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Chargeability of Service Tax - Service Tax Practice Manual / Ready Reckoner - Service TaxExtract Chargeability of Service Tax A. Service Tax and Constitution of India B. Incidence of Service Tax C. Applicability in the State of Jammu Kashmir D. Services provided from outside India by a person situated outside India - Import of Services ========== A. Service Tax and Constitution of India No tax can be levied without authority of the law. No law can be made without the authority of the constitution. Accordingly, power to levy service tax has been derived from the entry no. 92C of the Union List I of the Seventh Schedule read with article 246 of the Constitution of India. Entry no. 92C is appearing as under: 92C Taxes on services The above entry has been inserted by the Constitution (Eighty-eighth Amendment) Act, 2003. Residuary power [since the Constitution (Eighty-eighth Amendment) Act, 2003. yet to be notified ] Before this, the power to levy service has been exercised by the Central Government of India under the residuary entry no. 97 of the List I (called as union list) of the Seventh Schedule read with article 246 of the Constitution of India . Entry No. 97 is appearing as under: 97 Any other matter not enumerated in List II or List III including any tax mentioned in either of those Lists ========== B. Incidence of Service Tax In each taxing enactment there happens to be a charging section. Income Tax - Section 4 of the Income Tax Act, 1961 is the charging section. Central Excise section 3 of the Central Excise Act, 1944 is the charging section. Customs Duties Section 12 of the Customs Act, 1962 is the charging section. Service Tax Section 66B of the Chapter V of the Finance Act, 1994 is the charging section. Earlier, section 66 of the Chapter V of the Finance Act, 1994 was the charging section on or before 30-6-2012. Charging section of Service Tax From 1/7/2012 to 31/5/2015 As per Sec.66B , there shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent. 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 and collected in such manner as may be prescribed. Education cess @ 2% and secondary and higher education cess @ 1% was levied upto this period. From 1/6/2015 onwards As per Sec.66B , there shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen per cent. 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 and collected in such manner as may be prescribed. Plus Further swach bharat cess at 0.5% was levied from 15.11.2015 and Krishi kalyan cess at 0.5% was levied from 1.6.2016 Sec 65B (52) taxable territory means the territory to which the provisions of this Chapter apply; Taxable territory means the whole of India excluding the State of Jammu Kashmir . The word service is defined in clause (44) of the section 65B ========== C. Applicability of Provision of Service Tax in the State of Jammu and Kashmir The provisions of service tax are not applicable in the state of Jammu Kashmir. See section 64(1) of the Chapter V of the Finance Act, 1994 which reads as under: This chapter extends to the whole of India except the State of Jammu and Kashmir. Why the provision of service tax are not applicable in the state of Jammu Kashmir? Article 370 of the Constitution of India restricts the power of Parliament to make laws for the state of Jammu Kashmir. For the matters included in union list are subject to concurrence of the government of the State. That is why, there is no service tax provision has been extended to such state. Position on or before 30.6.2012 What will happen, where any person residing or having business place in the State of Jammu Kashmir but provides the services in other part of India? In such case, services provided by that person in the other part of India would be liable to service tax as he will fall under the preview of section 64 . However, if such person does not have any office or establishment outside Jammu Kashmir, and services, are provided from Jammu Kashmir to the other part of India, the practical problem is how and in what manner the amount of service tax shall be collected from such person. Is it mean that provisions of the section 66 (charging section) are not applicable but the provisions of other section (i.e. collection and recovery of tax) are applicable in the state of Jammu Kashmir. Section 64(1) does not refer to any such incidence, and in the opinion of the author / editor - the provisions of service tax are not applicable to person situated in Jammu Kashmir for services rendered anywhere in India from the place of Jammu Kashmir. On the contrary, what will happen, where any person residing in other part of India, but provides services in the state of Jammu Kashmir . Since the services are being provided in the State of Jammu Kashmir, there cannot be any incidence of tax on such service. Position on or after 1.7.2012 While introducing negative list, legislature has introduced concept of taxable territory. The scope of taxable territory is whole of India except Jammu and Kashmir. Any service which is deemed to be provided or to be provided within the taxable territory would be liable to service tax and where service provider is located outside taxable territory, recipient is liable to tax under reverse charge scheme. DEFINITION: Sec 65B (27) India means,-- (a) the territory of the Union as referred to in clauses (2) and (3) of article 1 of the Constitution; (b) its territorial waters, continental shelf, exclusive economic zone or any other maritime zone as defined in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976; (z80 of 1976.) (c) the seabed and the subsoil underlying the territorial waters; (d) the air space above its territory and territorial waters; and (e) the installations, structures and vessels located in the continental shelf of India and the exclusive economic zone of India, for the purposes of prospecting or extraction or production of mineral oil and natural gas and supply thereof; ========== D. Services provided from outside India by a person situated outside India - Import of Services Upto 30.6.2012:- Section 66A has been inserted by Finance Act, 2006 to make services provided from outside India in India by a person has a establishment outside India shall be treated as provided in India and the person receiving such services shall be liable to pay service tax on such services. W.e.f. 1.7.2012:- after introduction of concept of taxable territory, section 66A has been withdrawn.
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