The draft circular dated July 27, 2012 issued by the CBEC is a harbinger of things to come insofar as services provided by an employer to his employees are concerned.
Any service provided by the employer to his employee is liable to service tax even if he charges a consideration howsoever small for his services.
Such services, however, would remain immune from service tax if they are rendered gratis to the employees like making available crèches, gymnasium etc free.
Telephone provided by the employer to his employees would be scrutinised for the personal calls and such calls would come in for service tax even though the employee himself is spared of income-tax thereon under income-tax rules. Employers indulging their employees with both liquor and air-conditioned environs in the staff canteen will have to pay service tax.
Staff canteen not providing these two facilities would however remain impervious to service tax even if they charge for the food supplied thanks to a specific exemption in this regard.
Cases of joint employment have been spared the burden of service tax.
Thus, if a group employs a company secretary catering to all the companies in the group and whose salary is equitably borne by the members of the group, it would not be treated as manpower supply and hence not subject to service tax.
(The author is a New Delhi-based Chartered Accountant)
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