Service Tax (India)

Service tax is a tax levied on service providers in India, except the State of Jammu and Kashmir.

Central Board of Excise and Customs (CBEC)

The responsibility of collecting the tax lies with the Central Board of Excise and Customs(CBEC). Central Board of Excise and Customs (CBEC) is a part of the Department of Revenue under the Ministry of Finance, Government of India. It deals with the tasks of formulation of policy concerning levy and collection of Customs and Central Excise duties, prevention of smuggling and administration of matters relating to Customs, Central Excise and Narcotics to the extent under CBEC's purview. The Board is the administrative authority for its subordinate organizations, including Custom Houses, Central Excise Commissionerates and the Central Revenues Control Laboratory.

History

The provisions relating to Service Tax were brought into force with effect from 1st July 1994. The services, brought under the tax net in the year 1994-95, are as below: (1) Telephone (2) Stockbroker (3) General Insurance

The Finance Act (2) 1996 enlarged the scope of levy of Service Tax covering three more services, viz., (4) Advertising agencies, (5) Courier agencies (6) Radio pager services.But tax on these services was made applicable from 1st November, 1996.

The Finance Acts of 1997 and 1998 further extended the scope of service tax to cover a larger number of services rendered by the following service providers, from the dates indicated against each of them. (7) Consulting engineers (7th July, 1997) (8) Custom house agents (15th June, 1997) (9) Steamer agents (15th June, 1997) (10) Clearing & forwarding agents (16th July, 1997) (11) Air travel agents --- (1st July, 1997) (12) Tour operators (exempted up to 31.3.2000 Notification No.52/98, 8th July, 1998, reintroduced w.e.f. 1.4.2000) (13) Rent-a-Cab Operators (exempted up to 31.3.2000 Vide Notification No.3/99 Dt.28.2.99, reintroduced w.e.f. 1.4.2000) (14) Manpower recruitment Agency (1st July, 1997) (15) Mandap Keepers (1st July, 1997)

The services provided by goods transport operators, out door caterers and pandal shamiana contractors were brought under the tax net in the budget 1997-98, but abolished vide Notification No.49/98, 2nd June,1998.

Government of India has notified imposition of service Tax on twelve new services in 1998-99 union Budget. These services listed below were notified on 7th October, 1998 and were subjected to levy of Service Tax w.e.f. 16th October, 1998. (16) Architects (17) Interior Decorators (18) Management Consultants (19) Practicing Chartered Accountants (20) Practicing Company Secretaries (21) Practicing Cost Accountants (22) Real Estates Agents/Consultants (23) Credit Rating Agencies (24) Private Security Agencies (25) Market Research Agencies (26) Underwriters Agencies

In case of mechanized slaughter houses, since exempted, vide Notification No.58/98 dtd. 07.10.1998, the rate of Service Tax was used to be a specific rate based on per animal slaughtered. In the Finance Act’2001, the levy of service tax has been extended to 14 more services, which are listed below. This levy is effective from 16.07.2001. (27) Scientific and technical consultancy services (28) Photography (29) Convention (30) Telegraph (31) Telex (32) Facsimile (fax) (33) Online information and database access or retrieval (34) Video-tape production (35) Sound recording (36) Broadcasting (37) Insurance auxiliary activity (38) Banking and other financial services (39) Port (40) Authorised Service Stations (41) Leased circuits Services

In the Budget 2002-2003, 10 more services have been added to the tax net which are listed below. This levy is effective from 16.08.2002. (42) Auxiliary services to life insurance (43) Cargo handling (44) Storage and warehousing services (45) Event Management (46) Cable operators (47) Beauty parlours (48) Health and fitness centres (49) Fashion designer (50) Rail travel agents. (51) Dry cleaning services. and these services have been notified on 1-8-2002 and were subject to levy of Service Tax w.e.f. 16-8-2002. It is expected that in view of more & more services brought under the Service Tax net, the service tax revenue would now form a major part in Govt. Revenue earnings. In the Budget 2003-04 seven more services along with extension to three existing services have been added to the tax net which are listed below. The levy of service tax on these services is effective from 1st July, 2003. (52). Commercial vocational institute, coaching centres and private tutorials (53). Technical testing and analysis (excluding health & diagnostic testing) technical inspection and certification service. (54). Maintenance & repair services (55). Commission and Installation Services (56). Business auxiliary services, namely business promotion and Support services (excluding on information technology services) (57). Internet café (58). Franchise Services The rate of Service Tax was increased from 5% to 8% on all the taxable services w.e.f. 14.5.2003.

In the Budget 2004-05, 10 more services have been introduced in the service tax net along with reintroduction of three existing services as follows: (59) Transport of goods by road (earlier Goods Transport Operators service re- introduced).(60) Out door Caterer’s service (re-introduced)(61) Pandal or Shamiana service (re-introduced)(62) Airport Services (63) Transport of Goods by Air Services (64) Business Exhibition Services (65) Construction Services in relation to Commercial or Industrial BuildingConstruction Services in relation to Commercial or Industrial Building The levy of service tax on these services is effective from 10th September, 2004 and the rate of service tax has been enhanced to 10% from 8%. Besides this 2% Education Cess on the amount of service tax has also been introduced. Thereafter Service Tax is increased up to 12.24% and now currently the effective service tax rate is 12.36% including Education Cess.

In the Budget 2005-06, 9 more services have been introduced in the service tax net as follows with effect from 16.06.2005: (66) Intellectual Property Services (67) Opinion Poll Services (68) TV or Radio Programme Services (69) Survey and Exploration of Minerals Services (70) Travel Agent’s Services other than Rail and Air travel agents (71) Forward Contract Services (72) Transport of goods through pipe line or other conduit Services. (73) Site preparation & clearance Services (74) Dredging Services (75) Survey & Mapmaking Services (76) Cleaning Services (77) Membership of Clubs & Associations (78) Packaging Services (79) Mailing list compilation & Mailing Services (80) Construction Services in relation to Residential Complexes.

Future Proposals

The Finance Minister of India, Mr. P. Chidambaram in his Budget speech has indicated the government's intent of merging all taxes like Service Tax, Excise and VAT into a common Goods and Service Tax by the year 2010. To achieve this objective, the rate of Central Excise and Service Tax will be progressively altered and brought to a common rate.Fact|date=June 2008In budget presented for 2008-2009 It was announced that all Small service providers whoes turnover does not exceed Rs10 lakhs need not pay service tax.

ee also

* Income tax in India
* Central Excise (India)

References

* [http://exciseandservicetax.nic.in/aboutcbec.html Central Board of Excise and Customs(CBEC)]

Serve tax in India http://servicetaxindia.co.in