Service tax was first introduced in India in 1994 on only 3 services. It has since been expanded to cover 199 services and is expected to eventually cover all services. The tax was introduced to increase government revenue and establish tax equivalence between goods and services. It is a tax on specified taxable services levied on the service provider. The service sector has grown significantly in India and now makes up the largest portion of GDP, demonstrating the country's increasing economic development.
Service tax was first introduced in India in 1994 on only 3 services. It has since been expanded to cover 199 services and is expected to eventually cover all services. The tax was introduced to increase government revenue and establish tax equivalence between goods and services. It is a tax on specified taxable services levied on the service provider. The service sector has grown significantly in India and now makes up the largest portion of GDP, demonstrating the country's increasing economic development.
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Service tax was first introduced in India in 1994 on only 3 services. It has since been expanded to cover 199 services and is expected to eventually cover all services. The tax was introduced to increase government revenue and establish tax equivalence between goods and services. It is a tax on specified taxable services levied on the service provider. The service sector has grown significantly in India and now makes up the largest portion of GDP, demonstrating the country's increasing economic development.
Service tax was first introduced in India in 1994 on only 3 services. It has since been expanded to cover 199 services and is expected to eventually cover all services. The tax was introduced to increase government revenue and establish tax equivalence between goods and services. It is a tax on specified taxable services levied on the service provider. The service sector has grown significantly in India and now makes up the largest portion of GDP, demonstrating the country's increasing economic development.
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Introduction
Service tax was first introduced in India on 1994.
It was started with only 3 services. The chelliah committee pointed out that indirect tax at the central level should be broadly neutral in relation to production and consumption of goods and in coming time it should be covers commodities and services. On this recommendation MR. MANMOHAN SINGH (union finance minister) in his budget introduced this concept on assessment year 1994-95. According to his speech many other countries do not difference between goods & services while imposing tax. So why are we back to take measures about imposing tax on telephone, non-life insurance & stockbrokers. There were two reasons of introducing service tax 1) Need of more revenue as our revenue was decreasing due to WTO commitments to rationalized duties. 2) To introduce a principle of equivalence between tax goods & service as there is a view that there is no distinction between consumption and service as both satisfy the human needs. Nature of service tax and its administration 1) It is a tax on service 2) It is livable only on specific taxable services listed u/s 65(105) 3) According to this tax service is a product of labour which is not tangible. 4) First it was imposed on three services viz. Telephone, non life insurance & stock brokers and now it has expanded to 199 services & even it will expand more till all services comes under this 5) List of service tax 6) There are sum services which assigned to public authority like regional transport officer (RTO), LPG, CNG etc. these are already in the land of government. The fees whichever is paid on this goes in government revenues, it is not under the service tax. Growth of service tax 1) The service sector is growing day by day with its largest contribution in GDP. The collections are ; FY COLLECTION IN CRORES 2007-8 50600 2008-9 64000 2009-10 69000 2010-11 82000 This show that our countries economy is increases with the growth in service sector 2) The growth of any economy evidenced by growth of its service sector. Todays services cover wide range of activities. The growing importance of service sector is an indicator of the economic development of our country. Silent features of a service 1) Act of doing useful/helpful activity. For example-classes ,private institutions & restaurants etc. are helping us by teaching, providing foods 2) Rendering of assistance/help. For example- survey, map-making, and telegraph service, telephone, tour operator etc. assist us by giving information, guidance, & training. 3) Anything which does not involve sale, supply or transfer of goods or commodities or property. for example-service provided by classes or educational institutes or by hospitals etc are not included as a trading of goods 4) Intangible commodity in the term of human efficiency service is already said that it is a labour product which is not tangible. We cannot see the education but we feel it 5) Existence of service provider & service recipient. Characteristics of service 1) Intangibility- services are intangible. Service cannot be touched, handled, looked at, smelled, tasted or heard. 2) Perishability- service are perishable in two regards, 1. Firstly, definite service is assigned for a definite person at a definite time & place. For example- an empty seat a plane never can be utilized or charged after departure 2. Secondly, a service which has been completely rendered to the consumer is irreversible and vanishes as the same has been consumed. For example-passengers transported to a destination cannot be transported again to this location at this point in time
3) Inseparability- service cannot be separated from service provider, to provide service ,service-provider should be there without him how can a service be executed 4) Simultaneous- service are rendered and consumed during the same period of time. On the request of the service consumer, the desire service is generated from scratch and without delay delivered or rendered to the service consumer. 5) Variability- each service is different from each other. Each service is unique. It is generated, rendered & consumed at a same time. It is cannot be getting back after the consumption and can never be repeated at the point of time, location, circumstances, conditions etc.
Applicability 1. Under section 64(1) of the act the provisions relating to the service tax is applicable to whole of India expect state of Jammu & Kashmir. 2. So any of service related to Jammu & Kashmir the service tax wont be imposed. 3. But if the service provider is from Jammu & Kashmir and is providing service to the any other state, in this case the service tax will be imposed. 4. Also if a service provider having a office in any part of India (other than Jammu & Kashmir), provides services to his clients from such place anywhere else other than the state of Jammu & Kashmir he would able to pay the service tax. Service provider Service receiver Applicability Inside Jammu & Kashmir Inside the Jammu & Kashmir Not applicable Inside Jammu & Kashmir Outside the Jammu & Kashmir Applicable Outside Jammu & Kashmir Inside the Jammu & Kashmir Not applicable
Rate of service tax a) Uniform rate-Unlike excise duty & customs, service tax is levied uniformly. The rate was @ 5% up to 13/05/2003, which was increased to 8% on 14/05/2003. Then increased to 10% on 10/09/2004,after that it increased to 12% on 18/04/2006 and currently it is levied @10% w.e.f 24/02/2009. Now at present it is 12.36% (including educational Cess @2% and secondary and higher secondary educational Cess @1%) a) Exemption limit- service tax was been imposed at a uniform rate when it was introduced on 1994 and there was no threshold limit. On 1/04/2005 threshold limit of rupees 4 lakhs was prescribed, which was increased to 8 lakhs by finance act 2007 & then it increased to 10 lakhs by the financial act 2008. General exemption General exemption is applicable to all services: a) Service provided to the United Nations or an international organizations: taxable services provided by the a person to the United Nations or an international organizations like World Health Organization(WHO), International Labour Organization(ILO), United Nation International Childrens Emergency Funds(UNICFE),International Monetary Fund(IMF) Etc. will be fully exempted. b) Service provided to developer/Units Of Special Economic Zone: taxable services provided to a developer of a special economic zone or a unit of special economic zone will be fully exempted c) Service provided to the solider & his family will be exempted. d) Any taxable services provided by TBI (technology business incubator) and STEP (science and technology entrepreneurship park) will be exempted. e) Specific exports of services are exempted. f) Exemption based turnover up to Rs. 10 lakh in a financial year: business whose turnover is up to 10 lakhs in a financial year are exempted. But there are some conditions like, it should be not be under any brand name & service in which tax is payable by service recipient. e.g. - goods transport agency. g) Exemption related to Reserve Bank Of India (RBI): exemption has been granted to; Taxable services provided to any person by RBI. Taxable services provided by person to RBI. Taxable services received in India from foreign by RBI under section 66A. Services provided within the states of Jammu & Kashmir. Service rendered free of charge. Source- BMS References-Vipuls prkashan