Service Tax was introduced for the fist time in the year 1994 through Chapter V of Finance Act, 1994.It derives constitutional validity from Entry 97 of List 1 (Union List) to Chapter VII of the Constitution. Service tax is levied on services provided. It is collected in the manner as maybe prescribed.
Till 30-06-2012 the scheme was as follows
- The term ‘service’ was not specifically defined in the Act. Only activities defined as taxable service in Section 65 were taxed.
- The service provider and service receiver was defined in Section 65 for them to qualify for levy of service tax
- Import of service was taxable from 18-04-2006 through Taxation of Services(Provided from Outside India and Received in India) Rules 2006
- Export of service tax not taxable from 15-03-2005 through Export of Service Rules, 2005
- Reverse charges covered only 100% reverse charge in specified cases. There was no partial reverse charge whereby both service receiver and service provider are liable to pay a specified portion of service tax
From 01-07-2012, the scheme of levy is as follows
- The word service has been defined in section 65B of the Act in an exhaustive manner. Section 66B which is the charging section, provides for levy of service tax on all services provided within the taxable territory i.e within India but excluding the state of Jammu & Kashmir.
- Taxable territory includes territorial waters, continental shelf, exclusive economic zone, seabed and airspace
- Negative list of service is specified in Section 66D. Service tax is payable on all services other than those listed here
- In order to find out whether the service is provided in the taxable territory, Place of Provision of Service Rules, 2012 have been notified as per the provisions of Section 66C
- Declared services as per Section 66E declares certain services as taxable in order to remove ambiguities
- Mega Exemption notification 25/2012 dated 20-06-2012 exemptions many services from service tax payment which are not covered in Section 66D
- Reverse charge mechanism has been enlarged to include may other services and the concept of partial reverse charge has been introduced for the first time.
CA. Roshan Thomas