TRADE NOTICE No.10/CE/SH/2016
Dated, Shillong the 9th June, 2016
Subject : Clarification regarding leviability o service tax in respect of services provided by arbitral tribunal and members of such tribunal - Regarding.
Attention of members of Trade, Industry and all others concerned are hereby invited to the above subject.
1.1 It has come to the notice of the Board that there is some confusion regarding the legal position with respect to continuance of reverse charge mechanism for services provided by arbitral tribunals and individual arbitrators on the arbitral tribunal, with effect from 1.4.2016.
2.1 Services provided by an arbitral tribunal to (i) any person other than a business entity; or (ii) a business entity with a turnover up to rupees ten lakh in the preceding financial year, are exempt from services tax [Entry 6(a) of Notification No. 25/2012 – ST refers]. “Arbitral tribunal” has been assigned the same meaning in the exemption notification No. 25/2012 – ST [paragraph 2(c)] as in clause (d) of Section 2 of theArbitration and Conciliation Act 1996, which is as follows:-
“arbitral tribunal means a sole arbitrator or a panel of arbitrators”
2.2 In the Budget 2016-17, the entry at (c) of Sl. No. 6 of notification No.25/2012-ST, has been omitted with effect from 1.4.2016. It read as:
“Services provided by a person represented on an arbitral tribunal to an arbitral tribunal.”
The matter has been examined. It may be noted that the services provided or agreed to be provided by an arbitral tribunal to a business entity (turnover exceeding Rs 10 lakh) located in the taxable territory, is taxable under reverse charge mechanism and recipient of service is liable to discharge service tax liability [Rule 2(d)(D)(I) of Service Tax Rules, 1994 and Notification No. 30/3012 – ST (Sl. No. 4) refer]. .
It could be argued that service provided by an arbitrator on the panel of arbitrators, to the arbitral tribunal is taxable under forward charge. However, this does not appear to be a correct interpretation of law. Any reference in Service Tax law to an “arbitral tribunal” necessarily includes the natural persons on the arbitral tribunal, by virtue of clause (d) of Section 2 of the Arbitration and Conciliation Act, 1996. Services are provided or agreed to be provided by the panel of arbitrators, as comprising the several natural persons on the said panel, to the business entity or to the arbitration institution approached by the business entity for purposes of arbitration. The liability to discharge service tax is on the service recipient, if it is a business entity located in the taxable territory with a turnover exceeding rupees ten lakh in the preceding financial year.
In view of the above, it is clarified that Service Tax liability for services provided by an arbitral tribunal (including the individual arbitrators of the tribunal) shall be on the service recipient if it is a business entity located in the taxable territory with a turnover exceeding rupees ten lakh in the preceding financial year.
Authority: Circular No.193/03/2016--Service Tax dated the 18th May, 2016 of TRU,
CBEC, New Delhi.
Copy forwarded for information and necessary action to:—
1. The Chief Commissioner, Central Excise, Customs & Service Tax, Shillong Zone, “CRESCENS’ Building, M.G. Road, Shillong- 793001.
2. The Commissioner, Central Excise & Service Tax, Dibrugarh.
3. The Commissioner of Customs (Prev), N.E.R., Shillong.
4. The Commissioner, Central Excise & Service Tax, Guwahati.
5. The Commissioner (Appeals), Central Excise & Service Tax, Guwahati.
6. The Commissioner (Audit), Central Excise & Service Tax, Guwahati.
7. The Deputy Commissioner (P & V), Central Excise & Service Tax, Shillong.
8. The Assistant Commissioner, (Audit/S.Tax), Central Excise & Service Tax, Shillong.
9. The Deputy/Assistant Commissioner, Central Excise & Service Tax, All Divisions under Shillong Commissionerate with a request to circulate the same to all Superintendent, Central Excise & Service Tax Range under their respective jurisdictions.
10. The Assistant Commissioner(Anti-Evasion), Central Excise & Service Tax, Shillong.
11. All Trade Association/Chamber of Commerce under Shillong Central Excise Commissionerate.
12. All R.A.C. Members under Shillong Central Excise Commissionerate.
13. P.A. to Commissioner, Central Excise & Service Tax, Shillong.
14. The Systems Officer, Computer Cell, Central Excise & Service Tax, Shillong, with a request to upload the Trade Notice immediately on the Commissionerate’s website.
15. Guard File.