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Service Tax implications on cleaning services

The Government of India, Ministry of Finance enacted the Finance Act, 2005 w. e. f. 13.05.2005 Levying Service Tax on new Services which included “Cleaning Activity” as defined under clause 24B of Section 65 of Finance Act, 2005.

The Notification No. 15/005 - Service Tax dt. 07.06.2005 made Service Tax effective from 16.06.2005 on the “Cleaning Services”.

“Cleaning Services includes Specialized Cleaning Services such as Disinfecting, Exterminating or Sterilizing of Objects or premises of : -
(i) Commercial or Industrial Buildings and premises thereof, or,
(ii) Factory, Plant or Machinery, Tank or Reservoirs of such Commercial or Industrial Buildings & premises thereof.

But does not include such services in relation to Agriculture, Horticulture, Animal husbandry or Dairying. “

The Association had represented to the CBDT and had meetings seeking abatement to the extent of 67% and also seeking clarifications.

The representation made by the Association has been circulated by the members of the Association vide Circular dt. 27.06.2005.

Some of the pertinent queries raised by the Association which still remain unanswered are given below :-

1. Which premises are considered non-commercial or industrial premises e.g. Schools / College / Central & State Government Departments / Railways / MES / PWD / State Government Organizations like U. P. Nirman Nigam etc. / Hospitals / Museums.

2. Definition of “objects” in relation to commercial & industrial premises – with relation to our service activity.

3. Services provided to export goods / commodities to fulfill mandatory export requirements (Quarantine) – where no Central Excise or Sales Tax / VAT or other taxes are charged – whether taxable.

4. “Services in relation to agriculture, dairying, horticulture & animal husbandry”

(i) Whether it includes godowns, storing, agricultural products such as rice, wheat, grains, pulses, spices, fruits etc. & processing units & the products themselves.

(ii) Whether dairying would include dairies, which also manufacture dairy & milk products such as processed / packaged milk – godowns / warehouses which store such products – product themselves.

(iii) Horticulture
(i) would it include plants / soil / pots connected to such plants.
(ii) Green houses / poly houses which are used in horticulture activities.
(iii) Warehouses where such plants are stored.
(iv) Plants themselves.

(iv) Export consignments of merchant exporters / star house exporters – fumigation services provided for fulfilling export Quarantine requirements – whether service tax is applicable.

(v) Whether
i. Service provided for raw materials / finished products / packaging material in a factory – will it attract Service Tax.
ii. If the above are for the purpose of export.
iii. In case of 100% EOU's.

(vi) Where services are provided not at clients premises but in the service providers own premises e.g.
(a)Fumigation in service providers own premises.

(vii) Whether the services of “weed control” will attract Service Tax – as it is neither disinfecting, exterminating or sterilizing of objects or premises.

(viii) Whether the service “Bird Management Service” will attract Service Tax – as it is neither disinfecting, exterminating or sterilizing of objects or premises.

Notification issued by the Government of India exempts certain categories from levy of certain categories.

1. Reserve Bank of India is exempted under the notification No. 22/2006 – Service Tax dt. 31.05.2006 for any service provided to them.

2. Services in the nature of Secondary Services which ultimately gets merged with the service that are being exported - e.g. BPO's registered as 100% EOU's under the STP Scheme which fall under the category of “Business Auxiliary Service” and treated as “Export of Service” under Export of Services Rules 2005 – Service Tax Circular No. 56/6/2003 read along with notification No.9/2005 dt. 03.03.2005.

3. Agricultural produce is also exempted from levy of Service Tax & also defined under Service Tax (Removal of Difficulty ) Order – 2002 dt. 01.08.2002.

4. Units or Developers of SEZ are also exempted from Service Tax vide GSR 248E dt. 31.03.2004.

5. Specialized Agency of United Nations having diplomatic immunity are exempted from the Service Tax as per Notification 16/2002 dt. 02.08.2002.

The Service Tax chargeable is based on the premises & not on the Status of the Customer, e.g. If a charitable Institution is using Commercial premises, then Services rendered for the said Commercial Premises will attract Service Tax unless the customer has obtained specific exemption.

Further, a letter from Ministry of Finance, issued to all Commissioners dt. 24.07.2005 provides that the Gross Amount charged for rendering services is liable for Service Tax.

Since the implementation of these Rules are just 2 years old there are no legal precedents or judgments relating to our Industry & Interpretation has to be done based on the common meaning & Notional Extension of definitions.

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