|
What constitutes ‘Service’ is
certainly a subject matter of discussion. Its plain meaning is an Act of helpful
Activity or Rendering of Assistance or Help. Service is generally a feeling in
the form of efforts and excludes sale of goods or property or commodities. It
pre-supposes existence of a Service Provider. For Service Tax purposes, if there
is no Service, then there should be no Tax.
‘Somebody’ wrote these
beautiful lines which truly reflects the concept of ‘Service’ in our day to day
life.
“Somebody did a golden deed;
Somebody proved a friend in need; Somebody sang a beautiful song; Somebody
smiled the whole day long; Somebody thought, it’s sweet to live; Somebody said,
I’m glad to give; Somebody fought a valiant fight; Somebody lived to shield the
right; that somebody is a service provider.”
Even though Tax has been
imposed on the Services by introducing Chapter–V in the Finance Act 1994, but
the term ‘Service’ has not been defined in Act or Rules or by way of any
explanation.
What is ‘Service’ under various
popular Dictionary meaning ?
Service has been defined
differently under various Dictionaries.
Wikipedia, the free
encyclopedia defines economic sense of Service as to, the non-material
equivalent of a good in economics and marketing.
A service is the diametrically
opposed non-material counter-piece of a physical good. A service provision
comprises a sequence of activities that does not result in ownership of the
outcome, and this is what fundamentally differentiates it from furnishing
someone with physical goods. Service provision is a process that creates
predetermined benefits by effectuating a change of service consumers, a change
in their physical possessions or a change in their tangible or intangible
assets.
‘Service’ definition:
The generic clear-cut,
complete and concise definition of the ‘service’ term reads as follows:
A ‘service’ is a set of
singular and perishable benefits-
-
delivered from the accountable service
provider, mostly in close co-action with his service suppliers,
-
generated by functions of technical systems
and/or by distinct activities of individuals, respectively,
-
commissioned according to the needs of his
service consumers by the service customer from the accountable service
provider,
-
rendered individually to an authorized service
consumer at his/her dedicated request,
-
and, finally, consumed and utilized by the
requesting service consumer for executing and/or supporting his/her
day-to-day business tasks or private activities.
The concept of Service can be
more definitely explained with the understanding of the following examples:
Work done by one person
that benefits another person.
Work done for others as an
occupation or business: has done service for us as a consultant.
Installation, maintenance,
or repairs provided or guaranteed by a dealer or manufacturer: a dealer with
full parts and service.
An act or a variety of work done for others, especially for pay: offers a
superior service to that of his competitors; provides full catering services.
An act of assistance or
benefit; a favor.
The serving of food or the
manner in which it is served.
To make fit for use;
adjust, repair, or maintain: service a car.
Type of business that
sells assistance and expertise rather than a tangible product: the field of
management consulting is a service industry.
Useful labor performed by
an individual or organization on behalf of others: Doctors, lawyers, interior
decorators, etc. provide services for which they are paid by their clients.
What is ‘Service’ under
Commercial Laws of the Country ?
Now, we may consider the
concept of Service as envisaged under the various commercial laws of India is
more or less same in the Commercial Laws.
In contract law, service
refers to an act or deed, rather than property.
‘Service’ under the Income
Tax means Service of any description which is made available to potential
users and includes the Provision of services in connection with business of
any industrial or commercial nature such as accounting, banking,
communication, conveying of news or information, advertising, entertainment,
amusement, education, financing, insurance, chit funds, real estate,
construction, transport, storage, processing, supply of electrical or other
energy, boarding and lodging.
Under the Monopolies and
Restrictive Trade Practices Act, Service means service of any description
which is made available to potential users and includes the provisions of
facilities in-connection with banking financing, insurance, chit fund, real
estate, transport, processing, supply of electrical or other energy, board or
lodging or both, entertainment, amusement or the conveying of news or other
information but does not include the rendering of any service free of charge
or under a contract of personal service.
Explanation.— For the removal of doubts, it is hereby declared that any
dealings in real estate shall be included and shall be deemed always to have
been included within the definition of ‘service’.
As per the Consumer
Protection Act 1986, Service means service of any description which is made
available to potential users and includes the provisions of facilities in
connection with banking, financing, insurance transport processing, supply of
electrical or other energy, board or lodging or both, entertainment, amusement
or the purveying of news or other information, but does not include the
rendering of any service free of charge or under a contract of personal
service.
Under the Foreign Exchange
Management Act, 1999, Service means service of any description which is made
available to potential users and includes the provisions of facilities in
connection with banking financing, insurance, medical assistance, legal
assistance, chit fund, real estate, transport, processing, supply of
electrical or other energy, boarding or lodging or both, entertainment,
amusement or the purveying of news or other information, but does not include
the rendering of any service fee of charge or under a contract of personal
service.
Under the Trademarks Act,
1999 and Competition Act, 2002, Service means service of any description which
is made available to potential users and includes the provision of services in
connection with business of any industrial or commercial matters such as
banking, communication, education, financing, insurance, chit funds, real
estate, transport, storage, material treatment, processing, supply of
electrical or other energy, boarding, lodging, entertainment, amusement,
construction, repair, conveying of news or information and advertising.
As per the International
Accounting for Business, Service means something provided, usually for a fee,
that may not be classed as manufacturing or production in any form (such as
legal advice, brokerage, agency services and financial advice).
Characteristics of Service:
Services can be paraphrased in
terms of their generic key characteristics.
-
Intangibility
Services are intangible and
insubstantial: they may not be touched, gripped, handled, looked at, smelled,
tasted or heard. Thus, there is neither potential nor need for transport,
storage or stocking of services. Furthermore, a service cannot be (re)sold or
owned by somebody, neither can it be turned over from the service provider to
the service consumer nor returned from the service consumer to the service
provider.
Solely, the service delivery
can be commissioned to a service provider who must generate and render the
service at the distinct request of an authorized service consumer.
-
Perishability
Services are perishable in
two regards
-
The relevant resources, processes and systems
are assigned for service delivery during a definite period in time. If the
designated or scheduled service consumer does not request and consume the
service during this period, the service cannot be performed for him. From
the perspective of the service provider, this is a lost economic
opportunity. Examples: An empty seat on a plane never can be utilized and
charged after departure.
-
When the service has been completely rendered
to the requesting service consumer, this particular service irreversibly
vanishes as it has been consumed by the service consumer. Example: the
passenger has been transported to the destination and cannot be transported
again to this location at this point in time.
-
Inseparability
The service provider is
indispensable for service delivery as he must promptly generate and render the
service to the requesting service consumer. In many cases the service delivery
is executed automatically but the service provider must assign resources and
systems and actively keep up appropriate service delivery readiness and
capabilities. Additionally, the service consumer is inseparable from service
delivery because he is involved in it from requesting it up to consuming the
rendered benefits. Example: The service consumer must sit in the hair
dresser’s shop & chair or on the seat in plane; correspondingly, the hair
dresser or the pilot must be in the same shop or plane, respectively, for
delivering the service.
-
Simultaneity
Services are rendered and
consumed during the same period of time. As soon as the service consumer has
requested the service (delivery), the particular service must be generated
from scratch without any delay and friction and the service consumer
instantaneously consumes the rendered benefits for executing his upcoming
activity or task.
-
Variability
Each service is unique. It is
one-time generated, rendered and consumed and can never be exactly repeated as
the point of time, location, circumstances, conditions, current configurations
and/or assigned resources are different for the next delivery, even if the
same service consumer requests the same service. Many services are regarded as
heterogeneous or lacking homogeneity and are typically modified for each
service consumer or each new situation (customized). Example: The taxi service
which transports the service consumer from his home to the opera is different
from the taxi service which transports the same service consumer from the
opera to his home – another point in time, the other direction, maybe another
route, probably another taxi driver and cab.
Each of these characteristics
is retractable per se and their inevitable co-incidence complicates the
consistent service conception and make service delivery a challenge in each
and every case. From the service consumer’s point of view, these
characteristics make it difficult, or even impossible, to evaluate or compare
services prior to experiencing the service delivery.
Mass generation and delivery
of services is very difficult. This can be seen as a problem of inconsistent
service quality. Both inputs and outputs to the processes involved providing
services are highly variable, as are the relationships between these
processes, making it difficult to maintain consistent service quality. For
many services there is labor intensity as services usually involve
considerable human activity, rather than a precisely determined process;
exceptions include utilities.
Human resource management is
important. The human factor is often the key success factor in service
economies. It is difficult to achieve economies of scale or gain dominant
market share. There are demand fluctuations and it can be difficult to
forecast demand. Demand can vary by season, time of day, business cycle, etc.
There is consumer involvement
as most service provision requires a high degree of interaction between
service consumer and service provider. There is a customer- relationship based
on creating long-term business relationships. Accountants, attorneys, and
financial advisers maintain long-term relationships with their clients for
decades. These repeat consumers refer friends and family, helping to create a
client-based relationship.
Thus, literally, ‘Service’
can be said to have the following salient features :
— Act of helpful activity
— Act of doing something useful
— Rendering of assistance/help
— Anything which does not involve supply or transfer of goods is service
— Transformation of user/user goods as a result of voluntary intervention of
service provider
— Intangible commodity in form of human effort
— Excludes sale of goods or commodities or property
— Existence of service provider and service recipient.
|