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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.
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 –
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
Services of Websites