Existing scheme for levy, assessment & collection Service Tax

Levy and assessment

Service tax is levied on specified services and the responsibility of payment of the tax is generally cast on the service provider but for few exceptions. 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. These tax returns have to be filed half yearly.

The Central Excise officers are authorized to conduct surveys to bring the prospective service tax assessees under the tax net. Directorate General of Service Tax at Mumbai oversees 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 1^st July 1994. It extends to the whole of India except the state of Jammu & Kashmir. The chronological list of taxable services with date of their introduction as on 31.07.2010 is given below:

The following services were brought under the tax net in the year 1994-95:

Rate of service tax was 5% adv.  

------------------------------------------------------------------------------------

The Finance Act (2) 1996 enlarged the scope of levy of Service Tax covering three more services viz.,

Rate of service tax was 5%.

------------------------------------------------------------------------------------

The Finance Act of 1997  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.

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, 2^nd June,1998.

The Service Tax was leviable  @ 5% on the 'gross amount' charged by the service provider from the client, from the dates as notified and indicated above.

------------------------------------------------------------------------------------

Following new services were brought under the Service Tax net in the 1998-99 union Budget. These services were notified on 7^th October, 1998 and were subjected to levy of Service Tax w.e.f. 16^th October, 1998.

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 animals slaughtered.

The rate of service tax was 5% on gross amount charged by the service provider.

------------------------------------------------------------------------------------

In the Finance Act’2001, the levy of service tax was extended to the following   services with effect from  16.07.2001:

The rate of service tax was 5% on gross amount charged by the service provider.

------------------------------------------------------------------------------------

In the Budget 2002-2003, the following  services were added to the tax net with effect from 16.08.2002:

Rate of service tax was 5% ( till 13.05.2003) on the gross amount charged by the service provider.

------------------------------------------------------------------------------------

In the Budget 2003-04, the  following new services along with extension to  the existing services were added to the tax net with effect from 01.07.2003:

The rate of Service Tax was 5% till 13.05.2003 and from 14.05.2003 the rate was increased to 8%  of the gross amount charged by the service provider on all the taxable services till 09.09.2004.

------------------------------------------------------------------------------------

In the Budget 2004-05, 10 more services have been introduced in the service tax net along with reintroduction of three existing services w.e.f 10.09.2004 as follows:

The rate of service tax on these services as well as all other  services  was enhanced from 8% to 10% with effect from 10^th September, 2004. Besides this, 2% Education Cess on the amount of service tax was introduced. Thus the effective service tax rate was 10.2% including Education Cess w.e.f 10.09.2004.

------------------------------------------------------------------------------------

Vide Notfn. No.33/2004 ST. 34/2004-ST and 34/2004-ST, all dated    3.12.2004, the following service was brought under service net with effect from 01.01.2005.

The rate of service tax was 10% plus 2% Education Cess.

------------------------------------------------------------------------------------

In the Budget 2005-06, 9 more services were brought under the service tax net with effect from 16.06.2005, as detailed below-

The rate of service tax was 10% plus 2% Education Cess till 17.04.2006 and from 18.04.2006 rate was enhanced to 12% Plus 2 % Education Cess.

------------------------------------------------------------------------------------

In the Budget 2006-07, 15 more services were brought under  the service tax net with effect from 01.05.2006 vide Notfn.No.15/2006-ST dated 25.04.2006 and Finance Act, 2006 ( 21 of 2006) as detailed below:

Rate of service tax  from 18-04-2006 to 10.05.2007 was 12% plus 2% Education Cess on service tax. With effect from 11.05.2007 the rate of service tax became 12% plus 2% Education Cess on service tax plus 1% Secondary & Higher Education Cess  on service tax ( Aggregating to 12.36%) 

------------------------------------------------------------------------------------

In the Budget 2007-08, 7  more services were brought under the service tax net with effect from 01.06.2007, and 6 existing services were grouped with Telecommunication Services  vide Notfn.No.23/2007-ST dated 22.05.2007 and Finance Act, 2007 ( 22 of 2007), as per the details given below:

Rate of service tax was 12% plus 2% Education Cess plus 1% Secondary Higher Education cess ( Aggregating to 12.36%) 

------------------------------------------------------------------------------------

In the Budget 2007-08, the scope of  service tax was extended to cover 6 more services  with effect from 16.05.2008 vide Notfn.No.18/2008-ST dated 10.05.2008 and Finance Act, 2008 ( 18 of 2008), as per the details given below:

From 24.02.2009, Rate of service tax became 10% + 2% (of  service tax) education Cess + 1% ( of service tax) Secondary Higher Education Cess (aggregating to 10.30%)

------------------------------------------------------------------------------------

In the Budget 2010 vide Finance (14/2010) Act,  2010, the scope of service tax was extended to cover 8 more services w.e.f.01.07.2010 vide Notification No.24/2010 ST dated 22.06.2010 as per details given below.

From 24.02.2009, Rate of service tax became 10% + 2% (of  service tax) education Cess + 1% ( of service tax) Secondary Higher Education Cess (aggregating to 10.30%)

------------------------------------------------------------------------------------

Note- As on 31.07.2010, 117 Services are under service tax net. Six services among listed above at Sr. No. 1,6,30,31,32 and 41 have been merged with “Telecommunication Service” with effect from 01.06.2007) 

------------------------------------------------------------------------------------

 Administrative mechanism.  

Service Tax is administered by the Central Excise & Service tax Commissionerates and the Service Tax Commissionerates working under the Central Board of Excise & Customs, Department of Revenue, Ministry of Finance, Government of India. LTUs are also collecting Service Tax in respect of the Large Tax Paying units registered with them.  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 6 ^th of the following month if tax is deposited electronically and 5^th of the following month if tax is deposited in any other manner.  Further, in case the assessee is individual or proprietary firm or partnership firm, tax payment is required to be made  only once in a quarter i.e by 6 ^th of the following quarter if tax is deposited electronically and 5^th of the following quarter if tax is deposited in any other manner.                    

(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 in the form of ST 3 or ST3A as the case may be is minimized. Filing of Statutory return has been made half yearly and by the 25^th of the month following the half-year ending on 31^st arch and 30^th September. 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)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.

Santhosh T.T

(Kerala)