Chargeability to tax under service tax law:
Section 66B (Charging section) provides as under :
Service tax @ 14 % ( 0.5 % Swach Bharat Cess w.e.f 15.11.2015) will be leviable 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 for a consideration and collected in such manner as may be prescribed.
Hence, the main conditions for charging service tax are —
- Service should be provided or agreed to be provided;
Note– Advance retained in the event of cancellation of contract of service by the service receiver – taxable because advance was against service that was agreed to be provided.
- It should not be covered in the ‘Negative’ List’;
- Service should be provided for consideration. It shall include both monetary consideration and non-monetary consideration i.e. consideration in kind like supply of goods and services in return for provision of service. Thus, money value of non-monetary consideration is required to be determined for levy of service tax on a service;
- Service should be provided in ‘Taxable Territory’ as per POPS Rules, 2012. As per section 64 Service Tax extends to the whole of India except the State of Jammu & Kashmir.
Note- i. Service provides to SEZ Developer/ Unit is presently exempt under E/N-40/2012.
ii Service tax not applicable on export of services.
- Service should be provided by one person to another i.e. services provided by a person to self are outside the ambit of taxable service like A service provided by one branch of a company from taxable territory to another branch or to its head office located in taxable territory does not attract service tax but an establishment of a person located in a taxable territory and another establishment of such person in non taxable territory attract service tax.
Note- 1.Person includes an individual , HUF, a firm (including LLP ) , a Company , an AOP or BOI whether incorporated or not , a local authority , a society , Government ,or every artificial juridical person ,not falling within any of the preceding sub-clauses as above.
Explain – 1. Service tax cannot be levied if services are provided in the state of J&K. In other words if a person from the state of J&K provides the services outside J&K in any part of India such service is liable under service tax law because the location where the service is consumed is relevant.
e.g. Mr. H of Nagaland has a place of business in J&K as well as in Assam. Hence, he is liable to pay service tax on those services rendered in Assam but he is not liable to pay service tax on services rendered in the state of J&K.
Explain — Mr. X of Indian provided the Technical testing and analysis /Technical inspection and certification services which are taxable services respectively ,from taxable territory (i.e. India ) to Mr. P of USA (i.e. nontaxable territory ) through Internet. These services are not taxable because these are in the nature of export of services from India to a country outside India and fulfill the conditions of Rule 6A of STR,1994:
- The place of provision of service is outside India i.e. service is used in non-taxable territory.
- The payment is received by the service provider in convertible foreign exchange.
- The service receiver and service provider are not merely establishments of a distinct person by virtue of explanation 3 of clause 44 of section 65B of the Act.