Pradeep Jain - Chartered Accountant

Query

(ram) Posted On: 09 Aug, 2012

Construction Sir under old regime ,Prime location charges, car parking construction, transfer charges and other allied charges are liable to tax @ of 10% ( full rate), now w.e.f 01/07/12, new concepts of bundled service introduced. So can these charges be treated as construction service (bundled) and accordingly liable to pay abated scheme i.e tax on 25% (with land) even if charged separately shown in agreement and in invoice. Thanks

Section 66F (3) is follows: “(a) If various elements of a bundled service are naturally bundled in the ordinary course of business, it shall be treated as provision of a single service which gives such bundle its essential character (b) If various elements of a bundled service are not naturally bundled in the ordinary course of business, it shall be treated as provision of a service which attracts the highest amount of service tax.” The section 66F does not make any difference whether charges billed separately or together. So the above question will be depended on that whether the service are naturally bundled in the ordinary course of business or not? Manner of determining if the services are bundled in the ordinary course of business Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators few of which are listed below – • The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package then such a package could be treated as naturally bundled in the ordinary course of business. • Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines. • The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. For example service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business. • Other illustrative indicators, not determinative but indicative of bundling of services in ordinary course of business are – • There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use. • The elements are normally advertised as a package. • The different elements are not available separately. • The different elements are integral to one overall supply – if one or more is removed, the nature of the supply would be affected. No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each case has to be individually examined in the backdrop of several factors some of which are outlined above.

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