UNIT I
SERVICE TAX
The provisions relating to Service Tax were brought into force with effect from July 1, 1994 vide chapter V of the Finance Act, 1994. It extends to the whole of India except the State of Jammu and Kashmir. Entry 97 of List-I of Schedule VII of the Constitution of India extends the constitutional rights to the Central Government to levy service tax. The Government of India, through the Department of Revenue administers the levy and collection of service tax in India. The service tax being an indirect tax, its administrative control is vested with the Central Board of Excise & Customs (CBEC).
In the last two financial years 2014-2015 & 2015-2016, the total revenue collection from service tax was Rs. 168132 crore & Rs. 211456 Crore (flash-figures) respectively, which shows a commendable growth from revenue collection of Rs. 407 crore in the financial year 1994-1995.
The budgetary target of revenue collection in this financial year 2016-2017 is Rs. 231000 crore which is about 14%% of the total tax collection target of Government of India.
To begin with, service tax was introduced on 3 services namely Telephone Services, Non-Life Insurance Services and Stock Brokers’ Services which gradually increased to 119 services. From 1 July 2012, the concept of taxation on services was changed from a Positive List of services approach to a 'Negative List regime'. This changed the taxation system of services from tax on the specified services to tax being levied on all services, other than those mentioned in the Negative List or which were exempted by a notification.
GENERAL PRINCIPLES:
There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen percent. 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.
“Taxable service” means any service on which service tax is leviable under section 66B.
SECTION 67.Valuation of taxable services for charging service tax. —
(1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall, —
(i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him;
(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration;
(iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner.
(2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged.
(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.
(4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed.
Explanation. — For the purposes of this section, —
(a)“consideration” includes —
(i) any amount that is payable for the taxable services provided or to be provided;
(ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed;
(iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.
(b)“gross amount charged” includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called
“Suspense account” or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.
SECTION 68. Payment of service tax. —
(1) Every person providing taxable service to any person shall pay service tax at the rate specified in section[ 66B] in such manner and within such period as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1), in respect of [such taxable services as may be notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section [66B] and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider.
SECTION 70. Furnishing of returns. —
(1) Every person liable to pay the service tax shall himself assess the tax due on the services provided by him and shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency and with such late fee not exceeding twenty thousand rupees, for delayed furnishing of return, as may be prescribed.
(2) The person or class of persons notified under sub-section (2) of section 69, shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency as may be prescribed.
SECTION 71. Scheme for submission of Returns through Service Tax Preparers. —
(1) Without prejudice to the provisions of section 70, the Board may, by notification in the Official Gazette, frame a Scheme for the purposes of enabling any person or class of persons to prepare and furnish a return under section 70, and authorise a Service Tax Return Preparer to act as such under the Scheme.
(2) A Service Tax Return Preparer shall assist the person or class of persons to prepare and furnish the return in such manner as may be specified in the Scheme framed under this section.
(3) For the purposes of this section, —
(a) “Service Tax Return Preparer” means any individual, who has been authorised to act as a Service Tax Return Preparer under the Scheme framed under this section;
(b) “person or class of persons” means such person, as may be specified in the Scheme, who is required to furnish a return required to be filed under section 70.
(4)The Scheme framed by the Board under this section may provide for the following, namely:—
(a) the manner in which and the period for which the Service Tax Return Preparer shall be authorised under sub-section (1);
(b) the educational and other qualifications to be possessed, and the training and other conditions required to be fulfilled, by a person to act as a Service Tax Return Preparer;
(c) the code of conduct for the Service Tax Return Preparer;
(d) the duties and obligations of the Service Tax Return Preparer;
(e) the circumstances under which the authorisation given to a Service Tax Return Preparer may be withdrawn;
(f) any other matter which is required to be, or may be, specified by the Scheme for the purposes of this section.
SECTION 71A .Filing of return by certain customers.- Notwithstanding anything contained in the provisions of sections 69 and 70, the provisions thereof shall not apply to a person referred to in the proviso to sub-section(1)of section 68 for the filing of return in respect of service tax for the respective period and service specified therein and such person shall furnish return to the Central Excise Officer within six months from the day on which the Finance Bill,2003 receives the assent of the President in the prescribed manner on the basis of the self-assessment of the service tax and the provisions of section 71 shall apply accordingly.]
SECTION 89. Offences and penalties. —(1) Whoever commits any of the following offences, namely :
(a) knowingly evades the payment of service tax under this Chapter; or
(b) avails and utilises credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of this Chapter; or
(c) maintains false books of account or fails to supply any information which he is required to supply under this Chapter or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
(d) collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due, shall be punishable,—
(i) in the case of an offence specified in clauses (a), (b) or (c) where the amount exceeds two hundred lakh rupees, with imprisonment for a term which may extend to three years:
Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term of less than six months;
(ii) in the case of the offence specified in clause (d), where the amount exceeds two hundred lakh rupees, with imprisonment for a term which may extend to seven years :
Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term of less than six months;
(iii)in case of any other offences, with imprisonment for a term which may extend to one year.
(2) If any person is convicted of an offence punishable under—
(a) clause (i) or clause (iii), then, he shall be punished for the second and for every subsequent offence with imprisonment for a term which may extend to three years;
(b) clause (ii), then, he shall be punished for the second and for every subsequent offence with imprisonment for a term which may extend to seven years.
(3) For the purposes of sub-sections (1) and (2), the following shall not be considered as special and adequate reasons for awarding a sentence of imprisonment for a term of less than six months, namely :—
(i) the fact that the accused has been convicted for the first time for an offence under this Chapter;
(ii) the fact that in any proceeding under this Act, other than prosecution, the accused has been ordered to pay a penalty or any other action has been taken against him for the same act which constitutes the offence;
(iii)the fact that the accused was not the principal offender and was acting merely as a secondary party in the commission of offence;
(iv)the age of the accused.
(4) A person shall not be prosecuted for any offence under this section except with the previous sanction of the Principal Chief Commissioner of Central Excise and Chief Commissioner of Central Excise.
Service tax input credit can be availed by manufacturers and adjusted against the tax payable on output services. There is an exhaustive list of services that are included and excluded from this.
Note: Service Tax has been replaced by the Goods and Services Tax (GST) starting 1 July 2017.
Manufacturers can avail CENVAT credit on input services and that can be adjusted against the tax payable on the output services.
Input services are any service that is used by a provider for providing output service that is taxable or is used by a manufacturer either directly or indirectly in relation to manufacture the final product and clearance of the final product.
Manufacturer can avail CENVAT credit on inputs that he uses for his output service that is taxable. For instance an interior decorating company pays rent for its office but the service that it provides is output service. The service tax paid on rent is input credit and can be adjusted against the service tax payable by the company.
Manufacturer using Annual Maintenance Contract and transportation service, they are the input services and the tax paid on those services is input credit and it can be adjusted against excise duty payable.
Input Services include:
Services are excluded from Input Service:
The following services are excluded from input service if they are used for the following purposes:
References:
