Basic Concepts of Service Tax

Ghalla & Bhansali, Chartered Accountants
BASIC CONCEPTS OF SERVICE TAX
GETTING STARTED WITH SERVICE TAX
BY RAJ MUKESH KHONA
1
PRESENTATION BY - RAJ MUKESH KHONA
“Knowledge increases by sharing, not by saving”
SERVICE TAX: BASIC CONCEPTS

Introduction to Service Tax
2
Service Tax was
introduced w.e.f.
01.07.1994 with
three services
Provisions of Service
Tax are contained in
Finance Act, 1994
Chapter V of
Finance Act, 1994
governs the Service
Tax Law
No Separate Act /
Department for the
purpose of Service
Tax Law
Administration of
Service Tax done by
CBEC i.e.; Excise
Department
W.e.f. 01.07.2012,
there was a change
in approach of
taxation of services
Upto 2012, only 119
services were
covered under
Service Tax net
W.e.f. 01.07.2012,
all services are
covered under
Service Tax net
However, services
specified in the
Negative List are not
covered under
Service Tax

Approaches for Taxation of Services
3
Selective
Approach
Positive List
Approach
Applicable
upto
01.07.2012
Basket of
taxable
services
Rest all
services –
not taxable
Comprehensive
Approach
Negative
List
Approach
Applicable
w.e.f.
01.07.2012
Basket of
non-taxable
services
Rest all
services -
taxable

Power to Levy Service Tax
4
Entry No. 97
Residuary
Entry
[Entry No. 92C
not effective]
Union List
of Indian
Constitution
Article
246 – 7th
Schedule

Department Ke Darshan
5
Government of India
Ministry of Finance
Department of Revenue
CBDT CBEC
Department of
Expenditure
Department of
Economic Affairs
Commissionerates of
Central Excise
Commissionerates of
Customs
Commissionerates of
Service Tax

Department Ke Darshan (Continued)
6
Principal Chief Commissioner or Chief Commissioner
Principal Commissioner or Commissioner or Commissioner (Appeals)
Additional Commissioner
Joint Commissioner
Deputy Commissioner
Central Board of Excise and Customs (CBEC)
Assistant Commissioner
Superintendent
Inspector

Administration Hierarchy of Service Tax
7
Government of India
Prime Minister – Mr. Narendra Modi
Ministry of Finance
Finance Minister – Mr. Arun Jaitley
Department of Revenue
Revenue Secretary – Mr. Hasmukh Adhia
Central Board of Excise & Customs
Chairman of CBEC – Mr. Najib Shah
Commissionerates of Service Tax

Composition of CBEC
8
CBEC Chairperson
Member - Budget
Member - Customs
Member - Service
Tax
Member - Central
Excise
Member - Personnel
and Vigilance
Member - Legal and
Judicial

Limbs of Service Tax Laws
Finance
Act, 1994
• Chapter V and VA (Section 64 to 98) of the
Finance Act, 1994.
• Chapter VI (Section 119) of Finance Act, 2015 –
Swachh Bharat Cess.
• Amended from time to time by Successive Finance
Acts.
• Provides the Legal Framework for levy and
collection of Service Tax.
Rules
(Delegated
Legislation)
• Rules cover procedural aspects like Registration,
Return Filing, Payment and Maintenance of BOA’s
• Relevant Rules -
• Service Tax Rules, 1994
• Place of Provision of Service Rules, 2012
• Point of Taxation Rules, 2011
• CENVAT Credit Rules, 2004
• Service Tax (Determination of Value) Rules, 2006
(Valuation Rules)
9

Understanding Key Terms
 Finance Bill & Finance Act – Finance Bill is one of the important component of
the Annual Budget presented before the parliament by the Finance Minister. The Bill
contains various amendments in various acts and prescribes the rates of taxes.
When the Finance Bill is approved by both the Houses of Parliament and receives
the assent of the President, it becomes the Finance Act. (Relevant Finance Act for
CS Executive June Exam is Finance Act, 2015 and Relevant A.Y. is 2016-17)
 Notifications – The notifications on service tax are issued by the Central
Government for the following purposes –
a) Declaring date of enforceability of service tax provisions.
b) Making or amending Rules relating to service tax.
c) Granting or withdrawing exemptions from service tax.
d) Dealing with other matters so as to facilitate governance of service tax matters.
10

Understanding Key Terms
 Circulars / Office Letters – Circulars / Office Letters are issued by CBEC to
Department Officers in order to explain the scope of service tax law. The Circulars or
Officer Letters clarify the position of law, but they cannot go contrary to the law.
These circulars are binding on the department, not on the assessee but assessee
can take benefit of these circulars.
 Orders – Orders are issued by Central Government or CBEC for removing
difficulties which may arise while implementing the provisions of service tax law.
CBEC issues orders defining the jurisdiction of Central Excise Officer for the
purpose of service tax.
 Trade Notices – Trade Notices are issued by Commissionerates to the field
officers or to the trade i.e.; Businessmen through Trade Association providing
guidelines for implementation of Law and sharing information with them.
11

Definition of Service [Section 65B(44)]
12
means includes excludes
Any Activity
Carried out by a
person for another *
For Consideration
Declared Services
Any activity which
constitutes merely -
Provision of services
by employee to
employer
Fees taken
by court or
tribunal
Transfer of title in goods or immovable property
by way of sale, gift or in any other manner
Transfer which is deemed to be a sale as per
Clause (29A) of Article 366 of the Constitution
Transaction in money or actionable claims
Service

Helicopter View – Definition of Service
13
Service Means
Any Activity
(Active / Passive)
Work Done,
Deed Done, Act
Done, Not to Act
By One Person
to Another
Existence of two
persons is must
(SP and SR)
Self Service - Not
Taxable e.g. H.O.
to Branch
For
Consideration
Monetary or
Non-Monetary

Activity + Consideration = Service
14
Activity
without
Consideration
Government
Services
Street
Performance
Free Access to
Channels
Consideration
without
Activity
Gifts and Tips
Donation and
Grants w/o
condition
Pocket Money
NOT A
SERVICE
NO SERVICE
TAX

Helicopter View – Definition of Service
15
Service
Includes
Declared
Service
Excludes
Sale of
Goods,
Immovable
Property
Deemed
Sales
Services of
in course of
Employment
Services of
Court /
Tribunal
Transaction
only in money
or actionable
claims
Services of
MP, MLA,
MLC,
Corporator,
Government
Nominated
Posts

Charging Section [Section 66B]
16
Service Tax shall be
levied on
Value of all services
Provided or agreed to be
provided
In a taxable territory
Other than services
specified in negative list

What is Taxable Territory?
 Taxable Territory has been defined in section 65B(52) as a territory to
which provisions of Chapter V of Finance Act, 1994 apply.
 As per Section 64(1) of the Finance Act, 1994 provisions of Chapter V of
Finance Act, 1994 extends to the whole of India except the state of Jammu
& Kashmir.
 Thus, Jammu & Kashmir is a non-taxable territory.
17
India J & K
Taxable
Territory

What is India?
18
Land
Part
Territorial
Waters
(12nms)
Exclusive
Economic
Zone
(200nms)
India
Air Space,
Water, Sea
Bed
Continental
Shelf and Oil
Rigs

Helicopter View - Charging Section
19
Service Tax
shall be
levied @
Basic Rate of
14%
Gate No.1
(Entry)
Gate No.2
(Exit)
Gate No.4
Gate No.5
(Exit)
Gate No.3
(Exit)
Other than Negative
Listed Services
Provided / agreed to be
provided in Taxable
Territory
By one person to
another person and
collected in prescribed
manner
Exempted Services
Value of All Services
As per POT
Rules, 2011
and STR,
1994
19 Specified
Services
Determined
as per
POPOS
Rules, 2012
As per MEN
25/2012-ST

Test to Determine a Taxable Service
20
Doing an activity
including activity
under Declared
Service?
Doing such
activity for
Consideration?
Does this activity
consist only of
transfer of title in
goods or
immovable
property?
Is this activity
considered as
deemed sales?
Is service
performed by MP,
MLA or MLC?
Is the
consideration for
the activity in the
nature of fees for
a court or
tribunal?
Is such an activity
in the nature of
service provided
by employee in
course of
employment?
Does this activity
consists only of a
transaction in
money or
actionable claim?
Considered
as a Service
Service Provided
or Agreed to be
provided in
Taxable Territory
Service does not
fall in Negative
List
Service is a
Taxable
Service
Yes Yes No
No
NoNoNo
Yes Yes Yes
No

21
Presentation by : Raj Mukesh Khona
Reach me at : rajkhona1@gmail.com
Connect with me on : Linked In | Facebook | Twitter

Basic Concepts of Service Tax

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