Levy of Service Tax

-By Ch.Kapil

Article Assistant at Gella & Co

3/23/2015 [email protected]

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


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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 required1. 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,customization,adaption,upgradation,enhancement,implementation 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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Levy of Service Tax

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