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Existing scheme for levy, assessment & collection of Service Tax in India
Levy and assessment
Service tax is
levied on specified taxable services and the responsibility of payment of
the tax is cast on the service provider. System of self-assessment of
Service Tax Returns by service tax assessees has been introduced w.e.f.
01.04.2001. The jurisdictional Superintendent of Central Excise is
authorized to cross verify the correctness of self assessed returns. Tax
returns are expected to be filed half yearly.
Central Excise
officers are authorized to conduct surveys to bring the prospective service
tax assessees under the tax net. Directorate of Service Tax at Mumbai over
sees the activities at the field level for technical and policy level
coordination.
Legal provisions
The provisions
relating to Service Tax were brought into force with effect from 1st
July 1994. It extends to whole of India except the state of Jammu & Kashmir.
The services, brought under the tax net in the year 1994-95 ,are as below:
| (1) |
Telephone |
| (2) |
Stockbroker |
| (3) |
General
Insurance |
The Finance Act (2) 1996 enlarged
the scope of levy of Service Tax covering three more services, viz.,
| (4) |
Advertising
agencies, |
| (5) |
Courier
agencies |
| (6) |
Radio pager
services. |
But tax on these services was made
applicable from 1st November, 1996.
The Finance Acts of 1997 and 1998
further extended the scope of service tax to cover a larger number of
services rendered by the following service providers, from the dates
indicated against each of them.
| (7) |
Consulting
engineers |
(7th
July, 1997) |
| (8) |
Custom house
agents |
(15th
June, 1997) |
| (9) |
Steamer
agents |
(15th
June, 1997) |
| (10) |
Clearing &
forwarding agents |
(16th
July, 1997) |
| (11) |
Air travel
agents --- |
(1st
July, 1997) |
| (12) |
Tour
operators |
(exempted upto
31.3.2000 Notification No.52/98, 8th July, 1998,
reintroduced w.e.f. 1.4.2000) |
| (13) |
Rent-a-Cab
Operators |
(exempted upto
31.3.2000 Vide Notification No.3/99 Dt.28.2.99, reintroduced w.e.f.
1.4.2000) |
| (14) |
Manpower
recruitment Agency |
(1st
July, 1997) |
| (15) |
Mandap
Keepers |
(1st
July, 1997) |
The services
provided by goods transport operators, out door caterers and pandal shamiana
contractors were brought under the tax net in the budget 1997-98, but
abolished vide Notification No.49/98, 2nd June,1998.
The Service Tax
is leviable on the 'gross amount' charged by the service provider
from the client, from the dates as notified and indicated above.
Government of
India has notified imposition of service Tax on twelve new services in
1998-99 union Budget. These services listed below were notified on 7th
October, 1998 and were subjected to levy of Service Tax w.e.f. 16th
October, 1998.
| (16) |
Architects |
| (17) |
Interior
Decorators |
| (18) |
Management
Consultants |
| (19) |
Practicing
Chartered Accountants |
| (20) |
Practicing
Company Secretaries |
| (21) |
Practicing
Cost Accountants |
| (22) |
Real Estates
Agents/Consultants |
| (23) |
Credit Rating
Agencies |
| (24) |
Private
Security Agencies |
| (25) |
Market
Research Agencies |
| (26) |
Underwriters
Agencies |
In case of mechanized slaughter
houses, since exempted, vide Notification No.58/98 dtd. 07.10.1998, the rate
of Service Tax was used to be a specific rate based on per animal
slaughtered. In the Finance Act’2001, the levy of service tax has been
extended to 14 more services, which are listed below. This levy is effective
from 16.07.2001.
| (27) |
Scientific
and technical consultancy services |
| (28) |
Photography |
| (29) |
Convention |
| (30) |
Telegraph |
| (31) |
Telex |
| (32) |
Facsimile
(fax) |
| (33) |
Online
information and database access or retrieval |
| (34) |
Video-tape
production |
| (35) |
Sound
recording |
| (36) |
Broadcasting |
| (37) |
Insurance
auxiliary activity |
| (38) |
Banking and
other financial services |
| (39) |
Port |
| (40) |
Authorised
Service Stations |
| (41) |
Leased
circuits Services |
In the
Budget 2002-2003, 10 more services have been added to the tax net which are
listed below. This levy is effective from 16.08.2002.
|
(42) |
Auxiliary services to life insurance |
|
(43) |
Cargo handling |
|
(44) |
Storage and warehousing services |
|
(45) |
Event Management |
|
(46) |
Cable operators |
|
(47) |
Beauty parlours |
|
(48) |
Health and fitness centres |
|
(49) |
Fashion designer |
|
(50) |
Rail travel agents. |
|
(51) |
Dry cleaning services. |
and these services have been
notified on 1-8-2002 and were subject to levy of Service Tax w.e.f.
16-8-2002.
It is expected that in view
of more & more services brought under the Service Tax net, the service tax
revenue would now form a major part in Govt. Revenue earnings.
In the Budget 2003-04 seven
more services along with extension to three existing services have been
added to the tax net which are listed below. The levy of service tax on
these services is effective from 1st July, 2003.
(52). Commercial vocational institute,
coaching centres and private tutorials
(53). Technical testing and analysis
(excluding health & diagnostic testing) technical inspection and
certification service.
(54). Maintenance & repair services
(55). Commission and Installation
Services
(56). Business auxiliary services,
namely business promotion and Support services (excluding on information
technology services)
(57). Internet café
(58). Franchise Services
The rate of Service Tax was increased from 5%
to 8% on all the taxable services w.e.f. 14.5.2003.
In the Budget 2004-05, 10 more services have
been introduced in the service tax net along with reintroduction of three
existing services as follows:
(59) Transport of goods by road (earlier Goods
Transport Operators service re- introduced).
(60) Out door Caterer’s
service (re-introduced)
(61) Pandal or Shamiana
service (re-introduced)
(62)
Airport Services
(63)
Transport of Goods by Air Services
(64)
Business Exhibition Services
(65)
Construction Services
(66)
Intellectual Property Services
(67)
Opinion Poll Services
(68)
TV or Radio Programme Services
(69)
Survey and Exploration of Minerals
Services
(70)
Travel Agent’s Services other than
Rail and Air travel agents
(71)
Forward Contract Services
The levy of service tax on
these services is effective from 10th September, 2004 and the
rate of service tax has been enhanced to 10% from 8%. Besides this 2%
Education Cess on the amount of service tax has also been introduced. Thus
the effective service tax rate is now 10.2% including Education Cess.
Administrative mechanism.
Service Tax
is administered by the Central Excise Commissionerates working under the
Central Board of Excise & Customs, Department of Revenue, Ministry of
Finance, Government of India. The unique feature of
Service Tax is reliance on collection of tax, primarily through voluntary
compliance.
Government has
from the very beginning adopted a flexible approach concerning Service Tax
administration so that the assessees and the general public gain faith and
trust in the tax measure so that voluntary tax compliance, one of the avowed
objectives of the Citizens Charter, is achieved. Substantive and procedural
liberalization measures, adopted over the years for this purpose, are clear
manifestations of the above approach. Following are some of the measures
adopted in that direction:
| (i) |
Under Section 67 of the
Finance Act, 1994, Service Tax is levied on the gross or aggregate
amount charged by the service provider on the receiver. However, in
terms of Rule 6 of Service Tax Rules, 1994, the tax is permitted to be
paid on the value received. This has been done to ensure that
providers of professional services are not inconvenienced, as in many
cases, the entire amount charged/billed may not be received by the
service provider and calling upon him to pay the tax on the billed
amount in advance would have the effect of asking him to pay from his
own pocket. It would also make the levy a direct tax, which is against
the very scheme of Service Tax. |
| (ii) |
Corporate assessees
are given the liberty to pay tax on the value of taxable service,
provided by them in a month, by the 25th of the
following month to enable them to finalize the accounts. Further, the
individual assessees are required to pay the levy only
once in a quarter.
|
| (iii) |
The process of
registration of assessees has been considerably simplified. |
| (iv) |
No separate accounts have
been prescribed for the purposes of Service Tax. It has been provided
that accounts being maintained by the assessees under any other law in
force would be sufficient. This has placed the Department at
considerable inconvenience to itself, so as to minimize difficulties for
the assessees. |
| (v) |
The Finance Act’2001 has
introduced self assessment for service tax returns; thereby sparing the
assessees from the rigours of routine scrutiny and assessment.
|
| (vi) |
Frequency of filing the
returns is minimized. Filing of Statutory return has been made half
yearly and by the 25th of the month following the half-year.
This is in replacement of the monthly/quarterly returns prescribed
earlier. |
| (vii) |
Penal provisions do exist
in respect of Service Tax also. Failure to obtain registrations, failure
to pay the tax, failure to furnish the prescribed returns, suppression
of the correct value of the taxable services and failure to comply with
notice do attract penal provisions as prescribed. But, it is
specifically provided that no penalty is imposable on the assessee for
any of the above failures, if the assessee proves that there was
reasonable cause for the failure. This provision has been inserted to
take care of the genuine difficulties of the new assessees. |
| (viii) |
Government's liberal
attitude is more evident in the case of prosecutions. Hardly will there
be any tax statute with revenue implications, where prosecutions of the
offenders are not provided. In the case of the Service Tax also it was
thought of and sections 87 to 93 of the Finance Act, 1994, did provide
for prosecution of offenders. However, these provisions were
subsequently withdrawn as a noble gesture towards the assessees.
|
| (ix) |
Service Tax
Credit Rules, 2002, have been replaced by the CENVAT Credit Rules, 2004,
introduced by the Finance Act, 2004, where under CENVAT credit has been
extended across the sectors i.e. goods and services. |
|