Arbitration services exempted from service tax

The Central Government on September 12, 2011 came out with a notification exempting arbitration services provided by an arbitral tribunal to business entities from service tax.

Finance Act 2011 had amended Section 65(105)(zzzzm) of Finance Act, 1994 to read -

"(zzzzm) (i) to any person, by a business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner;
(ii) to any business entity, by any person, in relation to representational services before any court, tribunal or authority;
 (iii) to any business entity, by an arbitral tribunal, in respect of arbitration.

Explanation.—For the purposes of this item, the expressions “arbitration” and “arbitral tribunal” shall have the meanings respectively assigned to them in the Arbitration and Conciliation Act, 1996"

Notification no. 45/2011 dated 12th September 2011 issued by the Central Government, has exempted taxable services referred to under item (iii) above. Thus services provided by arbitral tribunal in respect of arbitration to any business entity is now exempt from service tax.

It is pertinent to note that the notification exempts only the services provided by the arbitral tribunals in relation to arbitration from the tax liability. Any taxable services rendered by lawyers in relation to arbitration or any ancillary taxable services rendered by arbitral institutions are not affected by the same.