Genesis of service tax in India :

The imposition of service tax was in sequel to the Report of the Chelliah Committee on Tax Reforms. On these recommendations, Dr. Manmohan Singh, the then Union Finance Minister, in his Budget speech (year 1994-95) introduced the new concept to tax services by mentioning “There is no sound reason for exempting services from taxation, when goods are taxed and many countries treat goods and services alike for tax purposes. The Tax Reforms Committee has also recommended imposition of tax on services as a measure for broadening the base of indirect taxes. I, therefore, propose to make a modest effort in this direction by imposing a tax on services of telephones, non-life insurance and stock brokers.” Thus, initially service tax was imposed on 3 services.

The baton then passed on to successive finance ministers who widened the service tax net in their rein. This selective approach of taxation of services continued till 30.06.2012. With the introduction of the Finance Act, 2012, India embraced the new system of taxation of services by way of the introduction of negative list. Hence, with effect from July 1, 2012, there is comprehensive taxation of the entire service sector.