Landmark Service Tax Judgment - Management, Maintenance and Repair Services

According to Section 65 (105) (zzg), any service provided or to be provided to any person, by any person, in relation to management, maintenance or repair, is a ‘taxable service’

According to Section 65 (64), “management, maintenance or repair” means any service provided by –

(i)   any person under a contract or an agreement; or

(ii) a manufacturer or any person authorised by him, in relation to,

(a) management of properties, whether immovable or not

(b) maintenance or repair of properties whether immovable or not; or

(c) maintenance or repair including reconditioning or restoration, or servicing of any goods or equipment, excluding motor vehicle.

Explanation - For the removal of doubts, it is hereby declared that for the purposes of this clause,-

(a) “goods” includes computer software;

(b) “properties” includes information technology software;

According to Section 65 (50), ‘Goods’ has the meaning assigned to it in Section 2 (7) of The Sale of Goods Act. Accordingly "goods" means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale;

According to Section 65 (53a) "information technology software” means any  representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment;

Service Tax is leviable on the services provided towards management, maintenance and repair irrespective of the fact that the receiver of the service is different from the person making payments for such services. Maintenance is to keep a machine, building etc. in a good condition by periodically checking and servicing or repairing. While repair is a one time activity, maintenance is a continuous process of which repairing may be incidental or ancillary.

Maintenance or repair of computer software will be leviable to service tax under this category. It may be noted that development of computer software is distinct from maintenance or repair of computer software and development of computer software continues to be leviable to service tax as an "information technology service".

(a)  Small service providers whose aggregate value of taxable services rendered in the previous year has not exceeded the limit of Rs. 10,00,000/-  (Service Tax Notification No. 8/2008-ST dated 01.03.2008)

(b)  Services provided to the United Nations or International Organisations

(c)  Services provided to Special Economic Zones (SEZ) units (including unit under construction) and SEZ developers

(d)  Services which are exported as per ‘Export of Services’ Rules

(e)  Services provided for official or personal use of foreign diplomatic missions and family members of diplomatic missions.

(f)  Services provided to Reserve Bank of India

(g)  Out of total value of service provided proportionate value of goods and material provided by the Service Provider

ISSUE 1: Whether maintenance or repair of software is liable to service tax?

ANSWER 1: Explanation to section 65(64) provides that “goods” includes computer software. Since, maintenance or repair of any goods is liable to service tax, services provided in relation to maintenance or repair or servicing of computer software is liable to service tax under “management, maintenance or repair” service [section 65(105)(zzg)].

TIL LTD. Vs COMMISSIONER OF SERVICE TAX, KOLKATA (STO 2008 CESTAT 222)