SERVICE TAX BASICS

1. Service Tax is an Indirect Tax. There is no separate act called Service Tax Act. The provisions to levy tax on services are contained in the Financial Act, 1994.

2. Based on the recommendation of the Tax Reforms Committee headed by Dr. Raja J. Chelliah, Service Tax was introduced for the first time in 1994 by the 10th Finance Minister Dr. Manmohan Singh.

3. The levy on taxable service was notified on 1st July 1994. Initially three services were identified and taxed. They were telephone, Stock Broking and General Insurance. The Government of India is following the selective approach while taxing services. It means all services are not taxed and services that are to be taxed are identified separately and brought to tax.

4. The Central Government is empowered to levy tax under Entry No: 82 to 92C. Accordingly Entry No: 92C deals with taxes on services. Article 268A of the constitution contains that taxes on services shall be levied by the Government of India and such tax shall be collected and appropriated by the Government of India and the state in India. Hence the Central Government alone is empowered to levy tax on services in India.

5. The legislations relating to service tax are the

1. Finance Act, 1994
2. The Service Tax Rules, 1994
3. Notifications issued by CBEC
4. Circulars issued by CBEC
5. CENVAT Credit Rules, 2004.

6. The Service Tax Law is administrated by the CBEC. To assist and Co-ordinate in the administration, a separate Directorate by name Director General of Service Tax has been formed with Head Quarters at Mumbai. The Directorate of Service Tax coordinates between the CBEC and the Central Excise Commissionerates. It also monitors the collection and assessment of Service Tax. The Service Tax reports received from various commissionerates are combined by the Directorate to monitor the performance.

Vishal Jalan

Chartered Accountant