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Introduction

Service tax was first introduced in India on 1994.


It was started with only 3 services.
The chelliah committee pointed out that indirect tax at the central level
should be broadly neutral in relation to production and consumption of
goods and in coming time it should be covers commodities and services.
On this recommendation MR. MANMOHAN SINGH (union finance
minister) in his budget introduced this concept on assessment year
1994-95.
According to his speech many other countries do not difference
between goods & services while imposing tax. So why are we back to
take measures about imposing tax on telephone, non-life insurance &
stockbrokers.
There were two reasons of introducing service tax
1) Need of more revenue as our revenue was decreasing due to WTO
commitments to rationalized duties.
2) To introduce a principle of equivalence between tax goods & service as
there is a view that there is no distinction between consumption and
service as both satisfy the human needs.
Nature of service tax and its administration
1) It is a tax on service
2) It is livable only on specific taxable services listed u/s 65(105)
3) According to this tax service is a product of labour which is not tangible.
4) First it was imposed on three services viz. Telephone, non life insurance
& stock brokers and now it has expanded to 199 services & even it will
expand more till all services comes under this
5) List of service tax
6) There are sum services which assigned to public authority like regional
transport officer (RTO), LPG, CNG etc. these are already in the land of
government. The fees whichever is paid on this goes in government
revenues, it is not under the service tax.
Growth of service tax
1) The service sector is growing day by day with its largest contribution in
GDP. The collections are ;
FY COLLECTION IN CRORES
2007-8 50600
2008-9 64000
2009-10 69000
2010-11 82000
This show that our countries economy is increases with the growth in
service sector
2) The growth of any economy evidenced by growth of its service sector.
Todays services cover wide range of activities. The growing importance
of service sector is an indicator of the economic development of our
country.
Silent features of a service
1) Act of doing useful/helpful activity. For example-classes ,private
institutions & restaurants etc. are helping us by teaching, providing
foods
2) Rendering of assistance/help. For example- survey, map-making, and
telegraph service, telephone, tour operator etc. assist us by giving
information, guidance, & training.
3) Anything which does not involve sale, supply or transfer of goods or
commodities or property. for example-service provided by classes or
educational institutes or by hospitals etc are not included as a trading of
goods
4) Intangible commodity in the term of human efficiency service is
already said that it is a labour product which is not tangible. We cannot
see the education but we feel it
5) Existence of service provider & service recipient.
Characteristics of service
1) Intangibility- services are intangible. Service cannot be touched,
handled, looked at, smelled, tasted or heard.
2) Perishability- service are perishable in two regards,
1. Firstly, definite service is assigned for a definite person at a
definite time & place.
For example- an empty seat a plane never can be utilized or
charged after departure
2. Secondly, a service which has been completely rendered to the
consumer is irreversible and vanishes as the same has been
consumed.
For example-passengers transported to a destination cannot be
transported again to this location at this point in time

3) Inseparability- service cannot be separated from service provider, to
provide service ,service-provider should be there without him how can
a service be executed
4) Simultaneous- service are rendered and consumed during the same
period of time. On the request of the service consumer, the desire
service is generated from scratch and without delay delivered or
rendered to the service consumer.
5) Variability- each service is different from each other. Each service is
unique. It is generated, rendered & consumed at a same time. It is
cannot be getting back after the consumption and can never be repeated
at the point of time, location, circumstances, conditions etc.





Applicability
1. Under section 64(1) of the act the provisions relating to the service tax
is applicable to whole of India expect state of Jammu & Kashmir.
2. So any of service related to Jammu & Kashmir the service tax wont be
imposed.
3. But if the service provider is from Jammu & Kashmir and is providing
service to the any other state, in this case the service tax will be
imposed.
4. Also if a service provider having a office in any part of India (other than
Jammu & Kashmir), provides services to his clients from such place
anywhere else other than the state of Jammu & Kashmir he would able
to pay the service tax.
Service provider Service receiver Applicability
Inside Jammu &
Kashmir
Inside the Jammu &
Kashmir
Not applicable
Inside Jammu &
Kashmir
Outside the Jammu &
Kashmir
Applicable
Outside Jammu &
Kashmir
Inside the Jammu &
Kashmir
Not applicable

Rate of service tax
a) Uniform rate-Unlike excise duty & customs, service tax is levied
uniformly. The rate was @ 5% up to 13/05/2003, which was increased
to 8% on 14/05/2003. Then increased to 10% on 10/09/2004,after
that it increased to 12% on 18/04/2006 and currently it is levied @10%
w.e.f 24/02/2009.
Now at present it is 12.36% (including educational Cess @2% and
secondary and higher secondary educational Cess @1%)
a) Exemption limit- service tax was been imposed at a uniform rate when
it was introduced on 1994 and there was no threshold limit. On
1/04/2005 threshold limit of rupees 4 lakhs was prescribed, which was
increased to 8 lakhs by finance act 2007 & then it increased to 10 lakhs
by the financial act 2008.
General exemption
General exemption is applicable to all services:
a) Service provided to the United Nations or an international
organizations: taxable services provided by the a person to the United
Nations or an international organizations like World Health
Organization(WHO), International Labour Organization(ILO), United
Nation International Childrens Emergency
Funds(UNICFE),International Monetary Fund(IMF) Etc. will be fully
exempted.
b) Service provided to developer/Units Of Special Economic Zone:
taxable services provided to a developer of a special economic zone or a
unit of special economic zone will be fully exempted
c) Service provided to the solider & his family will be exempted.
d) Any taxable services provided by TBI (technology business incubator)
and STEP (science and technology entrepreneurship park) will be
exempted.
e) Specific exports of services are exempted.
f) Exemption based turnover up to Rs. 10 lakh in a financial year: business
whose turnover is up to 10 lakhs in a financial year are exempted. But
there are some conditions like, it should be not be under any brand
name & service in which tax is payable by service recipient. e.g. - goods
transport agency.
g) Exemption related to Reserve Bank Of India (RBI): exemption has been
granted to;
Taxable services provided to any person by RBI.
Taxable services provided by person to RBI.
Taxable services received in India from foreign by RBI under
section 66A.
Services provided within the states of Jammu & Kashmir.
Service rendered free of charge.
Source- BMS
References-Vipuls prkashan