Login | Register Now | Contact Us   
 

CGST Act IGST Act UTGST Act GST (Compensation to the States) Act Addendum to the GST Rate Schedule - 03.06.2017 101st Constitution Amendment Act, 2016 Addendum to the GST Rate Schedule - 18.05.2017 GST Compensation Cess Rates Decided in the GST Council Meeting held on 18.05.2017 Chapter Wise Rate wise GST Schedule - 03.06.2017 Chapter wise GST Rate Schedule for Goods Decided in the GST Council Meeting held on 18.05.2017 Revised Threshold for Composition Scheme - 11.06.2017 IGST Exemptions Approved by the GST Council - 11.06.2017 GST Rates Approved by the GST Council - 11.06.2017 Service Tax Exemptions in GST IGST Exemption, Concession List - 03.06.2017 Composition - Rules Valuation Rules ITC - Rules Invoice, Debit & Credit Notes - Rules Payment - Rules Refund - Rules Registration - Rules Return- Rules Transition Rules Proposed CTD Document Accounts and Record Rules GST rate Schedule for Services List of Services under Reverse Charge Classification Scheme for Services Under GST Decisions Taken by the GST Council in the 16th Meeting - 11.06.2017
'Blunder of bundled services'
09 May, 2012 Ahmedabad :
'Blunder of bundled services'

Speech is silver, silence is Golden. There are times when silence has more meaning and speaking proves to be a blunder. Spelling out “bundled service” may prove to be the biggest blunder in the Finance Bill, 2012 Franck Muller Long Island replica watch. The finance bill proposes a new insertion vide section 66F: ‘where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description’. ‘Bundled service’ means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. An example of ‘bundled service’ would be air transport services provided by airlines wherein an element of transportation of passenger by air is combined with an element of provision of catering service on board. Each service involves differential treatment as a manner of determination of value of two services for the purpose of charging service tax is different. Two rules have been prescribed for determining the taxability of such services in clause (3) of section 66F of the Act. These rules, which are explained below, are subject to the provisions of the rule contained in sub section (2) of section 66F, viz a specific description will be preferred over a general description. The blunder has arisen due to this new concept of “naturally bundles” and not so naturally bundled services, giving a scope of discretion to the assessing officer and thus inviting disputes and litigations. As per these rules, the Services which are naturally bundled in the ordinary course of business are defined as“ If various elements of a bundled service are naturally bundled in the ordinary course of business, it shall be treated as provision of a single service which gives such bundle its essential character”, For example, a 5-star hotel provides a 4-D/3-N package with the facility breakfast. This is a natural bundling of services in the ordinary course of business. The service of hotel accommodation gives the bundle the essential character and would, therefore, be treated as service of providing hotel accommodation.

As regards the Services which are not naturally bundled in the ordinary course of business the rule says that ‘If various elements of a bundled service are not naturally bundled in the ordinary course of business, it shall be treated as provision of a service which attracts the highest amount of service tax.’ For example, a house is given on rent one floor of which is to be used as residence and the other floor is given for the purpose of commercial activity. Such renting for two different purposes is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for use as residence is in the proposed negative list service while renting for non-residence use is chargeable to tax. Since the latter category attracts highest liability of service tax amongst the two services bundled together, the entire bundle would be treated as renting of commercial property.

Significance of the condition that the rule relating to ‘bundled service’ are subject to the provisions of sub-section (2) of section 66F which says “where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description” This rule predominates over the rule laid down in sub-section (3) relating to ‘bundled services’. In other words, if a bundled service falls under a service specified by way of a description then such service would be covered by the description so specified.

Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators few of which are listed below –

• The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package then such a package could be treated as naturally bundled in the ordinary course of business.

• Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines.

• The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. For example service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are -

• There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use.

• The elements are normally advertised as a package.

• The different elements are not available separately.

• The different elements are integral to one overall supply – if one or more is removed, the nature of the supply would be affected.

The department knows that there is no straight jacket formula which can be laid down to determine whether a service is naturally bundled in the ordinary course of business or otherwise. Each case has to be individually examined in the backdrop of several factors some of which are outlined above. This gives scope of misinterpretation and thus does not rule out ambiguity. On one hand the FM claims that his budget proposals are to end the scope of discretion and thus put an end to the rampant corruption and on the other hand he blunders by paving way to the concept of bundled services.

Courtesy: From the desk of Monish Bhalla, Founder, www.servicetaxonline.com
Related Contents
  • Bundled Services [Section 66F]
  •  
     

    www.centralexciseonline.com

     


    www.taxolegal.com


    Page copy protected against web site content infringement by Copyscape


    www.customsindiaonline.com
    Home | Mission | Contact Us | Acknowledgements © 2009 Copyrights, All Rights Reserved. 
    Disclaimer Though all efforts have been made to reproduce the order and other contents correctly, the access and circulation is subject to the condition that EASY SERVICETAXONLINE DOT COM PRIVATE LIMITED is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions. The replica watches Site is constantly updated and any or all of the contents are liable to be modified, altered, deleted or replaced. EASY SERVICETAXONLINE DOT COM PRIVATE LIMITED is not responsible/liable for any loss or damage caused to anyone whether directly or indirectly  due to any modification , alteration, addition, deletion or replacement of any of the contents.

    Copyright: Reproduction of news articles, photos, or any other content in whole or in part in any form or medium without express written permission of  EASY SERVICETAXONLINE DOT COM PRIVATE LIMITED is prohibited.Do not copy contents of this site. All pages are protected by COPYSCAPE. Plagiarism will be detected by COPYSCAPE.