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INTRODUCTION
Service Tax is a form of indirect tax imposed on specified services called
"taxable services". Service tax cannot be levied on any service which is not
included in the list of taxable services. Over the past few years, service tax
been expanded to cover new services. The objective behind levying service
tax is to reduce the degree of intensity of taxation on manufacturing and trade
without forcing the government to compromise on the revenue needs. The
intention of the government is to gradually increase the list of taxable
services until most services fall within the scope of service tax. For the
purpose of levying service tax, the value of any taxable service should be the
gross amount charged by the service provider for the service rendered by
him.
Service Tax was first brought into force with effect from 1 July 1994. All
service providers in India, except those in the state of Jammu and Kashmir,
are required to pay a Service Tax in India. Initially only three services were
brought under the net of service tax and the tax rate was 5%. Gradually more
services came under the ambit of Service Tax. The rate of tax was increased
from 5% to 8% w. e. f. 14 May 2003. From 10 September 2004 the rate of
Service Tax was enhanced to 10% from 8%. Besides this 2% education cess
on the amount of Service Tax was also introduced. In the Union Budget of
India for the year 2006-2007, service tax was increased from 10% to 12%.
On February 24, 2009 in order to give relief to the industry reeling under the
impact of economic recession, the rate of Service Tax was reduced from 12
per cent to 10 per cent.
Service tax is a tax levied on service providers in India, except the State of
Jammu and Kashmir
Constitutional Validity
Article 265 of the Constitution lays down that no tax shall be levied
or collected except by the authority of law. Schedule VII divides this subject
into three categories-
Legal provisions
The provisions relating to Service Tax were brought into force with
effect from 1st July 1994. It extends to whole of India except the state of
Jammu & Kashmir. The services, brought under the tax net in the year 1994-
95, are as below:
(3a) “aircraft” has the meaning assigned to it in clause (1) of section 2 of the
Aircraft Act, 1934 (22 of 1934)
(3b) “aircraft operator” means any person which provides the service of
transport of goods or passengers by aircraft; (3c) “airport” has the meaning
assigned to it in clause (b) of section 2 of the Airports Authority of India Act,
1994 (55 of 1994)
Service Tax Act 1994
(3d) “airports authority” means the Airports Authority of India constituted
under section 3 of the Airports Authority of India Act, 1994 (55 of 1994) and
also includes any person having the charge of management of an airport or a
civil enclave
(4)"air travel agent" means any person engaged in providing any service
connected with the booking of passage for travel by air
(7) "assessee" means a person liable to pay the service tax and includes his
agent
(17) “beauty treatment” includes hair cutting, hair dyeing, hair dressing,
face and beauty treatment, cosmetic treatment, manicure, pedicure or
counseling services on beauty, face care or make-up or such other similar
services;
Service Tax Act 1994
(18)"beauty parlour" means any establishment providing beauty treatment
services; (19)“business auxiliary service” means any service in relation to,
—
promotion or marketing or sale of goods produced or provided by or
(i)
belonging to the client; or
(ii) promotion or marketing of service provided by the client; or
a) to market; or
(b) to promote; or
(c) to advertise; or
(d) to showcase,
any product or service, intended for the growth in business of the producer or
provider of such product or service, as the case may be;
[(i) a motorcab, or
(ii) a maxicab, or
(iii) any motor vehicle constructed or adapted to carry more than twelve
passengers, excluding the driver, for hire or reward:
(21) "Cable operator" shall have the meaning assigned to it in clause (aa)
of section 2 of the Cable Television Networks (Regulation) Act, 1995 (7 of
1995)
Service Tax Act 1994
(22) "Cable service" shall have the meaning assigned to it in clause (b) of
section 2 of the Cable Television Networks (Regulation) Act, 1995 (7 of
1995)
(a) cargo handling services provided for freight in special containers or for
non containerised freight, services provided by a container freight terminal or
any other freight terminal, for all modes of transport, and cargo handling
service incidental to freight; and
(24a) “civil enclave” has the meaning assigned to it in clause (i) of section 2
of the Airports Authority of India Act, 1994 (55 of 1994);
(i) any body established or constituted by or under any law for the time being
in force; or
(ii) any person or body of persons engaged in the activities of trade unions,
promotion of agriculture, horticulture or animal husbandry; or
(iii) any person or body of persons engaged in any activity having objectives
which are in the nature of public service and are of a charitable, religious or
political nature; or
30) "Computer network" has the meaning assigned to it in clause (j) of sub-
section (1) of section 2 of the Information Technology Act,2000 (21 of
2000);
(33a) “credit card, debit card, charge card or other payment card
service” includes any service provided,—
(iii) By any person, including an issuing bank and an acquiring bank, to any
other person in relation to settlement of any amount transacted through such
card.
(vi) by a person, to an issuing bank or the holder of such card, for making use
of automated teller machines of such person; and
(vii) by the owner of trademarks or brand name to the issuing bank under an
agreement, for use of the trade mark or brand name and other services in
Service Tax Act 1994
relation to such card, whether or not such owner is a club or association
and the issuing bank is a member of such club or association.
(34) "credit rating agency" means any person engaged in the business of
credit rating of any debt obligation or of any project or programme requiring
finance, whether in the form of debt or otherwise, and includes credit rating
of any financial obligation, instrument or security, which has the purpose of
providing a potential investor or any other person any information pertaining
to the relative safety of timely payment of interest or principal;
(51)"health and fitness service" means service for physical well-being such
as, sauna and steam bath, Turkish bath, solarium, spas, reducing or slimming
salons, gymnasium, yoga, meditation, massage (excluding therapeutic
massage)or any other like service
The levy of service tax on these services is effective from 10th September,
2004 and the rate of service tax has been enhanced to 10% from 8%. Besides
this 2% Education Cess on the amount of service tax has also been
Service Tax Act 1994
introduced. Thus the effective service tax rate is now 10.2% including
Education Cess.
Administrative mechanism.
(i) Under Section 67 of the Finance Act, 1994, Service Tax is levied on
the gross or aggregate amount charged by the service provider on the
receiver. However, in terms of Rule 6 of Service Tax Rules, 1994,
the tax is permitted to be paid on the value received. This has been
done to ensure that providers of professional services are not
inconvenienced, as in many cases, the entire amount charged/billed
may not be received by the service provider and calling upon him to
pay the tax on the billed amount in advance would have the effect of
asking him to pay from his own pocket. It would also make the levy
a direct tax, which is against the very scheme of Service Tax.
(ii) Corporate assessees are given the liberty to pay tax on the value of
taxable service, provided by them in a month, by the 25th of the
following month to enable them to finalize the accounts. Further, the
individual assessees are required to pay the levy only once in a
quarter.
(iii) The process of registration of assessees has been considerably
simplified.
Service Tax Act 1994
1.2 Service Tax revenue collection target for the year 2004-05 was
fixed at Rs. 14150 crores, however on the basis of figures obtained
from the Pr. C.C.A., the actual service tax revenue collection stands at
Rs. 14196.19 crores. It indicates a growth of 79.93% against the actual
realization Rs. 7889.97 crores during the last f.y. 2003-04.
1.3 There is a substantial growth in the assessee base from 403856 nos.
in 2003-04 to 7,74,988 nos. in 2004-05. It indicates a growth of almost
91%, which is significantly robust ever after 1994-95 in comparison
with 74% growth rate of previous year. The revenue and assessee
statistics from the year 1994-95 to 2004-05 is as shown in the Table-1
below:
Table – 1
No. of
Financial Revnue No. of
% Growth Services % Growth
Year Rs. Crores Assessees
taxed
8. Audit and
Inspections
1. Target of Rs. 17,500 crores Service Tax collection for f.y. 2005-06 to be
exceeded
2. Intensify the field survey operations to ensure that all taxable service
assessees are brought into the tax net and Service Tax due from them are
collected without hitch.
4. While the basic tenet of voluntary compliance of Service Tax law has
to be adhered to, recalcitrant/ habitual evaders of Service Tax have to be
booked for appropriate action under the law. There could be no leniency in
this regard.
9. Attend to all major court cases relating to Service Tax law for early
decision.
10. Deploy adequate staff to attend to the service tax work and provide
infrastructure and conveyance to implement service tax law effectively.
Phone No. :
2418 1418
B) All other categories (other than “A” above) e.g Public or Private
limited Companies
FILING OF
RETURNS
The Service Tax Assesses are required to file a half yearly return in
Form ST-3 in triplicate, to the Superintendent of Central Excise, dealing with
Service Tax work. The return is to be filed within 25 days from the last day
of the half year it relates to and should be accompanied by copies of all TR-
6 Challans issued in the relevant period.
Half-Year period means (1) 1st April to 30th September and (2) 1st
October to 31st March.
Thus, the returns for half year ending 30th September and 31st March
are required to be filed on or before 25th October and 25th April.
Service Tax Act 1994
Further, assesses filing the returns for the first time should also furnish
to the department the list of all the accounts maintained by them, relating to
Service Tax.
PENALTY
Penalty in the case of delay in paying the Service Tax to the Government
within the prescribed time limit:
For failure to pay the service tax, the assessee would be required to pay a
minimum penalty of Rs.100/- to Rs.200/- per day as decided by Central
Service Tax Act 1994
Excise Officer. This amount is subject to a ceiling of the amount equivalent
to Service Tax not paid.
Interest is also payable at the rate of fifteen percent per annum for delayed
payment of Service Tax.
Penalty for non filing or delayed filing of the half yearly returns:
An assessee failing to file the half yearly returns or failing to file them in
time are liable to a penalty of a sum which may be extended to One
Thousand Rupees.