Social or Business Function and Service Tax
By Pradeep Modi, B.Com, FCA, DISA
E-mail:- capradeepmodi@gmail.com
India is the country of celebration and celebration in lay man language means banquet, carnival, feast, festival, party etc. and in one word Entertainment.
Dictionary meaning of “entertainment” is an event, performance, or activity designed to entertain others.
In Service Tax charges is levied on the entertainer. The value of the taxable service here is the gross amount charged.
Finance Minister of India is however not levied tax on the entertainment. When the Social or Business Function organized is not in the nature of entertainment but in the obligation than the Service Tax is levied.
“Social Function” includes marriage an Explanation inserted by the Finance Act, 2007
Now, we find one by one how the different activities or services are chargeable as Service Tax.
Mandap Keeper’s Services
Mandap keeper service area is not new for the levy of service tax. The levy has been imposed w.e.f. 1-7-1997 vide Notf. No. 19/97 ST dt. 26-6-1997.
Definitions:-
“Mandap” means any immovable property as defined in Section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixtures, light fittings and floor coverings therein, let out for consideration for organizing any official, social or business function.- Section 65(66)
“Mandap Keeper” has been defined as a person who allows temporary occupation of a mandap for consideration for organising any official, social or business function – section 65(67).
Taxable Service has been defined as services provided or to be provided to a client by mandap keeper in relation to the use of mandap in any manner including the facilities provided or to be provided to the client in relation to such use and also services, if any, provided or to be provided as a caterer –Sec.65 (105)(m).
Analysis:-
The definition of mandap is very wide in its coverage and covers all immovable properties let out for organising social, official or business functions. It includes within its scope places like kalyana mandaps or marriage halls, banquet halls, conference halls etc. Hotels and restaurants providing any such facility within their premises for organizing any social, official or business function shall also be included in the coverage of service tax. Therefore the levy of service tax will apply in all these cases.
It also includes any furniture, fixtures, light fittings and floor covering therein, let out for consideration of specified purposes. It means, where the person who possesses the mandap for their own specified functions, acquires furniture, fixtures, light fitting or floor covering under bailment basis, such contract shall not be part of the mandap for the purposes of the determining the levy on the mandap. Now, it has been taxed under the title – “Pandal and Shamiana w.e.f. Sept. 10, 2004.
To attract the service tax on services rendered by the mandap keepers, it is mandatory that the mandap keeper has let out some room, space or hall for some period of time for holding specified functions and during such period the room, space or hall is essentially in exclusive (temporary) possession of the person to whom it is so let out. In other words, there is a certain exclusivity, which has been afforded to the person to whom it has been let out.
The term “value”:-
The value of the taxable service means the gross amount charged by the mandap keeper from the client for use of the mandap including the facilities provided to the client in relation to such use and also the charges for catering if any.
In other words, The Service Tax would be leviable not only on the hire charges for the mandap but also charges for electricity, whether on actual basis or otherwise, charged to the customer. The tax is to be collected on the whole amount even if separate bills are issued one for the rental and the other for electricity charges. The mandap keeper may also bill the client for other services rendered by him such as charges for providing furniture, fixtures, lighting fittings, vessels, crockery, cutlery, etc. All these charges are includible in the value of taxable service for the levy of Service Tax.
Renting out hall etc. for purpose of holding a dance, drama & Music programmes or competition is chargeable to Service Tax, as the same are social functions.
Convention Services
The date of levy:-The levy is w.e.f. 16-7-2001 vide Notf. No. 4/2001 ST, dated 9-7-2001.
Definitions:-
“Convention” has been defined to mean a formal meeting or assembly which is not open to the general public, and does not include a meeting or assembly the principal purpose of which is to provide any type of amusement, entertainment or recreation. - section 65(32),
As per section 65(105)(zc) as amended by sec.68(A)(33)(C) of the Finance Act, 2006, the taxable service is any service provided or to be provided to a customer by any person in relation to holding of a convention.
Scope of service:-
For this purpose, specified service means any formal assembly or meeting [except the assembly where the principal purpose is to provide an amusement, entertainment or recreation] provided that such assembly or meeting is not open for general public. For example, a seminar organized by the Institute of Chartered Accountants of India for its member in a hotel. Such assembly shall be called as convention instead of a Mandap Keeper.
Analysis:
Any service provided for holding a conference, seminar, meeting, etc. by a commercial concern will come under the tax net. The service could be in the nature of providing of room /hall for the convention. The service could also include providing other facilities such as video conferencing, equipment such as overhead projector, video-roma (LCD projector), speakers, microphone, technical staff for operating these equipment and stationery, etc., apart from providing space for holding a convention. The charges for such facilities shall also be included in the value of taxable service. There may be a thin difference between a “mandap keeper” and convention but it does not mean that there is an intention to charge the service tax twice on the same service. If a service provider is already registered as a mandap keeper and paying service tax, he is not liable to pay service tax again under the category of convention service. Similarly, a convention service is not liable to tax as mandap keeper service also.
Event Management Services
Date of levy:- The levy is w.e.f. 16-8-2002.
Definitions:-
“Event Management” means any service provided in relation to planning, promotion, organizing or presentation of any arts, entertainment, business, sports, marriage or any other event and includes any consultation provided in this regard. - Section 65(4o)
Taxable service means any service provided or to be provided, to a client, by an event manager in relation to event management – Sec. 65(105)(zu).
“Event manager” means any person who is engaged in providing any service in relation to event management in any manner – sec. 65(41) of the Act, 1994.
Analysis:-
The term employed is “any person” irrespective of their legal or business status, it means an individual, partnership firm, body incorporate etc. would be the service provider under the title for such specified serviced subject to the condition that such person must be engaged to provide such service irrespective of the fact whether the same is their business or not.
Event as per the definition means any art, entertainment, business sports or any other event. Management for event means planning, promotion, organizing or presentation of such event and includes any consultation provider in this regard. So far as other event are concerned, the same may be social like marriage, religious, cultural, political etc. event manager means any person who is engaged in providing any service in relation to event management in any manner – In this definition, [in comparison to other services like, sound recording studio or agency, video production agency, security agency etc.], the term “engaged in the business” has not been employed. It means the question whether provision of such service is his business or not, has no relevance. What would be the criterion is whether he has provided his service in such category. It shall be the key issue.
For managing an event, the event manager hires the service of photographer, videographer, sound recording studio, advertising agency, mandap keeper and security agency. The taxable service is any service provided by the event manager in relation to management of event. Therefore the gross amount charged by the event manager from the client for organizing the event is liable to be included in the value of the taxable service for the purpose of calculation of service tax even if the service tax has already been paid by the event manager to such agencies.
However, where under the contract such additional service have not been hired by the event manager, certainly, the payment made to them by the sponsor himself shall not be a part of the consideration charged by the event manager, but ultimately, subject to the facts and circumstances of each case and the terms of the contract in writing, which would be quite relevant to solve the riddle. Since the levy is on event management but not on the event, the sale proceeds of tickets or revenue generated from the sale of space shall not be the subject for the levy.
Pandal or Shamiana
Date of imposition of the levy:- The levy is w.e.f. 10-09-2004.
Definitions:-
“Pandal or shamiana” means a place specially prepared or arranged for organizing an official, social or business function- sec 65 (77a).
“Pandal or shamianna contractor” means a person engaged in providing any service either directly or indirectly in connection with the preparation, arrangement, erection or decoration of a pandal or shamiana and includes the supply of furniture, fixture, light and lighting fittings, floor coverings and other articles for use therein- Sec.65 (77b).
Taxable service means any service provided or to be provided to a client, by a pandal or shamiana contractor in relation to a pandal or shamiana in any manner and also includes the services, if any, rendered as caterer- Sec. 65 (105) (zzw) of the Act, 1994.
Analysis:-
The term employed under sec. 65 (77b) is “ engaged in providing any service..” .Another expression are “……….in connection with the preparation, arrangement, erection or decoration of a pandal or shamiana ….”
It may mean any service in relation to arrangement of a pandal is taxable which also includes supply of furniture, fixtures, light and light fittings, floor coverings and articles for use therein. At this point, the word “therein” is also relevant. It means any article supplied for use in the pandal or shamiana shall be covered.
Since in sec. 65 (77a), for the term “pandal or shamiana”, the word employed is “a place” but not a loose pandal or shamiana (i.e. in common language called as Tambu) but since, under the definition of the ”pandal or shamiana contractor”, the words employed are “…includes supply of… other articles for use therein”, the expression “therein” refers the word “pandal or shamiana” i.e. a place specifically prepared or arranged…, accordingly, such supply shall be covered under the title for the levy.
The service which is normally termed as ‘Pandal and Shamiana’ service in North India is same as ‘Kalyana Mandap’ service in South India. The service basically involves erecting a temporary structure for a function, which is to be dismantled after the function is over. The contractor usually provides furniture, fittings, decoration material, generating sets etc. He may, in addition, undertake catering contract.
Outdoor Catering Services
Date of imposition of the levy:-The levy under the title is w.e.f. 10 –09-2004.
Definitions:-
“Outdoor caterer” means a caterer engaged in providing services in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services- Sec. 65 (76a).
Taxable Service means any service provided or to be provided to a client by an outdoor caterer- sec. 65 (105) (zzt).
“Caterer” means any person, who supplies, either directly or indirectly, any food, edible preparations, alcoholic or non- alcoholic beverages or crockery and similar articles or accoutrements for any purpose or occasion- Sec. 65 (24).
In other words, for catering service, it is not required that there must be some foods or beverages – mere supply of crockery or other utensils for specified purposes or occasions would be sufficient - see also TAMIL NADU KALYAN MANDAPAM OWNERS’ ASSOCIATIONS Vs. UOI – 2001 (133) ELT – 36 (Mad.)
Analysis:-
In mandap keeper or convention service, outdoors catering arranged by the client them-selves are not taxable under the title mandap keeper or convention service. It shall be taxable only when the mandap keepers themselves have provided the same. Now, when the client arranges the catering services themselves with the outdoor caterer directly, the consideration paid to them by the client shall be the amount charged to determine the assessable value.
Sale of food across the counter, [as in fast-food joints / restaurants or serving of food in a restaurants / hotels are involving] do not fall within the ambit of outdoor catering. Similarly, mere free delivery (or delivery at a nominal cost to cover transport charges) of food by a fast food point, restaurant, etc. shall also not be subject to service tax as in such cases, there is no service element but only a mere sale of food.
Hence, it is clear from the above that even the Renting out hall etc. for purpose of holding a dance, drama & Music programmes or competition is chargeable to Service Tax, which is mainly organized for the purposes of Entertainment. However, thanks to the ministry for his kind heart that some sort of abatements is provided to those who provides catering too. Table of amendments given below for easy reference.
TABLE OF ABATEMENTS ADMISSIBLE FOR VARIOUS SERVICES
|
S.No.
|
Taxable Service
|
Abatement
|
|
1.
|
MANDAP KEEPER
Ø When catering service is also provided…………………….
Ø When service is provided by Hotel as mandap with catering…………………………………………………………………..
|
40%
40%
|
|
2.
|
CONVENTION SERVICE
Ø When catering service is also provided……………………
|
40%
|
|
3.
|
OUTDOOR CATERING
Ø When food is also provided along with catering service………………………………………………………………
|
50%
|
|
4.
|
PANDAL AND SHAMIANA
Ø When catering service is also provided…………………
|
30%
|
Ø The above abatements shall be admissible, if the benefit under the CENVAT Credit Rules,2004 and Notification No.12/2003- S.T.,dated 20-6-2003 are not availed.
Ø The abatement at SI.Nos 1 to 4 are as per Notifications Nos. 1/2006 – S.T. dated 1-3-2006.
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