F.No. 334 / 8 /201 6 - TRU Government of India Ministry of Finance Department of Revenue (Tax Research Unit) Dated - April 13 , 201 6 To, Principal Chief Commissioners of Customs and Central Excise (All) Principal Chief Commissioners of Central Excise & Service Tax (All) Principal Director Generals of Goods and Service Tax /System/CEI Director Gene ral of Audit/Tax Payer Services Principal Commissioners/ Commissioners of Customs and Central Excise (All) Prin cipal Commissioners/Commissioners of Central Excise and Service Tax (All) Principal Commissioners/Commissioners of Service Tax (All) Principal Commissio ners/Commissioners LTU/Central E xcise/ Service Tax (Audit) Subject: - Clarification on issues regarding levy of Service Tax on the services provided by Government or a local authority to business entit ies - reg. Madam/Sir, Any service provided by Government or a local authority to a business entit y has been made taxable w.e.f 1 st April 2016. Post Budget 2016, representations have been received from several quarters including business and industry associations in respect of various aspects pertaining to the taxa tion of such services. Accordingly , the following clarifications are is sued: - Sl. No. Issue Clarification 1. Services provided by Government or a local authority to another Government or a local authority . Such services have been exempted vide Notification No. 25/2012 – ST dated 20.6.2012 as amended by Notification No. 22 /2016 – ST dated 13 .4.2016 [Entry 54 refers] . However, the said exemption does not cover services specified in sub - clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act, 1994. Page 2 of 13 2. Services provided by Government or a local authority to an individual who may be carrying out a profession or business . 1. Services by way of grant of passport, visa, driving license, birth or death certificates have been exempted vide Notification No. 25/2012 – ST dated 20.6.2012 as amended by Notification No. 22 /2016 – ST dated 13 .4.2016 [Entry 55 refers] . 2. Further, for services provided upto a taxable value of Rs 5000/ - , S l . No. 5 below may please be seen. 3. Service Tax on taxes , cesses or duties . T axes , cesses or duties levied are not consideration for any particular service as such and hence not leviable to Service Tax . T hese 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 . 4. Service Tax on fines and penalties . 1. It is clarified that fines and penalty chargeable by G overnment or a local authority imposed for violation of a statute , bye - laws , rules or regulations are not leviable to Service Tax . 2. F ines and liquidated damages payable to Government or a local authority for non - performance of contract entered into wit h Government or local authority have been exempted vide Notification No. 25/2 012 – ST dated 20.6.2012 as amended by Notification No. 22 /2016 – ST dated 13 .4.2016 [Entry 57 refers]. 5. Services provided in lieu of fee charged by Government or a local authority . It is clarified that any activity undertaken by Government or a local authority against a consideration constitutes a service and Page 3 of 13 the amount charged for performing such activities is liable to Service Tax . It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not. As long as the payment is made (or fee charged) for getting a service in return ( i.e., as a quid pro quo for the service received ) , it has to be regarded as a consideration for that service and taxable irrespective of by what name such payment is called. It is also clarified that Service Tax is leviable on any payment, in lieu of any permission or license granted by the Government or a local authority. 2. However, s ervices provided by the Government or a local authority by way of: (i) registration required under the law; (ii) testing, calibration, safety check or certification r

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