Difference Between Business Auxilary Services & Business Support Services:

Difference Between Business Auxilary Services & Business Support Services:

 

Appropriate classification of activities carried out by the

service provider is of utmost importance .The effective

rate of the service tax varies from one taxable service to

another. Thus to determine the correct effective rate of

service tax, it is essential and of foremost importance

that the service is properly classified.

Moreover, one may tend to lose some legitimate

benefits due to misclassifications. Incorrect classification of taxable

service may result into non-availability of certain exemptions or

abatements. Thus, the assessee ends up paying more service tax than

what is actually required by the law. It may also happen at times that

certain exemption or abatement are not available to the service provider

however, due to misclassification the assessee may unknowingly avail

such benefit and as a consequence, the department may in future

initiate recovery proceedings along with interest and penalty.

Business Auxiliary Service (BAS) is one of the most important services

in the eyes of revenue department. It covers abroad spectrum of

activities including marketing, promotional activities, production, jobwork

etc., whereas “support services of business or commerce” (BSS)

means services provided in relation to business or commerce and

includes evaluation of prospective customers, telemarketing, processing

of purchase orders and fulfillment services, and other transaction

processing. These activities might seem to be overlapping with those of

BAS and thus create confusion as regards with proper classification. If a

service is classified under one category, the tax liability may start from

earlier period than other category. For example, service tax on Business

Auxiliary Service (BAS) was levied from July 01, 2003, whereas service

tax on Business Support Service (BSS) was levied from May 01, 2006.

On a closer look, one sees the overlapping activities between BSS and

BAS. The moot distinction between the two categories is that in

comparison to the BSS category, the category of BAS is more specific.

There can be confusion at times where the services provided such as

billing, payments, collection, remittance etc. are in relation to business

or commerce. But essential difference between the two categories is

that BAS covers outsourcing transactions within specific functional

areas whereas BSS covers outsourcing transactions in general.

 

One of the main areas causing such confusion is promotional activities

carried out on behalf of clients. In the case of SR Kaltankrishnan vs

Commsioner of Cochin, (STO 2007 CESTAT 1258) an identical issue

was discussed. The learned advocate stated that the appellant SR

Kalyanakrishnan has been appointed by M/s. ICICI Ltd., Mumbai in

terms of agreement. As per the agreement, the appellant has to verify

the correctness, fairness and authenticity of information furnished by

those seeking loan from Bank. The types of verification are residence

verification, office verification and Tele verification. The appellant was

paid a fixed rate for such service.

The appellant was proceeded against by the revenue for non-registry

with the service tax authority. According to the department, the

appellant is engaged in the services of “Business Auxiliary Service”

since the service was provided in relation to promotion of service

provided by the client. It was contented by the learned advocate that

there is no element of promotion of loan by the appellant. The appellant

did not promote the business of ICICI by persuading people to take loan

from ICICI.

On a careful consideration of the entire issue, the tribunal observed that

the verification of the details given by the loan seekers for ICICI cannot

be treated as promoting their business and that the services rendered

by the applicants would be rightly classifiable as “Business Support

Service” which came into taxable net only w.e.f. 1-5-2006. It is pertinent

to note here that the inclusion of a new category service automatically

implies the exclusion from the earlier category of service.

 

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