Pager
services were brought under the Service Tax net by the Finance (No. 2) Act,
1996, w.e.f. 1-11-1996 vide Notification No. 6/96, dated 31-10-1996.
The service shall be taxed, if provided by a Telegraph authority to
subscribers.
Rate of Service Tax: The rate
of service tax is specified in section 66 of the Act. The Finance (No. 2) Act,
2004 has substituted the charging section 66, and the rate of service tax is
enhanced from 8% to 10% ad valorem. The increase in tax rate has come into force
from the date of enactment of the Finance (No. 2) Act, 2004 i.e. 10-9-2004.
Further, the Finance (No. 2) Act, 2004, w.e.f. 10-9-2004 has also
levied an education cess @ 2 % of the service tax. The cess paid on inputs
services shall be available as credit for payment of cess on output services.
For further discussion in this regard, refer to Chapter -'Payment of
Service Tax'.
The
definition of pager has been given under clause (77) of section 65. It
provides:
"Pager
means an instrument, apparatus or appliance which is a non-speech, one
way personal calling system with alert and has the capability of receiving,
storing and displaying numeric or alpha-nutneric messages".
Therefore,
in paging services, there is non-speech one way communication from the
paging company to its subscriber, for the message received by the paging
company for its subscriber. The paging company provides such services to its
subscriber within a specified area on fixed monthly rental basis. The messages
are transmitted in the form of numeric or alphanumeric depending upon the
compatibility of the instrument (i.e. pager).
(1) Pager works
A person,
who desires to have paging service, has to purchase an instrument known as
pager, it is also being sold by the company providing paging services. The
person has to subscribe the paging services from a company providing such
service. The paging company charges fixed monthly rent for such service and
allots a pager number to each subscriber. Any person, who wants to give any message
to the person having pager, has to call to the Pager Company by dialing the
pager number of the subscriber. The officer of the pager company, after
confirming the pager number of the subscriber, takes the message from the
caller and feeds the message in the computer to transmit the same to the
concerned subscriber. The message is immediately transmitted. The subscriber
gets the signal on his/her pager about the message and reads the message on the
screen of the pager.
(2) Pager Service is telephone services
No, a pager although falls under the definition of 'telegraph' as defined under section 3(l) of Indian Telegraph Act, 1885, but is not the same as 'telephone' since there is no conversion of acoustic signals to electric signals and vice versa and no two way speech communication. The department in its Trade Notice No. 31/96, dated 9-4-1996, Pune Commissionerate (appended as Annexure 1) has clarified, "Pager Services shall not fall within the purview of Service tax" as telephone services but now pager services has been made taxable as separate service.
The
definition of taxable service provided by the telegraph authority has been
given under sub-clause (c) of clause (105) of section 65. That is:
any
service provided "to a subscriber, by the telegraph authority in relation
to a pager".
Service
tax is liable to be paid when paging service is provided by telegraph
authority.
(1) Telegraph authority
"Telegraph
authority has the meaning assigned to it in clause (6) of section 3 of the
Indian Telegraph Act, 1885 and includes a person who has been granted a licence
under the first proviso to sub-section (1) of section 4 of that Act"
[clause (III) of section 65].
As
per section 3(6) of Indian Telegraph Act, 1885:
"Telegraph
authority means the Director-General of Posts and Telegraphs, and
includes any officer empowered by him to perform all or any of the functions of
the Telegraph authority under this Act".
As
per Service Tax Rules, the following persons are liable to pay service tax:
As per sub-clause
(i) of clause (d) of sub-rule (1) of Rule 2 of the Service Tax Rules,
1994, in relation to telephone or pager or a communication through telegraph or
telex or a facsimile communication or a leased circuit services, the person
liable to pay service tax means
(a) the Director General of
Posts and Telegraphs, referred to in clause (6) of section 3 of the Indian
Telegraph Act, 1885 (13 of 1885); or
The Director-General of Posts and Telegraphs is the head of Post and Telegraph department. However, if he delegates his power to any officer to perform all or any of the functions of Telegraph authority, that officer is also a Telegraph Authority [clause (6) of section 3 of the Indian Telegraph Act, 1885].
(b) the Chairman-cum-Managing
Director, Mahanagar Telephone Nigam Ltd., Delhi, a company registered under the
Companies Act, 1956 (1 of 1956); or
(c) any other person who has
been granted a licence by the Central Government under the first proviso to sub-section
(1) of section 4 of the Indian Telegraph Act, 1885 (13 of 1885).
Therefore,
the person to whom licenses have been issued by the Central Government are also
included in the expression 'telegraph authority'.
"the
Central Government may grant a license, on such conditions and in consideration
of such payments as it thinks fit, to any person to establish, maintain or work
a telegraph within any part of India" [first proviso to sub-section
(1) of section 4 of the Indian Telegraph Act, 1885].
In India,
the private sector companies holding the licence from the Central Government
under the Indian Telegraph Act are providing services, therefore, such
companies are responsible for payment of service tax for paging services.
Telephone
services liable to be charged to tax
Telephone
services are liable to be charged to service tax when provided to
§
a subscriber,
§
by a telegraph authority.
(1) 'Subscriber'
"Subscriber
means a person to whom any service of a telephone connection or a facsimile or
a leased circuit or a pager or a telegraph or a telex has been provided by the
telegraph authority" [clause (104) of section 65].
Therefore
a 'subscriber' is a person. Now, the question is that who is a person?
(2) Meaning of 'person'
The term
'person' has not been defined in the context of service tax. But, the term
'person' has been defined as "person shall include any company or
association or body of individuals, whether incorporated or not" [clause
(42). of section 3 of General Clauses Act, 1897].
Therefore, even though, in general, person is understood as only natural person (i.e. human being) but in the context of service tax, it includes natural, artificial and juristic person also. Thus, partnership firm, company, corporation, societies, government enterprises, Hindu undivided family (H.U.F.), etc. will also fall under the definition of person.
Therefore,
a subscriber may be artificial or juristic person or may be a natural
person; when service is provided to any such person, it will fall under the
service tax net.
The
value of taxable services for charging tax
The value
of taxable services in relation to pager services provided by the telegraph
authority to the subscriber, shall be the gross amount charged from the
subscriber for such services [section 67].
(1) Initial deposits made by the subscriber
to be included in the taxable value
As per
Explanation 1 to section 67, for the removal of doubt, in respect of pager
services, it is declared that the value of taxable services does not include the initial deposit made by the
subscriber at the time of application for pager. But, it has also been declared
that the value of taxable services includes the adjustment made by the
telegraph authority from any deposits made by the subscriber at the time of
application for pager.
(2) Cost of pager is the part of value of
taxable services
No, as per
section 67, taxable value shall be the gross amount charged from the subscriber
for providing telephone services, but pager charges, being the hardware, is not
the charges for services, therefore cannot be the part of value of taxable
services.
(3) InstaIlation/registration charges, monthly rental etc, are part of the taxable value
Yes, as
per section 67, taxable value shall be the gross amount charged from the
subscriber, therefore, it includes installation/ registration charges, inter-city
connection charges, monthly rentals, re-connection charges after
disconnection or any other services provided by the telegraph authority to its
subscriber on payment basis.
(4) Calibrating or repair of pagerform part
of taxable value
No,
according to section 67, the value of taxable services is the gross amount
charged by the service provider in connection with pager services, where paging company charges amount for the calibrating or repair of the pager,
being in connection with hardware (i.e pager), not related to pager services,
therefore, such charges shall not be part of the value of taxable service.
(5) Licencefee will be included in the
taxable value
The licence fee, if any, charged by the telegraph authority from the subscriber, will also form part of taxable value, since value of taxable service is the gross amount charged from the subscriber for such services. But, if the licence fees is charged by the Central Government while granting licence under first proviso to sub-section (1) of section 4 of the Indian Telegraph Act, 1885, to provide such services, it will not constitute part of the taxable value as the same is not charged for service as well as not recovered from the subscriber.
(6) Surcharge will be included in the taxable
value
No, the
Government has issued MF (DR) Circular No. 32/3/2000-CX, dated 20-12-2000
(appended as Annexure V in Chapter on 'Telephone Services') in respect of
telephone services provided by telegraph authority in which it is clarified
that service tax is not leviable on the amount of surcharge collected for
delayed payment of telephone bills, since it does not alter the value of
taxable services. The said circular was issued by withdrawing the earlier
circular No. 29/3/99, dated 15-7-1999 in which it was stated that
surcharge is also to be included in the taxable value, Though, the aforesaid
circular is issued in respect of telephone service provided by telegraph
authority but the same holds good and can be followed in respect of all other
taxable services (i.e. leased circuit, telegraph, telex, facsimile and pager
services) provided by the telegraph authority, since, in respect of all such
services, the definitions for the 'taxable services' and 'value of taxable
services' are similar.
Therefore, in case of pager services, the value of taxable services shall be the gross amount (excluding initial deposits but including adjustment from initial deposit) charged by the service provider for such services rendered by him without claiming any abatements towards administrative/ office expenses incurred for rendering such services. In other words, 'gross amount' here indicate that no deduction shall be allowed in respect of any expenditure incurred by the service provider which has proximate connection in rendering the services by him.
The
Government has granted exemption from the whole of Service Tax in respect of
all taxable services, for services provided to United Nations or an International
Organisation. Similarly, the exemption, subject to certain conditions, has also
been granted for taxable service provided to a developer or units of Special
Economic Zone (SEZ). The Government, w.e.f. 20 November, 2003 has restored the
exemption, as an interim measure, from the whole of service tax when payment is
received in convertible foreign exchange for the taxable services rendered in
India provided it was not repatriated from or sent outside India, such
exemption was earlier withdrawn w.e.f. 1-3-2003. The reader may
note that detailed discussion about aforesaid exemptions along with relevant
notifications have been given in the Chapter on 'Exemption from whole of
Service Tax - Some Cases'. ,
N.B. The
readers may note that provisions, procedures and other related discussion
related to registration, payments of service tax, filing of return, interest
and penalty, assessment procedure, appeal, refund of tax, etc., which are same,
as applicable in respect of other taxable services, have been given in separate
Chapters of this Book.
[Trade
Notice No. 306, dated 9-4-1996, Pune Commissionerate]
1. Certain doubts were
expressed regarding the application of Service Tax to "Pager
Services" and "Cellular Telephones" by the pager companies and
field formations.
2. The matter has been
examined at length. The term "taxable Service" has been defined in
section 65 of Chapter V of the Finance Act, 1994 (hereinafter referred to as
the Service Tax Act, 1994), The term "taxable Service" means any
service provided to a subscriber by the Telegraph Authority in relation to a
telephone connection only. A pager although falls under the definition of
"Telegraph" as defined under section 3(1) of the Indian Telegraph
Act, 1885, but is not the same as "telephone" since there is no
conversion of acoustic signals to electric signals and vice versa and no two
way speech communication.
3. It is therefore
clarified that "pager Services" shall not fall within the purview of
the Service Tax Act, 1994 at present as these services are not in relation to a
telephone connection.
4. Cellular Telephone
Services shall, on the other hand, fall within the purview of the Service Tax
Act, 1994 as the Cellular Telephone Companies are licenced under the first
proviso to sub-section (1) of section 4 of the Indian Telegraph Act, 1885
and provides services to subscribers in relation to a telephone connection.
5. These companies should
immediately contact the Service Tax Cell in the Headquarters of Central Excise
Commissionerate, Pune for understanding the procedures for payment of Service
Tax, as soon as they start cellular phone services in the jurisdiction of Pune
Commissionerate.
[Authority:
Min. of Fin. Service Tax Circular No. 7/1/96 (F. No. 149/8/95-CX.4),
dated 29-2-1996