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Indian Service Tax

Scientific and technical

Consultancy Service

Effective Date: 16.07.2001.

Authority: Notification No. 4/2001-ST, dt. 9/7/2001 (for full text of Notification

see under Broadcasting).

Rate of Service Tax: 8% from 14/5/2003 (5% upto 13/5/2003). 10% from 10/9/2004 - Cess 2% of 10% = 0.2. Total ST = 10.2%.

Definition: "scientific or technical consultancy"means any advice, consultancy, or scientific or technical assistance, rendered in any manner, either directly or indirectly, by a scientist or a technocrat, or any science or technology institution or organisation, to a client, in one or more disciplines of science or technology; [Section 65(92)].

Taxable service: Scientific or technical consultancy provided by a scientist or a technocrat, or by any science or technology institution or organisation to a client.

Value of taxable service: Gross amount charged from the client. Exemptions:

(i) Services by doctors, medical colleges, nursing homes, hospitals, diagnostic pathological labs, technocrats

       (ii) Mere testing

(iii) Grants & Aids

 Person liable to pay: Scientists, Technocrat, Institution and Organisation.

Head of Account :

 SI. CodeSCCD

Minor-head  004400131                  Scientific & Technical 00440124       

Consultancy Service

Sub-head            00440013101              Tax Collection                     00440125        116

Sub-head            00440013102              Other Receipts                       00440126        113

Sub-head            00440013103              Deduct Refunds            00440127        118

Main text of Departmental Circular/TN:

[Ministry's ENo. B.II/I/2000-TRU dated 9/7/2001 - Annexure I]

1. Section 65(60)* defines "scientific and technical consultancy" as any advice, consultancy, or scientific or technical assistance, rendered in any manner,

* Section 65(92), w.e.f. 10/9/2004.

by a scientist or a technocrat, or any science or technology institution or organisation, to a client, in one or more discipline of science or technology. The taxable service has been defined in clause 72 (za) of Section 65 as "any service provided, to a client, by a scientist or a technocrat, or any science and technology institution or, organisation, in relation to scientific or technical consultancy".

2. The taxable service should be understood in the context of its commonly understood meaning and scope. For instance, it would cover consultation, advice or technical assistance provided by a scientist or a technocrat or a science or technology institution on any issue relating to any branch of science and technology. Such consultation may be in the nature of an expert opinion/advice in regard to scientific or technical feasibility or any other scientific or technical aspect of a project, process or design, recommending an apt technology, suggestion for improvement in existing technology or process, providing consultation on any technical problem or about new technology, etc. Some of the specific issues raised and clarifications thereon are given below.

3. Points for clarification:

Point raised for clarification                             Clarification

Whether services rendered by                  In common parlance, these categories

doctors, medical colleges,                                   of service providers are not known

nursing homes, hospitals,                                  as scientists or technocrats or

diagnostic and pathological                              science or technology institutions

labs, etc., would come under the                      or organisations. They will not be

purview of the proposed levy.             covered under service tax.

Whether public funded research                         Yes. Service tax is liable to be paid

institutions like CSIR, ICAR,               when any scientific or technical

DRDO, IITs and IISc., Regional                       consultancy service is rendered

Engineering Colleges etc., which               whether by public funded

are exempt from payment of                                 institutions or by private agencies.

income tax 'are covered under

the service tax.

Whether testing services will be                         Mere testing will not attract service

covered under the proposed levy?                tax. However, in case testing is an

                                                                   integral part of the consultancy, then

                                                                   such activity is part and parcel of the

                                                                   taxable service and no abatement

                                                                   of any kind admissible.

Many public funded research                                     In the facts of this case, no service is

institutions receive grants or                                 rendered to anyone. Hence the question

aids from the Government for                         of payment of service tax does not

conducting research /project                                    arise. However, if they render service

work. Whether such activities                            to anyone on payment basis, service

would be covered under the levy?                       tax will be payable on such services.

Whether the service tax will be                    If scientific or technical consultancy

leviable on consultancy provided                       is provided to a government

to government departments,                             department for which consultation

public sector undertakings?Fees are received, then service tax would be applicable.