Notifications add to confusion over service tax

The slew of notifications on the service tax does not seem to be coming to a stop. On June 7, the government issued not less than 15 notifications doubling this up with a press release explaining them.

These were basically intended to fix the date for the new services announced in the Budget to come into the service tax net apart from some exemptions, abatements and procedural changes.

Notification No 22/2005, which is meant for providing an exemption to non-residents in the course of sailing a ship""is sufficient for us to get a idea about the futility of issuing too many notifications.

The notifications starts with a rider that the services should be provided and consumed outside India. If one thought this was all, one is certain to get disappointed. The ship should be

registered as an Indian ship under the Merchant Shipping Act, 1958 (44 of 1958);

registered under the Coasting Vessels Act, 1838 (19 of 1838);

registered under the Inland Vessels Act, 1917 (1 of 1917); or

chartered and licenced under the Merchant Shipping Act, 1958

The ship should be owned or chartered by

a citizen of India;

a company or a body established by or under any Central Act or State Act which has its principal place of business in India; or

a co-operative society, which is registered or deemed to be registered under the Co-operative Societies Act, 1912 (2 of 1912), or any other law relating to co-operative societies for the time being in force in any state.

The exemption is available only if the taxable services are provided in relation to

handling of ships in a port outside India;

handling or storage of goods carried in a ship in a port outside India; or

any other services related to the handling of ships or goods carried in a ship.

Explanation: For the purposes of this notification, "non-resident person" means a person, who has established a business or has a fixed establishment from which the service is provided or to be provided, or has his permanent address or usual place of residence, in a country other than India.

The necessity to issue so many riders to grant an exemption to a service, which would contribute a minuscule to the entire revenue from the service tax needs a definite relook.

The definition of a non-resident here is different from that under other tax laws, which will in reality mean that a person could have different residential statuses under different laws.

It is an exercise in futility if one has to keep allotting pre-set conditions to new services being brought into the tax net. The track record of service exports in India should be enough of an indicator to decide, which services are to be taxed and which are to be exempted.