Service Tax Introduction
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Initially the service tax was levied on three services when it came into force by Finance Act V of 1994.No separate comprehensive Act has been passed for the purpose and some thirty four sections of the Central Excise Act, 1944 are still being referred to by virtue of powers derived Under Section 83 of the Finance Act, 1994. The provisions of service tax are being administered by the commissioners of central excise.
There are now 97 services under the net but these have been included in fits and start and there are still many services which are out of the scope tax net though these are required to be covered and the need has been felt since long time in the past but the same was not carried into the scope of the budget. This runs against those who had been covered for many years since whereas there are still other service providers who have been left uncovered this militates with the principles of equity in the matter of taxation.
Pin Pricks in the Service Tax:
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There are many irritants and pin pricks in the statute and the rules. There are procedural problems not taken care of and the tax payers are put at a disadvantageous citadel. The following points need to be addressed in the coming budget besides enlarging the scope of the levy:
1.The exemption which is meant for small service providers are not very straight as it looks. The exemption takes into account the turnover of the previous year also to grant you the exemption in the current year. If your turnover of taxable services exceed in the previous year beyond say Rs.8lacs then you would not be eligible for the current year even if the current year turnover is lower than the preceding year and falls under the governing exemption limits. Therefore the exemption is not absolute. This is not fairly construed provision and the exemption in such a case need be available for the current year.
2.The service recipient is given the arduous obligation to undertake the liability of paying the service tax which otherwise should fall on the service provider. This is so in the case of the Goods Transport Agency whose liability to pay is cast on the consignor or the consignee falling under specified categories who makes the payment to him and even to seek registration if they come in the specified category of service provider as per the notification 35/2004-ST dated 3rd of December, 2004. The same is the case for the recipient of services from the non resident who does not have office or establishment in
3.There is scope for overlapping of the services. A contractor who provides the services for exhibitionists and who does every thing on their behalf right from getting the space, providing the stall for them, erecting the same, providing labour and the furniture as well carpets, making provision for their website hosting and making design and drawing as also the interior decoration and providing other gadgets etc. falls in many services and they were hitherto seeking registration under Pandal and Shamiana contractor services provider head though they should be seeking under different categories for the type of service they provide not to be brought under one canopy of service head for their multiple services. They were in some cases considered as outdoor caterers also. Such instances are many even under business auxiliary services which covers many services but such services are got registered under other head. The export services were earlier exempt as being destination based (Ntf.21/2003-ST dated 20/11/2003) but now these exemption are sub-categorized under three categories wef 15th of March, 2005 to fulfill different conditions to avail exemption under Export of Services Rules,2005. The small service providers seeking exemption under export and for domestic turnover have to keep multiplicity of records to avail of the exemption.
4.The service tax is payable on the gross value charged by virtue of S.67 but in fact earlier it was not so except the advertising services. The charges in the shape of reimbursements are being clubbed with effect from 18th of March, 2006 unless provided as an agent of the service receiver under valuation of taxable services rules however many ifs and buts are there to seek an exemption and the department is not prepared to easily forgo their chance to levy the service tax.
5.There is another irritant in the new F. Act passed last year for the poor assesses who if for any reason however solemn forget to file or delays in filing the return shall be imposed with a penalty u/s.70 up to Rs.2000/-depending on the period of delay. This is very innocuous piece of legislation when the statue provides for charging 13% mandatory interest. This was not there earlier this mandatory levying of penalty is an invasion on the right of the assesses to appeal as the right to file appeal is a substantive right which should not be condemned in this manner without assesses being given the opportunity to be heard and against this penalty levied there is scope for preferring an appeal u/s.85 as the causes arising u/s.71, 72, 73 only are made subject matter of appeal.
6.There are frequent changes made by the department. The stand of the department in the matter of levying service tax on the full fledged money changers which now under a circular are exempt as not covered under the tax net of banking and finance services though the view of the department was quite contrary to this earlier.
7.There are also delays in granting registration and providing STC code number by the department and not acknowledging the receipt of letters under registered covers.ST-1 and ST-3 forms of registration and returns respectively have been changed many times and there is no simplification but the forms are made complex for the small assesses to fill up without taking the help of the experts which adds to their woes. The relevant amendments brought originally under Notifications 2/94 of 28/6/94 got amended by notifications 30/2004 of 22/9/2004, 35/2004 of 3/12/2004, 7/2005 of 1/3/2005, 23/2005 of 7/6/2005, 5/2006 of 1/3/2006, and lastly notification 29/2006.
8.Time period provided for appeal is also very crucial if the appeal is not filed in the time laid down or the prescribed time period for extension the substantive right of the appellant gets lost for ever as per the recent rulings of the courts in this regard.
There is need for an exhaustive legislation for the service tax though the Goods and Services Act is being sought to be brought by 2010 which like VAT will slither away from the timeframe from timely implementation. The Act need to weaned away from the finance ministry for proper answerability.
Contributor: Vijay Kumar Kalia M.NO-080352
FCA, DISA-ICA
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