Back Support service of business centre
We are running our office through a business centre in Bangalore and they are asking for 12.24 per cent service tax on the monthly invoice produced. The monthly invoice includes: (a) Rs 6,500 as rent for the rented cabin; (b) Rs 2,000 for Internet connectivity; and (c) Rs 1,000 for tea and coffee.
Are we liable for service tax of 12.24 per cent for entire amount or only against (a) and (b)? Please advice.
Vinod Shintre
The support services provided by a business centre in the form of rented cabin, Internet connectivity and tea/coffee services has been chargeable to service tax w.e.f. May 1, 2006, under the taxable services — `support services for business and commerce'.
According to Section 65(104c) of the Finance Act, 1994 "support services of business or commerce" means services provided in relation to business or commerce and include evaluation of prospective customers, telemarketing, processing of purchase orders and fulfilment services, information and tracking of delivery schedules, managing distribution and logistics, customer relationship management services, accounting and processing of transactions, operational assistance for marketing, formulation of customer service and pricing policies, infrastructural support services and other transaction processing.
It also defines `infrastructural support services' by way of a explanation and they include providing office along with office utilities, lounge, reception with competent personnel to handle messages, secretarial services, Internet and telecom facilities, pantry and security.
Business centres provide infrastructural support, such as providing instant offices along with all types of secretarial assistance, known as business centre services.
All such outsourced services are covered under business/commerce support services. Such services should lend support to the business/commerce of the service receiver. Services of personal nature shall not be covered.
In view of the legal position, it appears that renting a cabin, providing Internet connectivity and supply of beverages, will all be covered in the scope of this taxable service.
On the amount on which service tax will be levied, as per Section 67 as substituted by Finance Act, 2006, gross amount charged by the service provider for taxable services provided shall be subjected to service tax.
As such, service tax shall be payable on the entire amount charged or paid, which the tea and coffee supplied.
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Sanjiv Agarwal
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