Any service provided by Government or a local authority to a business entity has been made taxable w.e.f 1st April 2016. Thus, there have been many issues which are raised by trade and industry. Accordingly CBEC has clarified various issues vide Circular No. 192/02/2016-S.T. dated 13.04.2016.

As per the said Circular, services by way of grant of passport, visa, driving license, birth or death certificates have been exempted.

It is also clarified that Taxes, cesses or duties levied are not consideration for any particular service as such and hence not leviable to Service Tax. These taxes, cesses or duties include excise duty, customs duty, Service Tax, State VAT, CST, income tax, wealth tax, stamp duty, taxes on professions, trades, callings or employment, octroi, entertainment tax, luxury tax and property tax.

It is further clarified by the Board that fines and penalty chargeable by Government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to Service Tax. Further, fines and liquidated damages payable to Government or a local authority for non-performance of contract entered into with Government or local authority have also been exempted.

Services provided by the Government or a local authority by way of: (i) registration required under the law; (ii) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under the law, have been exempted vide Notification No. 22/2016 -ST dated 13.4.2016.

Services provided by Government or a local authority where the gross amount charged for such services does not exceed Rs. 5000/- is exempted but it does not cover services provided by Government Railways, Department of Post or hiring of Aircraft. It also clarified that in case where continuous supply of service is provided by the Government, the exemption shall apply only where the gross amount charged for such service does not exceed Rs. 5000/- in a financial year. It appears that such condition may not be a welcome step.

Services by way of allocation of natural resources to an individual farmer for the purposes of agriculture have been exempted. But, such allocations/auctions to categories of persons other than individual farmers would be leviable to Service Tax. This may leave many questions unanswered and may lead to some future ltigations.

Services in the nature of change of land use, commercial building approval, utility services provided by Government or a local authority are also exempted. Regulation of land-use, construction of buildings and other services listed in the Twelfth Schedule to the Constitution which have been entrusted to Municipalities under Article 243W of the Constitution, when provided by governmental authority are already exempt under Notification No. 25/2012 -ST dated 20.6.2012. The said services when provided by Government or a local authority have also been exempted from Service Tax vide Notification No. 22/2016 -ST dated 13.4.2016. Also, services provided by Government, a local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution have been exempted from Service Tax.

To remove confusion the Circular also mentioned that Cenvat Credit can be availed on the basis of challan evidencing payment of Service Tax.