Genesis and Authority of Service Tax Levy in India

-By Ch.Kapil
Article Assistant at Gella & Co
3/23/2015 1kapilchidurala93@gmail.com

 Genesis of Service Tax Levy
 Authority of Levy
 Administration of Service Tax
 Service [Section 65 B (44) of Chapter Finance
Act,1994]
 Levy of Service Tax
 Role of Chartered Accountant

 Base of Service Tax is Report of Chelliah
Committee
 Budget Speech for the year 1994-95 by Dr.
Man Mohan Singh, Union Finance Minister
 Initially chargeable services are 3; namely
1. Telephones
2. Non Life Insurance
3. Stock Brokers

 Indian Constitution vide article 265 says “ No
tax shall be levied or collected except by
authority of law”
 Schedule VII of Indian Constitution has 3 list
for bifurcation of power.
 List I – Union List
 List II – State List
 List III - Concurrent List

 Entry 82 to Entry 92 C of List I enumerates
the Central Government's power for collection
of taxes
 Entry 45 to Entry 63 of List II enumerates the
State Government's power for collection of
taxes
 Entry 92 C – Taxes on Services (Not Effective
as on date)
 Collection of Service tax is in accordance
with Entry 97- Residuary Entry only

3/23/2015kapilchidurala93@gmail.com 6
Ministry Of Finance
Department of Revenue
CBEC
Central Excise Zones-Chief
Commissioner
Central Excise Commissionerate -
Commissioner
Additional Commissioner
Joint Commissioner
Assistant / Deputy Commissioner
Super indent
Inspector

 According to the Section 66 B of Chapter V of
Finance Act,1994 says the rate of service tax
is 12% on the value of service
 But how much do we charge? @ 12.36% ?
 Because Chapter VI of Finance Act
(No.2),2004 specify the education Cess to be
paid on the service tax paid under Chapter V
i.e. @ .36% on 12% of Service Tax

 Two Parties are involved in Contract of
service
1. Service Provider
2. Service Receiver
 To find the nature of taxability, Majorly 4
things are required
1. What is service?
2. Where is it provided?
3. Who has to pay the tax?
4. When Should I Levy?

 Section 65 B (44) of Chapter V of Finance
Act,1994 defines service as “ Means any activity
carried out for consideration and a Declared
Service but does not include the following :
1. An activity which constitute merely;
a. Transfer of title of goods by way of sale or gift
or any other manner
b. movement of goods which has the meaning of
sale according to clause(29a)of article 366 of
constitution
c. a transaction in money or actionable claim
2. A provision of service in course of employment
3. Fees taken in any court or tribunal established
under any law for the time being in force

List of Nine Declared Services are:
1. Renting of immovable property
2. Construction of complex, building, civil
structure or a part thereof including a
complex or building intended for sale to a
buyer ,wholly or partly except where the
entire consideration is received after
issuance of certificate of completion by a
competent authority
3. Temporary transfer or permitting the use or
enjoyment of any intellectual property right

4.Development,design,programming,customizatio
n,adaption,upgradation,enhancement,impleme
ntation of information technology software
5. Agreeing to the obligation to refrain from an act
or to tolerate an act or a situation or to do an
act
6. Transfer of goods by way of hiring ,leasing,
licensing, or any such manner without transfer
of right to use such goods
7. service portion in execution of a works contract

8. Activities in relation to delivery of goods on
hire purchase or any system of payment by
instalments
9. Service portion in an activity where in goods,
being food or any other whole of human
consumption or any drink(whether or not
intoxicating) is supplied in any manner as art
of the activity

 Section 68 of Chapter V of Finance Act,1994
says service tax to be paid on the service
provided or to be provided in the taxable
territory only.
 What is taxable territory?
 Taxable territory has been defined as “to the
territory to which the chapter apply”
 It applies to India defined under Section
65B(25)

 The territory of the union as referred to in clauses (2)
and (3) of article 1 of Indian Constitution
 Its territorial waters, continental shelf, exclusive
economic zone or any other maritime zone as defined
in the territorial waters, continental shelf, exclusive
economic zones and other maritime zones act,1976
 The seabed and the subsoil underlying the territorial
waters
 The air space above its territory and territorial waters
and
 the installations, structures and vessels located in
the continental shelf of India and the exclusive
economic zone of India for the purposes of
prospecting or extraction or production of mineral oil
and natural gas and supply thereof

 There shall be levied a tax (hereinafter referred to
as the service tax) at the rate of twelve per cent
on the value of all services, other than those
services specified in the negative list, provided or
agreed to be provided in the taxable territory by
one person to another and collected in such
manner as may be prescribed [Section 66B]
 In addition to the services specified in Negative
list, services exempted under Mega Notification
also not liable to service tax (Notification No 25/
2012 / 20.06.2012)

 An Individual
 A HUF
 A Company
 A Society
 A Limited Liability Partnership
 An AOP,BOI whether incorporated or not
 Government
 A Local Authority
 Every Artificial Judicial Person not falling
within any of the preceding clauses

 As discussed earlier the liability of payment
of service tax is on both Service Provider and
Receiver on nature of service
 Service Provider is liable to levy tax under
Section 68
 Service Receiver is liable to pay tax under
Section 68 (2) i.e. Reverse charge Mechanism
which is Rule 2(d) of the Service Tax
Rules,1994

1. Insurance
2. Goods Transport Agency
3. Sponsorship
4. Arbitral Tribunal
5. Advocate Services
6. Support Service
7. Rent or Cab Service
8. Supply of Manpower
9. Works Contract Services
10. Import of Service [Section 68(2)- Chapter V
of FA,1994]
- [Notification No 30/2012]

 Is Printing of Books a service? And under what
tax he has to register?
 Beauty saloon, P.G.’S in Bangalore are covered
under Declared services?
 A Ltd bought technology from the X
Company situated in United states which is
branch of XYZ Ltd. Now who has to get
register and under what? Who has the liability
of service tax?

 Raja has rented a building to the government
for organising technical seminar. Is his
business a service? Under What?
 Me and Mom Company Ltd. has invited
tenders vide notice in The Times of India? Is
the process covered under service tax
liability?
 A popular Rock star has gone for National
Convention to perform the Entertainment
schedule. Can he levy service tax on the Bills?

 Advisory services
 Procedural compliance
 Personal Representation
 Certification and Audit
 Onerous Task to Keep Pace

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Genesis and Authority of Service Tax Levy in India

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