Sopore law college

Name. : Nasir Bashir

Enrollment no : 17042128044 (44)
Semester : BA LLB 8th

Subject: Taxitation Law

Topic : Discuss in Detail Definitions, Nature and Scope of Service tax.

Teacher incharge : Mr. Wajid .

Defination of “services tax” .
Definition: Service tax is a tax levied by the government on service
providers on certain service transactions, but is actually borne by the
customers. It is categorized under Indirect Tax and came into existence
under the Finance Act, 1994.

Description: In this case, the service provider pays the tax and recovers
it from the customer. Service Tax was earlier levied on a specified list of
services, but in the 2012 budget, its scope was increased. Services
provided by air-conditioned restaurants and short term accommodation
provided by hotels, inns, etc. were also included in the list of services.

It is charged to the individual service providers on cash basis, and to

companies on accrual basis. This tax is payable only when the value of
services provided in a financial year is more than Rs. 10 lakh. This tax is
not applicable in the state of Jammu & Kashmir.

Discuss in Detail Definitions, Nature and Scope of Service tax.

Service tax is a indirect tax imposed on specific services
(taxable services) provided by a service provider
(company, individual, firm, and so on).
Service tax was first brought into force with effect from
1st July, 1994. All service providers in India, except
those in the state of Jammu and Kashmir, are required to
pay a service tax in India.
 Initially only three services were brought under service
tax and the tax rate was 5%. Gradually more services
came under the ambit of service tax.
The rates currently applicable are listed below:
●     Service tax - 14%
●     Swachh Bharat Cess - 0.5%
●     Krishi Kalyan Cess - 0.5%
Scope
Initially, service tax was chargeable on the basis of
realisation, that is, receipt of the consideration for the
services provided/to be provided (in case of advance
receipts). With effect from 1 April 2011, the Point of
Taxation Rule was introduced for the collection of
service tax.
Point of taxation refers to the point of time when a
service shall be deemed as provided.
According to this rule, the point of taxation shall be
either of the following dates, whichever is earlier:
●     Date of issue of the invoice
●     Date of receipt of payment
The liability of paying tax to the Government is on the
service provider, that is, the person providing the
service, and in some cases, the liability is on the service
receiver.
Example: Royal Agency provided advertising services of
Rs. 1,00,000 to SysImage. On the service amount of
Rs.1,00,000, Royal Agency is liable to pay the tax of
Rs. 12,360 @ 12.36% (12% of Service Tax, 2% of
Education Cess, 1% of Secondary Education Cess).
Applicability
Service tax is applicable on taxable services:
1.    Provided and taxable in the hands of service
provider.
2.    Received and taxable in the hands of service
receiver: Generally it is the service provider who is
liable to collect Service Tax from his customer/client
and pay the same to the Government. But Section
68(2) empowers the Government to notify the
services with regard to which the service receiver
would be held liable to pay Service Tax to the
Government.
For the services mentioned below, the service receiver is
liable to pay Service Tax (as per Notification 36/2004 ST
dated 31.12.2004 as amended from time to time):
●     Goods Transport Agency service
●     Business auxiliary service of distribution of
mutual fund by a mutual fund distributor or agent
●     Sponsorship service provided to any body
corporate/firm
●     Taxable services received by any person in India
from abroad
●     Insurance auxiliary service by an insurance
agent
With effect from 1 July, 2012, a negative list-
based system of tax on services was introduced:
●     Negative list is a list of services that are not subject
to service tax.
●     All services other than those featuring in the negative
list fall under the purview of taxable services.
The definition of taxable service is different for each class
of services, for example, in case of a stock broker
agency, any service provided to an investor by buying or
selling securities listed on a recognised stock exchange
will be a taxable service.

Scope: It is leviable on taxable services ‘provided’ or ‘to   be

provided’ by   a service provider. The services ‘to be provided’ in
future are taxed only if payment in its respect is received in
advance.

Two separate persons required   Payment to employees not

covered: For   charge of service  tax, it is necessary that the
service provider and service recipient should be two separate
persons acting  on ‘principal to principal basis’. Services provided
by an employee to his employer are not covered service tax and,
therefore, salaries or allowances paid to them cannot be charged
to service tax.

Value: For the levy of the service tax, the value shall be computed
in accordance with section 67 read  with Service Tax
(Determination of Value) Rules, 2006.

Free services not taxable  : No service tax is leviable upon the
services provided free of cost.

  Payment of service tax : The person providing the service (i.e.

the service provider) has to pay  service tax in such manner and
within such period as is prescribed in the Service Tax Rules, 1994.
The service tax is to be paid only on the receipt of payment
towards the value of taxable services.

Procedures: Provisions  have been  made  for  registration,

assessment  including self assessment, rectifications, revisions,
appeals and penalties on the service providecos

  CENVAT credit: The credit of service tax and excise duty across

goods and services is allowable in accordance with the CENVAT
Credit Rules, 2004. Accordingly, output  service provider (i.e.
provider  of any  taxable service) can avail credit not only of the
service tax paid on any input service consumed for rendering any
output service but also of the excise duty paid on any inputs and
capital goods used for rendering output service. CENVAT credit so
availed can be utilized for payment of service tax on taxable
output service.

Services provided   by   an unincorporated   association/body

to   its   members also taxable

Explanation to Sec. 65] : ‘Taxable   service’ includes any taxable

service provided   or   to be provided by   any   unincorporated  
association or   body   of persons   to a member thereof, for  
cash, deferred   payment or   any   other   valuable   consideration.
Hence, the  services  (falling under  any category of taxable
service) provided or to be provided by any unincorporated
association/body to member thereof shall be liable to service tax.

  This provision is an exception to the ‘principle of mutuality’.

Performance of statutory activities/duties, not  ’service’: An
activity   performed   by a sovereign   /public authority under
provisions of law does not constitute provision of taxable service
to a person and, therefore, no service tax is leviable on such
entities.

Import/Export of services: While import of services is

chargeable to tax u/s 66A, the export of services has been made
exempt from tax. Import/export provisions are discussed
separately.