BACKGROUND OF SERVICE TAX LAW :
Unlike the central excise or customs there is no separate legislation enacted for service tax. The Act is administered by the central excise department. For this purpose section 83 of the Act provides that certain specified sections of the Central Excise Act 1944 will apply in relation to service tax as they apply in relation to excise duty. The provisions of service tax are contained in Chapter V of the Finance Act, 1944 and administered by the Central Excise Department.
Service tax is a destination based consumption tax. The principle of consumption of services determine the liability of service tax
Service tax -an indirect tax, is a levy on services provided or agreed to be provided for a consideration. The levy of Service tax on the service provider is akin to the levy of CED which is charged on manufactured goods. Like excise duty, which is a tax on value addition of goods, service tax is a tax on value addition of services.
Unlike central excise Act, which extends to the whole of India including the state of Jammu and Kashmir, the services provided within the territorial limits of the state of Jammu and Kashmir are excluded from the purview of the levy of service tax ,irrespective of whether the person rendering the service or the person receiving the service is residing within or outside that state. Now ,therefore , the services provided by a person having his business premises in the state of JK and providing taxable services to the clients in other parts of the country would be liable for payment of ST. Similarly, a person having his business premises in any of the Indian States other than JK who provides the services to the persons in the State of JK, would not be liable to pay ST.
It is important to note that Service shall be provided in a taxable territory as per ‘The place of provision of services Rules, 2012’
Service tax was introduced for the first time in the year 1994 through insertion of Chapter V of Finance Act ,1994 with three services brought within service tax net namely telephone services ,stock broking and non-life insurance. Since 1994, the scope of taxability was increased by amending Finance Act 1994 from time to time and thereby providing for levy of service tax on new categories of services and by 2011 about 117 services were brought under service tax.
The Finance Act 2012 has completely changed the basis of imposing the tax. The tax is payable on all the services except those specified in negative list or otherwise exempt. Notification No 25/2012-ST dated 20.6.2012 exempts various services from payment of service tax .Services specified therein are taxable but are exempt, hence no tax is payable on the same.
Till 1-7-2012, service tax was based on positive list i.e. service listed in section 65 (105) of Finance Act, 1994 were taxed. As per section 66 service tax was payable on rendering of services specified in section 65 (105) and valuation of service will be as per section 67 of Finance Act, 1994 read with valuation rules.
With effect from 1.7.2012 all services are taxable except those which are mentioned in negative list of services and exempted services. Section 66B is the charging section of the said Act.