This document provides an overview of the basic structure of service tax law in India. It discusses the origin and growth of service tax since 1994. Key points include: - Service tax is levied under the constitutional residuary power of the Parliament. - There are numerous rules, notifications, and circulars that provide references on service tax law. - The hierarchy for administration runs from the Central Board of Excise and Customs down to inspectors. - Important dates include the introduction of service tax in 1994 and the shift to negative list-based taxation in 2012. - The new negative list system taxes all services by default, excluding only those under the 16 entries in the negative list.

1. Basic Structure of Service Tax Law – 1/12
CA Sri Harsha
harsha@sbsandco.com
by
#35

2. Coverage
 Origin & Growth of Service Tax Law;
 Constitutional Background;
 References;
 Hierarchy;
 Important dates;
 Old Law vs New Law – Why shift is required?;
 New Law;
 Preview of Next Session
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3. Origin & Growth of Service Tax Law
 Service Tax was introduced in the Year 1994 vide Finance Act, 1994. It initially started with 3
services and down the years, it has become a key contributor to the Indirect Taxes and
consequently to the country’s GDP.
 Indirect Tax Contribution to GDP as per recent CAG Audit Report is as under:
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4. Origin & Growth of Service Tax Law
 Growth of Service Tax over the last 5 years:
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5. Constitutional Background
 Service tax is levied vide Entry 97 of List I of Seventh Schedule of the Constitution of India.
Article 246 empowers the Parliament to make laws for the entries mentioned in List I.
 Entry 97 is the residuary entry which reads as ‘Any other matter not enumerated in List II or List
III including any tax not mentioned in those lists’. Hence, service tax is levied vide the residuary
entry.
 Entry 92C was introduced in the Year 2004 vide The Constitution (Ninety – Second Amendment)
Act, 2003. However, the same was not made effective as on date. Hence, even today the service
tax is levied and administered by Parliament vide the residuary entry.
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6. References: (1/3)
 Finance Acts;
 Rules;
 Notifications;
 Circulars;
 Trade Notices;
 Education Guide released by TRU of CBEC;
 Judicial Precedents;
 Budget Speeches;
 Information obtained through Right to Information Act, 2005
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7. Finance Acts: (2/3)
 Finance Act, 1994 – Chapter V – Service Tax Law:
 Total 32 Sections;
 Section 64 to Section 96
 Finance Act, 1994 – Chapter VA: Advance Ruling Provisions:
 Total 14 Sections;
 Section 96A to Section 100
 Finance Act, 2008 - Chapter VI - Service Tax Dispute Resolution Scheme, 2008
 Total 11 Sections;
 Section 91 to Section 101
 Finance Act, 2013 – Chapter VI – Service Tax VCES, 2013:
 Total 11 Rules;
 Section 104 to Section 114
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8. Rules: (3/3)
 Total 15 sets of Rules:
 Service Tax Rules, 1994;
 Cenvat Credit Rules, 2004;
 Service Tax (Determination of Value) Rules, 2006;
 Point of Taxation Rules, 2011;
 Place of Provision of Service Rules, 2012;
 Service Tax (Advance Rulings) Rules, 2003;
 Service Tax (Registration of Special Category of Persons) Rules, 2005;
 Service Tax (Publication of Names) Rules, 2008;
 Dispute Resolution Scheme, 2008;
 Service Tax (Provisional Attachment of Property) Rules, 2008;
 Service Tax Return Preparer Scheme, 2009;
 Service Tax (Settlement of Cases) Rules, 2012;
 Service Tax (Compounding of Offences) Rules, 2012;
 Service Tax Voluntary Compliance Encouragement Scheme Rules, 2013
 Service Tax and Central Excise (Furnishing of Annual Information Returns) Rules, 2016
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9. Hierarchy: (1/2)
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Central Board of
Excise and
Customs
27 Chief
Commissionerate
83 Composite
Executive
Commissionerate
36 Exclusive CE
Commissionerate
22 Exclusive ST
Commissionerate
20 Directorates
General

10. Hierarchy: (2/2)
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Commissioner
Additional
Commissioner
Joint
Commissioner
AC/DC
Superintendent
Inspector

11. Important Dates:
 01.07.1994 – Introduction of Service Tax in India;
 10.09.2004 – Allowed cross sector Credits under Cenvat;
 01.01.2005 – Introduction of Reverse Charge on Specified Services;
 16.05.2005 – Advances were brought into tax net;
 18.04.2006 – Introduction of Section 66A –ST on services received from Outside India;
 19.04.2006 – Introduction of ST (DoV) Rules, 2006
 01.07.2011 – ST on Accrual Basis;
 01.07.2012 – Introduction of Negative List based taxation;
 01.07.2012 – Introduction of Place of Provision of Service Rules to determine consumption;
 01.07.2012 – Introduction of Partial Reverse Charge Mechanism;
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12. Old Law vs New Law- Why shift is required?:
 With effective from 01.07.2012, the taxation has been changed from positive based to negative
based. Earlier to that, there were a total of 119 services. Only if service provided falls into any of
the 119 entries, there used to be taxability. If not, no service tax.
 What made to move to the new law? :
 The service sector contribution to GDP was not matching with the service tax revenue to the GDP;
 Inability to define certain services which are complicated and technology oriented;
 Satisfaction of multiple definitions to arrive at the taxability;
 Burden to be shifted on the assessee;
 Classification Issues;
 Reduce Litigation;
 Expand the tax base;
 Move towards GST
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13. New Law:
 The first draft of the negative list is issued on 31.08.2011. After receiving feedback from stake
holders, the second and revised draft was issued on 18.11.2011. Finally, the law was made
effective from 01.07.2012.
 What is negative list based taxation?:
 Section 66D of Finance Act, 1994 contains entries, which are called Negative List of Services.
 Currently, there are 16 entries in Section 66D. Certain entries have sub-entries, there by extending the scope.
 All other services, except mentioned in Section 66D shall be taxable.
 Since all other services except mentioned in Section 66D are taxable, it is relevant to define,
what is a ‘service’? Hence, after 18 years of introduction, the phrase ‘service’ has been defined.
Earlier, there used to be a definition for taxable service for each 119 activities. Only after
01.07.2012, a generalized definition has come into the statute book.
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14. New Law:
 Under the current law, the activity shall be subjected to service tax, if any of the following are
not met:
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Check #1
• Is the activity is excluded from the definition of ‘service’?
Check # 2
• Is the activity specified under Section 66D?
Check # 3
• Is the activity covered under Mega Exemption Notification?

15. Preview of Next Session:
 In the next session, the discussion shall be on the detailed analysis of definition of ‘service’ and
entries in the ‘declared services’.
 The session shall be on 27th May, 2016.
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