What are the provisions of Business Auxiliary Service?

Business Auxiliary Service :
Date :
This service became taxable w.e.f. 1.7.2003
Taxable Services
Any service provided or to be provided to a client, by any person, in relation to
business auxiliary services.
Definition :
“Business Auxiliary Service” means any service in relation to :-
(i) Promotion or marketing or sale of goods produced or provided by or belonging
to the client: or
(ii) Promotion or marketing of service provided by the client; including games of
chance for example: – lottery, lotto, bingo); or
(iii) Any customer care service provided on behalf of the client; or
(iv) Procurement of goods or services, which are inputs for the client; or
(v) Production or processing of goods for, or on behalf of, the client; or
(vi) Provision service on behalf of the client; or
(vii) a service incidental or auxiliary to any activity specified in sub- clauses (i) to (iv),
such as :
 Billing
 Issue or collection or recovery of cheques,
 Payments,
 Maintenance of accounts and
 Remittance,
 Inventory management
 Evaluation or development of prospective customer or vendor
 Public relation services,
 Management or supervision, and includes services as a commissions
agent, but does not include any activity that amounts to “manufacture”
within the meaning of clause (f) of section 2 of the Central Excise Act, 1944.

Inputs: “Inputs” means all goods or services intended for use by the client.
Scope : Distributors receive commission from mutual funds for providing services
relating to purchase and sale of Mutual Funds units. Services provided by such
distributors are in the nature of commission agent and are therefore liable to service
tax under ‘business auxiliary services’.
Value : Value of taxable service shall be the gross amount charged by the service
provider of such service rendered by him.

Exemptions And Exclusions :
(1) Agri-Commission Agent : The commission agent working for the sale or
purchase of agricultural produce viz, grains, pulses, tobacco, cotton, jute,
sugarcane, tea, coffee etc, are exempted from payment of service tax.
(2) Diamonds and Jewellery : The service of production or processing of goods in
relation to the manufacture of
(i) Cut and polished diamonds of gold or other precious metals
(ii) Plain and studded jewellery of gold or other precious metals, shall be
exempt from service tax.
(3) TBI and STEP: Services provided by Technology Business Incubators (TBI)
and Science and Technology Entrepreneurship Parks (STEP) are exempt from
service tax. Tax exemption is also available to the incubatees i.e. the persons
availing the services of the above organizations.