provided to JNNURM and Rajiv Awas Yojana schemes; (iii) exemption to sponsorship services provided to sporting activities conducted by certain sports organizations and authorities; (iv) exemption to certain services provided within port or airport; (v) exemption from levy of service tax on distribution of electricity; (iv) exemption provided to certain types of air travel, which are all brought out in this newsletter supplement.

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 before parting ...     -jk

Service Tax (Removal of Difficulty) Order "

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