Statutory provisions under Charge of Service Tax [Section 66B] :

Section 66B is the charging section of the Act, which provides that there shall be levied a tax (hereinafter referred to as the service tax) at the rate of 14% [from 01.06.2015 rate has been enhanced from 12% to 14%] on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.

(a) Provided or agreed to be provided: The implications of this phrase are –

•  Services which have only been agreed to be provided but are yet to be provided are also taxable.
•  Receipt of advances for services agreed to be provided become taxable before the actual provision of service.
• Advances that are retained by the service provider in the event of cancellation of contract of service by the service receiver become taxable as these represent consideration for a service that was agreed to be provided.

However, it is important to note that the liability to pay the service tax on a taxable service arise the moment it is agreed to be provided without actual provision of service. The liability to pay tax arises in such cases at the point of taxation which is determined as per the Point of Taxation Rules, 2011

(b) Provided in the taxable territory: The service must have been provided in the taxable territory. The place of provision of a service shall be determined as per the Place of Provision of Service Rules, 2012

Taxable territory means the territory to which the provisions of this Chapter apply i.e. the whole of territory of India other than the State of Jammu and Kashmir [Section 65(51)].

(c) Service should not be specified in the negative list : As per section 66B, to be taxable a service should not be specified in the negative list. The negative list of services has been specified in section 66D of the Act.