Introduction on Service Tax :
In India, Government’s primary sources of revenue are direct and indirect taxes. Earlier, central excise duty on the goods manufactured/produced in India and customs duties on imported goods constituted major sources of indirect taxes in India. However, revenue receipts from customs & excise declined constantly due to World Trade Commitments and rationalization of commodity duties.
On the other hand, service sector started growing phenomenally thereby pushing back the contribution of traditional contributors like agriculture and manufacturing sectors to GDP. Growing contribution to GDP accompanied by increasing growth rate in service sector promised new and wider avenues of taxation to the Government. It was felt that substantial revenue should come from the service sector and the tax on goods (excise duty) should be complemented with the tax on services. The tax on services could reduce the degree of intensity of taxation on manufacturing and trade without forcing the Government to compromise on the revenue needs, thereby enabling better pricing of its products by the manufacturing sector in the global market.
With these objectives in mind, service tax was introduced in India in 1994 and today it is envisaged as tax of future.