The revenue department on Tuesday clarified that service tax would not be levied on money orders, operation of savings accounts and issue of postal orders services provided by the department of posts.

In a circular to all its field formations, the Central board of Excise and Customs said while banking and other financial services provided by a bank, a financial institution or a non-banking financial company or any other service provider similar to a bank or a financial institution was liable to service tax, the DoP was not similar to a bank or a financial institution and hence did not fall within the category of any other similar service provider.

However, courier services provided by the DoP will continue to attract the levy. The clarification issued today also does not exempt business auxiliary services provided by the DoP like passport services or sale of UPSC forms and postal life insurance from the purview of the tax.

Finance ministry officials said following the clarification, the notices issued by the directorate of service tax to the DoP to pay service tax on the exempted services would become void. The re-examination of the service tax on some of the postal services had been prompted by a representation from the DoP on the issue.

The government has also come in for criticism from some political parties about its decision to tax some of the postal services.

The DoP had, in its representation, pointed out that it was a government body and therefore the imposition of the tax on its services amounts to a tax by the government on itself.

However, officials in the finance ministry pointed out that the basic premise is that the tax is on the service and it did not discriminate the service provider which could be either the government or the private sector.

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