Applicability Of St On Isp

Applicability of service tax on Internet Service Provider / Websites As per section 65(72)(ZH) of the Finance Act, 1994, with effect from 16th July, 2001, service tax will be levied on any service provided to a customer, by a commercial concern, in relation to on-line information and database access or retrieval or both in electronic form. Before we go on to discuss the applicability of service tax on internet service provider / websites we must understand the meaning and definitions of various words and phrases above to get an idea about the kind of services which will attract the service tax. As per section 65(19) of the Finance Act, 1994 the term “ On – line information and database access or retrieval” means providing data or information, retrieval or otherwise, to a customer in electronic form through a computer network. The online information and database access or retrieval may be public as is provided by websites or it may be private for limited number of users as is in the case of virtual private network or intranet which allows companies to interconnect their various divisions & departments at different geographical locations as well as enables employees to access the data & information from remote locations. Extranet allows partial access of data or information to even outsiders also. Now question arises as to how the information and database in electronic form is made available for access or retrieval online & who provides them. For availability of online information and database access or retrieval there are three elements. Firstly there must be data or information which is provided by websites in case of online provision of data or information through internet or data or information of companies for interconnecting various divisions and departments and allowing online access to employees through intranet or VPN. Secondly it must be in electronic form, which means any information generated, sent, received or stored in media, magnetic, optical computer memory, microfilm, computer generated microfiche or similar device. The company providing the data or information may store it in their own server or may take the disk space of the server on lease from ISP’s or Data Centers Thirdly there must be “Computer network” which means interconnection of one or more computers through – i) ii)

use of satellite, microwave, terrestrial line or other communication media; and terminals or a complex consisting of two or more interconnected computers whether or nor the interconnection is continuously maintained .

Now the question arises as to what are the services which will be chargeable to service tax for online access of data or information. Services of ISP’s Nowadays Internet Service Provider provides various services apart from their basic or major service of providing telecommunication network or gateways. The various services provided by ISP’s may be any of the following apart from their basic service :a) Domain Registration b) Keyword Registration c) Web Hosting d) Virtual Private Network e) Intranet f) Extranet g) Corporate website development h) Enterprise Intranet Development i) E-Commerce solutions j) Designing of websites, logo & Graphic design and multimedia Now let us discuss the applicability of service tax on above services one by one i)

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Provision of Network or gateways :- ISP’s provide telecommunication network or gateways to access the data or informations stored in a remote server. For providing above service they charge the customers on the basis of usage of time. They also provide dedicated lease lines on lump sum payment. Since the network or gateways provides access to the server where data or information is stored so above service will be chargeable to service tax. Domain or keyword Registration :- Some ISP’s also provides the service of domain or keyword registration. Domain or Keyword is the unique identity of an organisation intending to put data or information on the internet through website. It is the address of websites on the net. Since the customer who pays for the service of domain registration is not paying for access of data or information but they are paying for their identification on the net so it will not be chargeable to service tax. Web Hosting :- ISP’s providing web hosting services provide lease of server disk space to allow websites to store data or information which is accessed by user of internet. The customer who pays for the service of lease of server is not paying for the service of online access of data or information but on the other hand they are paying for the storage of data or information which is accessed by user of internet through telecommunication network. So the service to customer for lease of server is not chargeable to service tax since the above service involves storage and not access of online information or data. It is the service provided to user of internet which will be chargeable to service tax since they are paying for access to online data or information. Virtual Private Network / Intranet/ Extranet :- ISP’s also provide the service of VPN or intranet or extranet to enable organizations to connect their different

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departments and employees at different geographical location. In providing the above service amount charged only for providing network for online access of data or information will be chargeable to service tax. Consultancy provided for development of VPN or intranet or extranet will not be chargeable to service tax. Corporate website development or enterprise intranet development :- It will not be chargeable to service tax as the customer who is paying for above service is paying for the form of their online presence on the internet. They provide the data or information which is converted into a website which can be accessed online. E- Commerce solutions / Designing of web site or logo :- It will also not be chargeable to service tax for the reason that the customers pay for above services for their online presence.

Services of Websites Websites provide data or information which is accessed by user of internet through telecommunication network or gateway provided by ISP’s. The information provided by website may be free or certain specific information provided by website may be chargeable. For example website like lexsite.com charges their customer for providing online up-to-date information about various notification, circulars & changes taking place in various laws. So if a website charges for provision of data or information then it will be chargeable to service tax. But some websites also charges for trading or exchange of goods or services from the customers who uses their website for such trading or exchange. Such service will not be chargeable to service tax if the customer who is paying for such service is paying for providing the information about their goods or services to the user of internet. However if the person who accesses the information about the goods or services also pays to website for such access than it will be chargeable to service tax. However the person who accesses the information about goods or services does not pay anything for access to the information but pays for if he decides to buy or avail the above goods or services then it will not be chargeable to service tax.