CIR. NO.54/03/2003-CX(ST), DT. 21/04/2003

Classification of Internet Telephony Services

Sir,

I am directed to say that doubts has been raised regarding the classification of the Internet Telephony Service, as to whether this service is covered under the category of ‘telephone service’ or ‘online information and database access and/or retrieval service’ and hence liable to pay Service Tax.

2. Transmission of two-way voice communication through the medium of internet is called Internet Telephony. Even if the licenses to Internet Telephony Service Providers are issued under section 4 of the Indian Telegraph Act, 1885, the two way voice communication is made possible through data transfer over the Internet. As per Section 65(19), 1994, the term "on-line information and database access and/or retrieval" means providing data or information, retrievable or, otherwise, to a customer in electronic form through a computer network. Accordingly, it is to confirm that Internet Telephony Services fall under the category of online information and database access and/or retrieval services.

3. The field formations may suitably be informed.

4. Trade Notice may be issued for the information of the trade.

5. The receipt of this Circular may kindly be acknowledged.

Sd/-
(Manish Mohan)
Under Secretary to the Government of India

F.No. 149/9/2002 CX.4

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