The net of service tax was stated with 3 services in the year 1994 has become wide enough
to cover
104 services today. Law being young and having wide applicability over the assessees has created
opportunities for the professionals. This article concentrates mainly on Chartered Accountant in
practice and also those in Industry for getting the basic concepts of service tax law in brief. It would
be ideal to understand the following basic details of service tax, which are important for serving
clients / discharging duties liability of the service tax.
Levy is applicable on whom?
On which event is the levy applicable?
What is the value for payment?
What set – off would be available?
Basic procedure for registration.
Procedure for payment of Service Tax.
Procedure for filing returns.
Services which a CA can provide.
Practioner’s Aids.
Where the levy is applicable?
Service tax is imposed under Entry 97 of List I (union List), Seventh schedule to the constitution of
India which contains entries like foreign affairs. Entry 97 is a residual entry. The statutory provision of
service tax is given under Chapter V of the Finance Act 1994, which extends to whole of India except
state of Jammu and Kashmir. This means service tax is applicable only for the transaction happening
in India expect for the state of J & K. However on introduction of the section 66A and Taxation of
Service (provided for outside India and received in India) Rules 2006 the service received by the non-
resident shall also be taxable in the hands of the recipient in India. However whether such extra
territorial operation, which beyond the scope of the statue is constitutionally valid, is the question
pending to be resolved.
Levy is applicable on whom?
The levy of the service tax is provided under section 66 of the Finance Act. Service tax is a tax levied
on the services provider for providing the taxable service as defined under section 65(105) of Finance
Act, 1994. Service implies the existence of two parties. Service cannot be given to one self. If there is
no service provider and receiver relationship then there is no question of service being provided by
one person to any other person. Therefore on having two distinct person viz service provider and
service receiver, the person liable to be taxed is the defined service provider. The service provider
has to satisfy the definition.
f. As per Rule 6(3) if excess tax is paid in respect of service which is not wholly or partially
provided for any reason then excess service tax paid can be adjusted against service tax
payable for subsequent period if the amount of service tax and value of services is refunded
to person from whom it was received. Such refund is permissible only on account of services
not provided.
Inclusions and exclusions in value:
1. Sec 67(a) states that consideration includes any amount that is payable for taxable services
provided or to be provided. The consideration can be received/ given by a third person also.
2. In amount charged service tax would not be payable on value of goods, materials sold. There
should be documentary evidence to this effect,
3. Deduction is not available of value of goods consumed in providing service. Deduction is
available for transfer of property involved. Notification 12/2003 or Not.1/2006 provide for
the same.
4. Where the value of consideration is not ascertainable in terms of money, valuation would be
by application of Valuation Rules.
5. There should be resemblance between two services to constitute them as similar services.
The time, terms of payment must be considered to determine if two services are similar. The
paper writer is of the view that no two services even if provided to the same client in the
same month would be similar and comparable.
6. Equivalent value is not to be less than cost of providing such service.
7. All expenditure that have been incurred even when these are recovered separately by the
provider of taxable service are covered.
8. Where the expenses are incurred by service provider in course of providing taxable service
whether supported by a document or included in bill, these are includible in value for
computation of service tax.
9. When such costs are incurred by service receiver directly it is included and tax is computed
on such amount: Section 67(1)(II)
Exception: For costs to be excluded from value the following conditions are to be satisfied
The following are to be kept in mind as regards applicability of levy: