Service tax

Service tax is a part of Central Excise in India.

[12]
It is a tax levied on services provided in India, except
the State of Jammu and Kashmir. The responsibility of collecting the tax lies with theCentral Board of
Excise and Customs(CBEC).
The ex-Finance Minister of India, Pranab Mukherjee 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 2011. To achieve this objective, the rate of Central Excise and Service Tax
will be progressively altered and brought to a common rate.
[citation needed]
In budget presented for 2008-
2009 It was announced that all Small service providers whose turnover does not exceed 1,000,000
need not pay service tax.
1. Wealth Tax Act, which has a regular history of being passed and repealed;
2. Service Tax, imposed under Finance Act, 1994, which taxes the provision of services
provided by service providers within India or services imported by Indian from outside India;
3. Central Excise Act, 1944, which imposes a duty of excise on goods manufactured or
produced in India;
4. Customs Act, 1962, which imposes duties of customs, counterveiling duties and anti-dumping
duties on goods imported in India;
5. Central Sales Tax, 1956, which imposes sales tax on goods sold in inter-state trade or
commerce in Indisale of property situated within the State;
6. Entertainment taxes
Now, Service Tax and Excise will be inclusive part of GST in due course of time.

1. Constitutional & Legal provisions behind levy of Service Tax in India.
Constitutional Validity
Article 265 of the Constitution lays down that no tax shall be levied or collected except by the
authority of law. Schedule VII divides this subject into three categories-
a) Union list (only Central Government has power of legislation)
b) State list (only State Government has power of legislation)
c) Concurrent list (both Central and State Government can pass legislation).
To enable Parliament to formulate by law principles for determining the modalities of levying
the Service Tax by the Central Govt. and collection of the proceeds thereof by the Central Govt. and
the State, the amendment vide Constitution (92
nd
amendment) Act, 2003 has been made.
Consequently, new article 268 A has been inserted for Service Tax levy by Union Govt., collected and
appropriated by the Union Govt., and amendment of seventh schedule to the constitution, in list I-
Union list after entry 92B, entry 92C has been inserted for taxes on services as well as in article 270
of the constitution the clause (1) article 268A has been included.
****

2. Formation and function of DGST:
Considering the increasing workload due to the expanding coverage of service tax, it was
decided to centralise all the work and entrust the same to a separate unit supervised by a very senior
official. Accordingly, the office of Director General (Service Tax) was formed in the year 1997. It is
headed by the Director General (Service Tax). The functions and powers of Director General (Service
Tax) are :
i) To ensure that proper establishment and infrastructure has been created under different central
excise/service tax Commissionerates to monitor the collection and assessment of service tax.
ii) To study the staff requirement at field level for proper and effective implementation of service
tax.
iii) To study as to how the various service taxes are being implemented in the field and to suggest
measures as may be necessary to increase revenue collection or to streamline procedures :
iv) To undertake study of law and procedures in relation to service tax with a view to simplify the
service tax collection and assessment and make suggestions thereon:
v) To form a data base regarding the collection of service tax from the date of its inception in 1994
and to monitor the revenue collection from service tax:
vi) To inspect the service tax cells in the Commissionerate to ensure that they are functioning
effectively :
vii) To undertake any other functions as assigned by the Board from time to time.

2.A.
i) The Directorate General of Service Tax has been co-coordinating between the Board and
Central Excise Commissionerates. It also monitors the collection and the assessment of
Service Tax. The Service Tax Revenue Reports, received from various Central Excise
Commissionerates, are complied at the Directorate and the performance of the
Commissionerates/Zones in Service Tax collection are being monitored for corrective
actions.
ii) The Directorate General of Service Tax has been conducting inspection of Central Excise
Commissionerates. During the course of inspection, verification of Service Tax records,
maintained by the Commissionerate, is done. Staff of Service Tax Cell are also guided
suitably in proper implementation of Service Tax and maintenance of records. A meeting
with the Service Tax officers is always conducted in the Commissionerate during inspection.
Open-house meetings are also arranged in the Commissionerates. Problems faced by the
assessees in Service Tax compliance are sorted out in the open-house meeting with the
members of various service providers associations.
iii) The correspondences received from the field formations and service providers are
scrutinized and the clarifications sought for are replied to wherever possible. In cases where
the doubts/clarification sought involved policy matter, the Board has been apprised for
issuing clarification/instruction.
iv) This Directorate General has taken up the issue of forming a database regarding
registration of the assessee and collection of Service Tax in co-ordination with the
Directorate of Systems.
v) Presently there are 67 Central Excise Commissionerates and 7 Service tax
Commissionerates within the jurisdiction of 23 Central Excise Zones. The 7 Service Tax
Commissionerates have been established in Mumbai (2 Commissionerates), Delhi, Kolkata,
Chennai, Ahmedabad & Bangalore. Also, there are 5 Large Taxpayer Units (LTUs) located
at Mumbai, Bangalore, Delhi, Kolkata and Chennai.
xx-0-xx


3. Existing scheme for levy, assessment & collection of Service Tax in
India

Levy and assessment
Service tax is levied on specified services and the responsibility of
payment of the tax is generally cast on the service provider but for few
exceptions. System of self-assessment of Service Tax Returns by service tax
assessees has been introduced w.e.f. 01.04.2001. The jurisdictional
Superintendent of Central Excise is authorized to cross verify the correctness of
self assessed returns. These tax returns have to be filed half yearly.

The Central Excise officers are authorized to conduct surveys to bring the
prospective service tax assessees under the tax net. Directorate General of
Service Tax at Mumbai oversees the activities at the field level for technical and
policy level coordination.

Legal provisions
The provisions relating to Service Tax were brought into force with effect
from 1
st
July 1994. It extends to the whole of India except the state of Jammu &
Kashmir. The chronological list of taxable services with date of their introduction
as on 1.5.2011 is given below:
The following services were brought under the tax net in the year 1994-95:

1 Telephone 01.07.1994
{This service has been de-notified and grouped as
Telecommunication Services w.e.f. 01.06.2007 vide
Notfn. .23/07 ST dated 22.05.07 and Sec.135 of Finance
Act,2007 (22 of 2007)}
2 Stock broker 01.07.1994
3 General
Insurance
01.07.1994

Rate of service tax was 5% adv.
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The Finance Act (2) 1996 enlarged the scope of levy of Service Tax
covering three more services viz.,
4 Advertising
agencies
01.11.1996
5 Courier
agencies
01.11.1996
6 Radio pager
services.
01.07.1994
{This service has been de-notified and grouped
as Telecommunication Services w.e.f. 01.06.2007 vide
Notfn. No.23/07 ST dated 22.05.07 and Sec.135
of Finance
Act,2007 (22 of 2007)}
Rate of service tax was 5%.
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The Finance Act of 1997 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
(7
th
July, 1997)
(8) Custom house
agents
(15
th
June, 1997)
(9) Steamer agents (15
th
June, 1997)
(10) Clearing &
forwarding
agents
(16
th
July, 1997)
(11) Air travel agents (1
st
July, 1997)
(12) Tour operators 01.09.1997 (exempted upto 31.3.2000 Notification
No.52/98, 8
th
July, 1998, reintroduced w.e.f.
1.4.2000)
(13) Rent-a-Cab
Operators
16.07.1997 (exempted from 1.3.1999 upto
31.3.2000 Vide Notification No.3/99
Dt.28.2.99, reintroduced w.e.f. 1.4.2000)
(14) Manpower
recruitment
Agency
(7
th
July, 1997)
(15) Mandap Keepers (1
st
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, 2
nd
June,1998.

The Service Tax was leviable @ 5% on the 'gross amount' charged by the
service provider from the client, from the dates as notified and indicated above.
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Following new services were brought under the Service Tax net in the 1998-99
union Budget. These services were notified on 7
th
October, 1998 and were
subjected to levy of Service Tax w.e.f. 16
th
October, 1998.

16 Architects 16.10.1998
17 Interior Decorators 16.10.1998
18 Management or
Business Consultants
16.10.1998
19 Practicing Chartered
Accountants
16.10.1998
20 Practicing Company
Secretaries
16.10.1998
21 Practicing Cost
Accountants
16.10.1998
22 Real Estates
Agents/Consultants
16.10.1998
23 Credit Rating
Agencies
16.10.1998
24 Security Agencies 16.10.1998
25 Market Research
Agencies
16.10.1998
26 Underwriters Services 16.10.1998
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 animals slaughtered.

The rate of service tax was 5% on gross amount charged by the service
provider.
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In the Finance Act2001, the levy of service tax was extended to the
following services with effect from 16.07.2001:
27 Scientific and
technical consultancy
services
16.07.2001
28 Photography 16.07.2001
29 Convention 16.07.2001
30 Telegraph 16.07.2001
{This service has been de-notified and grouped
as Telecommunication
Services w.e.f. 01.06.2007 vide Notfn.
No.23/07 ST dated 22.05.07 and Sec. 135 of
Finance Act,2007 (22 of 2007)}
31 Telex 16.07.2001
{This service has been de-notified & grouped
as Telecommunication
Services w.e.f.01.06.2007 vide Notfn.
No.23/07 ST dated 22.05.07 and Sec.135 of
Finance Act,2007 (22 of 2007)}
32 Facsimile (fax) 16.07.2001
{This service has been de-notified and grouped
as Telecommunication Services
w.e.f.01.06.2007 vide Notfn. No.23/07 ST dated
22.05.07 and Sec.135 of Finance Act,2007 (22
of 2007)}
33 Online information
and database access
or retrieval
16.07.2001
34 Video Tape
Production services
16.07.2001
35 Sound recording 16.07.2001
36 Broadcasting 16.07.2001
37 Insurance auxiliary
services in relation to
General Insurance
16.07.2001
38 Banking and other
financial services
16.07.2001
39 Port Services (by
Major Ports).
16.07.2001
40 Authorized Service
Stations
16.07.2001
41 Leased circuits
Services
16.07.2001{This service has been de-notified
and grouped as Telecommunication Services
w.e.f.01.06.2007 vide Notfn. No.23/07 ST dated
22.05.07 and Sec.135 of Finance Act,2007 (22
of 2007)}


The rate of service tax was 5% on gross amount charged by the service
provider.
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In the Budget 2002-2003, the following services were added to the tax net with
effect from 16.08.2002:

42 Life Insurance services 16.08.2002
43 Insurance auxiliary services in
relation to Life Insurance
16.08.2002
44 Cargo handling 16.08.2002
45 Storage and warehousing
services
16.08.2002
46 Event Management 16.08.2002
47 Cable operators 16.08.2002
48 Beauty parlors 16.08.2002
49 Health and Fitness centers 16.08.2002
50 Fashion designer 16.08.2002
51 Rail travel agents. 16.08.2002
52 Dry cleaning services. 16.08.2002

Rate of service tax was 5% ( till 13.05.2003) on the gross amount charged by
the service provider.
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In the Budget 2003-04, the following new services along with extension to the
existing services were added to the tax net with effect from 01.07.2003:
53 Commercial Training &
Coaching centers
01.07.2003
54 Technical testing and analysis 01.07.2003
55 Technical inspection and
certification service.
01.07.2003
56 Management, Maintenance or
Repair services
01.07.2003
57 Erection, Commissioning and
Installation Services
01.07.2003
58 Business Auxiliary Services 01.07.2003
59 Internet caf 01.07.2003
60 Franchise Services 01.07.2003
61 Foreign Exchange Broker 01.07.2003
62 Port Services (Other or Minor
Ports)
01.07.2003
{extension
to port
services}

The rate of Service Tax was 5% till 13.05.2003 and from 14.05.2003 the rate
was increased to 8% of the gross amount charged by the service provider
on all the taxable services till 09.09.2004.


In the Budget 2004-05, 10 more services have been introduced in the
service tax net along with reintroduction of three existing services w.e.f
10.09.2004 as follows:

63 Out door Caterers service (re-
introduced)
10.09.2004
64 Pandal or Shamiana service
(re-introduced)
10.09.2004
65 Airport Services 10.09.2004
66 Transport of Goods by Air
Services
10.09.2004
67 Business Exhibition Services 10.09.2004
68 Construction Services in
relation to commercial or
Industrial Building
10.09.2004
69 Intellectual Property Services 10.09.2004
70 Opinion Poll Services 10.09.2004
71 TV or Radio Programme
Production Services
10.09.2004
72 Survey and Exploration of
Minerals Services
10.09.2004
73 Travel Agents Services other
than Rail and Air travel agents
10.09.2004
74 Forward Contract Services

10.09.2004


The rate of service tax on these services as well as all
other services was enhanced from 8% to 10% with effect from
10
th
September, 2004. Besides this, 2% Education Cess on the amount of
service tax was introduced. Thus the effective service tax rate was 10.2%
including Education Cess w.e.f 10.09.2004.
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Vide Notfn. No.33/2004 ST. 34/2004-ST and 34/2004-ST, all dated
3.12.2004, the following service was brought under service net with effect from
01.01.2005.
75 Transport of goods by road
(earlier Goods Transport
Operators service re-
introduced).
01.01.2005


The rate of service tax was 10% plus 2% Education Cess.
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-
In the Budget 2005-06, 9 more services were brought under the service tax
net with effect from 16.06.2005, as detailed below-
76 Transport of goods through pipe
line or other conduit Services
16.06.2005
77 Site Formation & Clearance etc.
Services
16.06.2005
78 Dredging Services 16.06.2005
79 Survey & Mapmaking Services 16.06.2005
80 Cleaning Services 16.06.2005
81 Membership of Clubs &
Associations
16.06.2005
82 Packaging Services 16.06.2005
83 Mailing list compilation & Mailing
Services
16.06.2005
84 Construction Services in relation
to Residential Complexes
16.06.2005
The rate of service tax was 10% plus 2% Education Cess till
17.04.2006 and from 18.04.2006 rate was enhanced to 12% Plus 2 %
Education Cess.
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In the Budget 2006-07, 15 more services were brought under the service tax net
with effect from 01.05.2006 vide Notfn.No.15/2006-ST dated 25.04.2006 and
Finance Act, 2006 ( 21 of 2006) as detailed below:
85 Sale of space or time for
advertisement
01.05.2006
86 Auctioneers Services 01.05.2006
87 ATM Operation, maintenance or
management Services
01.05.2006
88 Business Support Services 01.05.2006
89 Credit Card, Debit Card, Charge
Card or other payment Card
Services
01.05.2006
90 Internet
Telecommunication Services
01.05.2006
91 Public Relations Services 01.05.2006
92 Services provided by Recovery
Agent
01.05.2006
93 Services provided by Registrar
to an Issue
01.05.2006
94 Services provided by Share
Transfer Agent
01.05.2006
95 Ship Management Services 01.05.2006
96 Sponsorship Services 01.05.2006
97 Transport by Cruise ship
services
01.05.2006
98 Transport of goods in container
by rail services (Other than
Govt. Railway ) The words
other than Govt. Railways have
been deleted w.e.f.01.09.2009)
01.05.2006
99 Transport of passengers by air
on international journey services
01.05.2006

Rate of service tax from 18-04-2006 to 10.05.2007 was 12% plus 2%
Education Cess on service tax. With effect from 11.05.2007 the rate of service
tax became 12% plus 2% Education Cess on service tax plus 1%
Secondary & Higher Education Cess on service tax ( Aggregating to
12.36%)
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-
In the Budget 2007-08, 7 more services were brought under the service
tax net with effect from 01.06.2007, and 6 existing services were grouped with
Telecommunication Services vide Notfn.No.23/2007-ST dated 22.05.2007 and
Finance Act, 2007 ( 22 of 2007), as per the details given below:
100 Asset Management
Services
01.06.2007
101 Development &
Supply of Content
Services
01.06.2007
102 Designing Services 01.06.2007
103 Mining of Mineral,
Oil or Gas
01.06.2007
104 Renting of
immovable
property services
01.06.2007
105 Works Contract
Services
01.06.2007
106 Telecommunication
Services

01.06.2007
(This is not a new
service but the existing
services viz.Telephone
services, pager,
facsimile, telegraph,
leased circuit, telex
were grouped under it)
Rate of service tax was 12% plus 2% Education Cess plus 1%
Secondary Higher Education cess ( Aggregating to 12.36%)
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In the Budget 2007-08, the scope of service tax was extended to
cover 6 more services with effect from 16.05.2008 vide Notfn.No.18/2008-ST
dated 10.05.2008 and Finance Act, 2008 ( 18 of 2008), as per the details given
below:
107 Services of Clearing &
Processing House
16.05.2008
108 Registered or Recognised
Associations services in
relation to sale or purchase of
goods and forward contract
16.05.2008
109 Information Technology
Services
16.05.2008
110 Investment Management
Services under ULIP
16.05.2008
111 Services of Recognised Stock
Exchange
16.05.2008
112 Supply of tangible goods
services

16.05.2008

Rate of service tax w.e.f.11.05.2007 was12% + 2% (of service tax) education Cess + 1% ( of service
tax) Secondary Higher Education Cess.

From 24.02.2009, Rate of service tax became 10% + 2% (of service tax) education Cess + 1% ( of
service tax) Secondary Higher Education Cess (aggregating to 10.30%).

In budget 2009, following three new services have been brought under service tax net vide
Finance (No.02) Act, 2009 (33 of 2009) and taxed w.e.f.01.09.2009 vide Notification No. 26/2009 ST
dated 19.08.2009.

113 Cosmetic or Plastic Surgery Services 01.09.2009
114 Transport of Coastal goods, Goods through National
Waterways or Goods through Inland Waterways
01.09.2009
115 Legal Consultancy Services 01.09.2009

From 24.02.2009, Rate of service tax became 10% + 2% (of service tax) education Cess + 1% (of
service tax) Secondary Higher Education Cess (aggregating to 10.30%)
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In the Budget 2010 vide Finance (14/2010) Act, 2010, the scope of service tax was extended to cover
8 more services w.e.f.01.07.2010 vide Notification No.24/2010 ST dated 22.06.2010 as per details
given below.

116 Promotion, marketing or organizing of games of
chance including lottery, bingo etc. services
01.07.2010
117 Health services undertaken by Hospitals or
Medical establishments
01.07.2010
118 Maintenance of Medical Records services 01.07.2010
119 Promotion of Brand of Goods/Services etc. 01.07.2010
120 Services of Permitting Commercial Use or
Exploitation of any event
01.07.2010
121 Electricity Exchange Services 01.07.2010
122 Copyright Services 01.07.2010
123 Services provided by Builder in relation to
preferential location, internal/external development
etc.
01.07.2010
124
Services of Air-conditioned restaurants having
license to service alcoholic beverages in relation to
service of food or beverages.
1.5.2011
125
Services of providing of accommodation in hotels /
inns/ cubs/ guest houses/ campsite for a
continuous period of less than three months
1.5.2011

From 24.02.2009, Rate of service tax became 10% + 2% (of service tax) education Cess + 1% ( of
service tax) Secondary Higher Education Cess (aggregating to 10.30%)

Note- As on 1.05.2011, 119 Services are under service tax net. Six services
among listed above at Sr. No. 1,6,30,31,32 and 41 have been merged with
Telecommunication Service with effect from 01.06.2007)
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-
Administrative mechanism.

Service Tax is administered by the Central Excise & Service tax
Commissionerates and the Service Tax Commissionerates working under the
Central Board of Excise & Customs, Department of Revenue, Ministry of
Finance, Government of India. LTUs are also collecting Service Tax in respect of
the Large Tax Paying units registered with them. The unique feature of Service
Tax is reliance on collection of tax, primarily through voluntary compliance.

Government has from the very beginning adopted a flexible approach
concerning Service Tax administration so that the assessees and the general
public gain faith and trust in the tax measure so that voluntary tax compliance,
one of the avowed objectives of the Citizens Charter, is achieved. Substantive
and procedural liberalization measures, adopted over the years for this purpose,
are clear manifestations of the above approach. Following are some of the
measures adopted in that direction:

(i) Under Section 67 of the Finance Act, 1994, Service Tax is levied on the
gross or aggregate amount charged by the service provider on the receiver.
Rule 6(1) of the Service Tax Rules, 1994 has provided that Service Tax shall
be paid to the credit of the Government account in respect of the
services deemed to be provided as per the rules framed in this regard. Point of
Taxation Rules, 2011 has provided the point in time when a service shall be
deemed to have been provided; Rule 3 of the said rule provides that for the
purposes of these rules, unless otherwise provided, point of taxation shall be,-

(a) the time when the invoice for the service provided or to be provided is
issued: Provided that where the invoice is not issued within 14 days of the
provision of the service, the point of taxation shall be date of such
completion.
(b) In a case, where the person providing the service, receives a payment before
the time specified in clause (a), the time, when he receives such payment to
the extent of such payment.
Explanation For the purpose of this rule, wherever any advance by
whatever name known, is received by the service provider towards the
provision of taxable service, the point of taxation shall be the date of receipt
of each such advance.
Rule 4. Determination of point of taxation in case of change in effective rate of
tax. Notwithstanding anything contained in rule 3, the point of taxation in cases
where there is a change in effective rate of tax in respect of a service, shall be
determined in the following manner, namely:-

(a) In case a taxable service has been provided before the change in
effective rate of tax,-

(i) Where the invoice for the same has been issued and the payment
received after the change in effective rate of tax, the point of taxation
shall be date of payment or issuing of invoice, whichever is earlier;
or
(ii) Where the invoice has also been issued prior to change in effective
rate of tax but the payment is received after the change in effective
rate of tax, the point of taxation shall be the date of issuing of
invoice; or
(iii) Where the payment is also received before the change in effective
rate of tax, but the invoice for the same has been issued after the
change in effective rate of tax, the point of taxation shall be the date
of payment;

(b) In case a taxable service has been provided after the change in effective
rate of tax,-

(i) Where the payment for the invoice is also made after the change in
effective rate of tax but the invoice has been issued prior to the
change in effective rate of tax, the point of taxation shall be the date
of payment; or
(ii) Where the invoice has been issued and the payment for the invoice
received before the change in effective rate of tax, the point of
taxation shall be the date of receipt of payment or date of issuance
of invoice, whichever is earlier; or
(iii) Where the invoice has also been raised after the change in effective
rate of tax but the payment has been received before the change in
effective rate of tax, the point of taxation shall be date of issuing of
invoice.

Explanation for the purposes of this rule, change in effective rate of tax
shall include a change in the portion of value on which tax is payable in
terms of a notification issued under the provisions of Finance Act, 1994 or
rules made thereunder.
(for details Point of Taxation Rules, 2011 may be referred)

(ii) Corporate assessees are given the liberty to pay tax on the value of
taxable service, provided by them in a month, by the 6
th
of the following month if
tax is deposited electronically and 5
th
of the following month if tax is deposited in
any other manner. Further, in case the assessee is individual or proprietary firm
or partnership firm, tax payment is required to be made only once in a quarter
i.e by 6
th
of the following quarter if tax is deposited electronically and 5
th
of the
following quarter if tax is deposited in any other manner.

(iii) The process of registration of assessees has been considerably
simplified.

(iv) No separate accounts have been prescribed for the purposes of Service
Tax. It has been provided that accounts being maintained by the assessees
under any other law in force would be sufficient. This has placed the Department
at considerable inconvenience to itself, so as to minimize difficulties for the
assessees.

(v) The Finance Act, 2001 has introduced self assessment for service tax
returns; thereby sparing the assessees from the rigours of routine scrutiny and
assessment.

(vi) Frequency of filing the returns in the form of ST 3 or ST3A as the case
may be is minimized. Filing of Statutory return has been made half yearly and by
the 25
th
of the month following the half-year ending on 31
st
arch and
30
th
September. This is in replacement of the monthly/quarterly returns
prescribed earlier.

(vii) Penal provisions do exist in respect of Service Tax also. Failure to obtain
registrations, failure to pay the tax, failure to furnish the prescribed returns,
suppression of the correct value of the taxable services and failure to comply
with notice do attract penal provisions as prescribed. But, it is specifically
provided that no penalty is imposable on the assessee for any of the above
failures, if the assessee proves that there was reasonable cause for the failure.
This provision has been inserted to take care of the genuine difficulties of the
new assessees.

(viii) Service Tax Credit Rules, 2002, have been replaced by the CENVAT
Credit Rules, 2004, introduced by the Finance Act, 2004, where under CENVAT
credit has been extended across the sectors i.e. goods and services.



4. Analysis of Service Tax Revenue


SERVICE TAX REVENUE (ALL INDIA FROM 1994-95 TO 2009-10)

1. The Service Tax collections have shown a steady rise since its inception
in 1994. The tax collections have grown manifolds since 1994-95 i.e from Rs.
410 crores in 1994-95 to Rs.71174.58 crores in 2010-11.
2. The target for the year 2010-11 was Rs.69400 Crores and the
actual realisation was Rs.71174.58 Crores, showing increase of
Rs.1774.58 Crores (2.56%)
3 The total number of taxable services have also increased from 3 in 1994
to 119 as on 1
st
May, 2011.
4. There is a substantial growth in the assessee base from
3943 numbers in 1994-95. The revenue and assessee statistics from the year
1994-95 onwards onwards is given in the Table-1 below:
Table 1
Financial
Year
Revnue
Rs. Crores
%
Growth
over
previous
year
No. of
Services
under tax
net
No. of
Assessees
%
Growth
over
previous
year
1994-95 410 Base
Year
3 3943 Base
Year
1995-96 846 106 6 4866 23.41
1996-97 1022 21 6 13982 187.34
1997-98 1515 48 18 45991 228.93
1998-99 1787 18 26 107479 133.70
1999-00 2072 16 26 115495 7.45
2000-01 2612 23 26 122326 5.91
2001-02 3305 26 41 187577 53.34
2002-03 4125 25 52 232048 23.71
2003-04 7890 91 62 403856 74.04
2004-05 14196 80 75 774988 91.89
2005-06 23053 62 84 846155 9.18
2006-07 37482 63 99 940641 11.17
2007-08 51133 36 100 1073075 14.08
2008-09 60702 19 106 1204570 8.78
2009-10 58319 -3.93 117 1307286 8.53
(Revenue as reported by Pr.CCA and Number of assesses as reported by
Zones)
1.4 Zone wise performance in Service Tax revenue collection as reported by
the Chief Commissioners of all the Zones and comparison thereof with
previous year is as per Table-2 below.
Table 2
ZONE WISE SERVICE TAX COLLECTION FOR F.Y. 2008-09 & 2009-10
(Source: reports received from Commissionerates /Zones)
(Revenue in crores)
SR.
NO.
NAME OF THE
ZONE
REV.
2008-09
NO. OF
ASSESSEES
REV.
2009-10
NO. OF
ASSESSEES

1 AHMEDABAD 2017.58 62636 1975.44 64419
2 BANGALORE 3455.56 71836 3175.00 77489
3 BHOPAL 1148.91 49396 1046.25 53346
4 BHUBANESHWAR 817.23 16805 784.50 18986
5 CHANDIGARH 948.23 43540 680.96 45464
6 CHENNAI 3620.48 69191 3335.02 70475
7 KERALA 1009.78 23386 907.12 24158
8 COIMBATORE 932.91 61743 765.95 64286
9 DELHI 10178.93 144699 9895.07 156811
10 SHILLONG 279.92 12399 299.39 13303
11 HYDERABAD 2190.72 40947 2039.34 45578
12 JAIPUR 914.59 53303 817.14 56370
13 KOLKATA 2744.61 51966 2712.79 64996
14 LUCKNOW 769.49 46490 704.90 54438
15 MYSORE 661.51 24059 604.49 23636
16 MEERUT 1145.74 36439 1082.45 45890
17 MUMBAI-I 20205.11 178328 18440.84 188843
18 MUMBAI-II 350.13 3810 315.80 4375
19 NAGPUR 761.88 48511 725.04 52340
20 PUNE 2393.24 73920 2184.01 83075
21 RANCHI 636.26 24392 655.99 27303
22 VADODARA 980.57 38576 963.11 39810
23 VISHAKHAPATNAM 859.48 27654 814.03 31379
24 LTU 1935.58 544 3202.84 516
GRAND TOTAL 60958.44 1204570 58127.47 1307286
Note:There is a minor variation between the revenue figures provided by the
Zones and those reported by the Pr. C.C.A.
1.5 Commissionerate wise performance in Service Tax revenue collection as
reported by the Chief Commissioners of all the Zones, for the year 2007-08
& 2008-09 is given in Table-3 below.
Table 3
COMMISSIONERATE WISE SERVICE TAX COLLECTION FOR
F. Y. 2008-09 & 2009-10
( Source : Reports received from the Commissionerates /Zones )
Sr. No. Commissionerate GAR-7
Revenue
2008-09
(Rs.
In crores)
No. of
Assessees
GAR-7
Revenue
2009-10
(Rs.
In crores)
No. of
Assessees

1. AHMEDABAD SERVICE
TAX
999.31 25959 919.37 26222
2. AHMEDABAD-III 204.01 7614 198.12 8225
3. RAJKOT 703.30 18982 762.15 19544
4. BHAVNAGAR 110.96 10081 95.80 10428
5. BANGALORE SERVICE
TAX
3455.56 71836 3175.00 77489
6. BHOPAL 354.91 16438 352.41 15748
7. INDORE 459.78 20770 330.99 24086
8. RAIPUR 334.22 12188 362.85 13512
9. BHUBANESHWAR-I 452.16 12049 458.42 14870
10. BHUBANESHWAR-II 365.07 4756 326.08 4116
11. CHANDIGARH 635.85 18066 408.91 16931
12. JALANDHAR 122.32 8764 98.79 9140
13. LUDHIANA 190.06 16710 173.26 19393
14. CHENNAI-SERVICE TAX 3367.86 56082 3071.90 57008
15. CHENNAI-III 126.14 7956 115.61 8537
16. PONDICHERRY 126.48 5153 147.51 4930
17. COCHIN (KERAL) 507.26 9739 456.07 10220
18. CALICUT 208.82 7058 203.69 7312
19. THIRUVANANTHAPURAM 293.70 6589 247.36 6626
20. COIMBATORE 317.72 22163 249.32 22163
21. MADURAI 115.60 9737 92.26 10211
22. SALEM 115.37 10904 118.93 11631
23. THIRUNELVELI 136.59 10000 126.44 10574
24. THIRUCHIRAPALI 247.63 8939 179.00 9707
25. DELHI-SERVICE TAX 9906.05 129137 9662.15 142645
26. ROHTAK 160.49 7834 120.07 8843
27. PUNCHKULA 112.39 7728 112.85 5323
28. SHILLONG 165.38 2987 98.69 3277
29. DIBRUGARH 62.14 2724 71.62 2731
30. GUWAHATI 52.40 6688 129.08 7295
31. HYDERABAD-I 68.70 3610 56.83 3919
32. HYDERABAD-II 1646.47 23821 1527.46 26043
33. HYDERABAD-III 205.87 8242 185.16 9311
34. HYDERABAD-IV 269.68 5274 269.89 6305
35. JAIPUR-I 647.61 35451 596.83 37644
36. JAIPUR-II 266.98 17852 220.31 18726
37. KOLKATA-SERVICE TAX 2437.24 38952 2421.43 51899
38. BOLPUR 145.64 5841 153.36 6161
39. HALDIA 124.47 2823 97.29 2782
40. SILIGURI 37.26 4350 40.71 4154
41. LUCKNOW 419.91 13193 327.60 18841
42. ALLAHABAD 104.59 11437 128.60 12381
43. KANPUR 244.99 21860 248.70 23216
44. MANGALORE 256.16 5695 238.49 5843
45. BELGAUM 320.42 12417 283.71 11865
46. MYSORE 84.93 5947 82.29 5928
47. MEERUT-I 230.67 14385 270.29 16938
48. MEERUT-II 131.01 9205 102.41 10396
49. NOIDA 652.81 5897 574.54 11745
50. GHAZIABAD 131.25 6952 135.21 6811
51. MUMBAI-SERVICE TAX 20205.11 178328 18440.84 188843
52. RAIGAD 350.13 3810 315.80 4375
53. NAGPUR 321.75 18763 359.81 20624
54. NASIK 210.09 14971 166.65 15866
55. AURANGABAD 230.04 14777 198.58 15850
56. PUNE-I 347.34 11549 364.82 15701
57. PUNE-II ( Kolhapur ) 180.42 11742 160.36 12047
58. PUNE-III 1648.70 41979 1450.69 45761
59. GOA 216.78 8650 208.14 9566
60. RANCHI 201.36 8064 286.38 9128
61. JAMSHEDPUR 232.60 6008 198.93 6526
62. PATNA 202.30 10320 170.68 11649
63. VADODARA-I 260.58 8344 246.95 8672
64. VADODARA-II 255.14 10476 183.71 10422
65. SURAT-I 298.59 9102 329.74 9303
66. SURAT-II 46.44 2721 58.50 3033
67. DAMAN 74.46 5447 99.35 5794
68. VAPI 45.36 2486 44.86 2586
69. GUNTUR 226.52 10947 262.84 13886
70. VISHAKHAPATNAM -I 292.99 5144 318.42 5548
71. VISHAKHAPATNAM-II 250.93 5040 163.56 5081
72. THIRUPATI 89.04 6523 69.21 6864
73. LTU BANGLORE 770.20 147 896.00 161
74. LTU CHENNAI 771.07 258 804.24 298
75. LTU DELHI 115.12 14 843.94 20
76. LTU KOLKATA 0 0 0 0
77. LTU MUMBAI 279.19 125 658.66 37
GRAND TOTAL 60958.44 1204570 58127.47 1307286



Challenges before the Service Tax Administration in India
Service tax administration in India has before it multi-dimensional
challenges. Some of them are related to the very nature and growth of service
sector in the economy and others relate to procedural aspects of the service tax
collection.
The growth of service sector at a high rate offers opportunities as well as
challenges to bring under the tax net hitherto uncovered services. This offers
tremendous revenue potential to the Government. It is expected that in due
course Service Tax would reduce the tax burden on international trade (Customs
duty) and domestic manufacturing sector (Excise duty). So a planned growth of
service tax would be commensurate with the goals of economic liberalization and
globalization. This process requires levy of taxes on new services without
substantial rise in the rate or cost of collection.
The proposed Goods and Service Tax is a part of the tax reforms that
centre around evolving an efficient and harmonized consumption tax system in
the country. Presently, there are parallel systems of indirect taxation at the
Central and State level. The existing Service Tax System poses an imminent
challenge, to reform its synergies, to eventually harmonize itself in the GST
regime, as and when it is rolled out. Successful integration of goods and
service tax, would give India a world-class tax system and will bring in improved
tax collection. In a way, it will boost our economy and enable us to compete at
the global front. As a result, our system will eventually match the international
standard in the sphere of indirect taxation. It will also end the long standing
distortions of differential treatments to the manufacturing and service
sectors. The effort to prepare for a smooth integration with the GST without any
hardship to public is a big challenge, that need to be handled at the field as well
policy level.
No doubt, the twin goal of revenue maximization and introduction of the
culture of voluntary tax compliance also throw up major challenge before the
service tax administration in the country. The Department has taken several
steps to upgrade the skill of the officers handling Service Tax and equip them
with necessary expertise. Training programmes on the issues related to Service
Tax are regularly conducted for the Departmental officers. A Manual for scrutiny
of Service Tax Returns has been prepared by the CBEC to enable the
Departmental officers to carry out the scrutiny of Service Tax returns in a
methodical and systematic manner. At the same time, the Govt. has also taken
several facilitation measures for the tax payers. To assist them in the filing of
Service Tax returns, Service Tax Returns Preparer (STRP) Scheme has been
launched in 2009. To enable them to understand the basic issues related to
Service Tax, a booklet on Frequently Asked Questions (FAQ) on Service Tax
has been published and the FAQ has also been put up on the Departmental
website. Open House sessions, Seminars etc. are also organized by the field
formations to help the assesses and solve their problems.
****

6. Electronic Tax Administration
1.1 The Directorate General of Systems & Data Management has developed a web based software
named as AUTOMATION OF CENTRAL EXCISE AND SERVICE TAX (ACES) which automates
various processes of Central Excise & Service Tax for Assesses and Department and gives complete
end to end solution.

The ACES can be used for:

(i) Online registration and amendment of registration details;
(ii) Electronic filing of documents such as Returns, Claims, Intimations and permissions;
(iii) Online tracking of the status of applications, claims and permissions;
(iv) Online facility to view documents like registration Certificate, Returns, Show Cause
Notices, Order-In-Originals etc.
This web based software is available at www.aces.gov.in

1.2 As per the proviso to amended Rule 6 (2) of Service Tax Rules, 1994, where an assessee has
paid a total service tax of rupees ten lakh or more including the amount paid by utilisation of CENVAT
credit, in the preceding financial year, he shall deposit the service tax liable to be paid by him
electronically, through internet banking. This has been made effective from 01.04.2010 vide
Notification No.01/2010 ST dated 19.02.2010.


1.3 As per the proviso to amended Rule 7 (2) of Service Tax Rules, 1994, where an assessee has
paid a total service tax of rupees ten lakh or more including the amount paid by utilisation of CENVAT
credit, in the preceding financial year, he shall file the return electronically. This has been made
effective from 01.04.2010 vide Notification No.01/2010 ST dated 19.02.2010.



7. Audit and Inspections
Inspection: Directorate General of Service Tax (DGST) conducts inspections of
Service Tax work in Central Excise Commissionerates & Service tax
Commissionerates all over the country. Inspections in the past have prompted
the Commissionerates to streamline the service tax administration system.
In pursuance of the Boards letter No.137/311/2007-CX.3 dated
15.12.2007, the DGST is conducting the inspection of the Commissionerates
having service tax revenue of Rs.500 Crore and above per annum. Accordingly,
8 Commissionerates each were inspected by the DGST during 2008-09, 2009-10
and 2010-11.
Audit: The service tax is envisaged to be administered on self-assessment
basis. Legal provisions for facilitating such self-assessment have been made in
the Finance Act, 2001. This underlines the need for strengthening the audit
mechanism to prevent tax evasion/avoidance. The Director General of Audit,
Central Board of Excise & Customs New Delhi published SERVICE TAX AUDIT
MANUAL 2003 on 01.10.2003 containing the entire procedure to be followed by
the officers of the Department while conducting audit of the Service Tax
providers. All Commissionerates have also been directed to conduct the internal
audit of assessees records as per the instructions of the Board.
This audit drive has resulted in the augmentation of revenue. During
2009-10 total 12989 audits were conducted in India by 549 audit groups.
These audits, resulted in detection of short payment to the tune of Rs.
7873.84 Crores and a recovery of Rs.1083.43 Crores. It is necessary that all
available resources and efforts are mobilized by the field formations for audit of
the registered assesses as per the norms decided by the Board.



8. Future growth path for service tax in India.
Service tax is envisaged as the tax of the future. Well synchronized
taxation on manufacturing, trade (domestic & international) and service without
giving rise to cascading effect of taxation would be an ideal worth pursuing in the
immediate future. This would bring in VAT in its truest sense, though the
ultimate objection usher in the regime of Goods and Service Tax (GST).
Continued growth in GDP accompanied by higher rate of growth in
service sector promises new & wider avenues of taxation to the Government. If
the tax on services reduces the degree of intensity of taxation on manufacturing
and trade without forcing the Government to compromise on the revenue needs,
then one of the basic objectives of taxing the service sector would be achieved.
Voluntary tax compliance on the part of taxpayers demands prudent
accounting practices and transparency in the conduct of their business. Marginal
rates of taxation would be conducive in this process. Many new services may be
brought under the tax net in future. The inclusion of all value added services in
the tax net would yield larger amount of revenue and make the existing tax
structure more elastic.
Advanced economies of Western Europe, North America and Far East
have share of service sector in their GDP ranging from 60% to 80%. The growth
in absolute quantum of GDP and proportion of Service-sector in GDP holds
promise for larger revenue generation without increasing the existing level of
taxation
Future Course of Action
The following items of works have to be attended to urgently to improve the
administration of Service Tax in the country.
1. Target (Budget estimate) of Rs.82000 crores Service Tax collection for f.y.
2011-12 to be exceeded.
2. Intensify the field survey operations to ensure that all taxable service
assessees are brought into the tax net and Service Tax due from them are
collected without hitch.
3. While the basic tenet of voluntary compliance of Service Tax law has to be
adhered to, recalcitrant/ habitual evaders of Service Tax have to be booked for
appropriate action under the law. There could be no leniency in this regard.
4. Effective use of Audit and Anti-evasion as tools for ensuring the
compliance on the part of the assessee and curbing the instances of
irregularities and tax evasion. With the launch of ACES greater emphasis will be
on training the staff in computer skills necessary to carry out effective, systematic
and result oriented analysis of data available in the system, to achieve their
person.
5. The statutory change to prosecute frequent offenders/tax evaders is
needed in the Act.
6. Effectively implement an Electronic Tax Administration (ETA) system for
service tax so that service tax could be administered as a pioneer e-tax of the
country. The Directorate General of Systems & Data Management has
developed a web based software named as AUTOMATION OF CENTRAL
EXCISE AND SERVICE TAX (ACES) which automates various processes of
Central Excise & Service Tax for Assesses and Department and gives complete
end to end solution. This web based software is available at www.aces.gov.in
7. Concentrate on liquidation of Service Tax arrears and issue necessary
clarifications to the field officers so that arrears linked up with disputed
interpretations of the provisions of the law could be easily resolved.
8. Attend to all major court cases relating to Service Tax law for early
decision.
9. Deploy adequate staff to attend to the service tax work and provide
infrastructure and conveyance to implement service tax law effectively.



Telephone Directory, DGST

EPABX lines : 022 - 2410 2584 / 86 / 89
FAX : 022 - 2417 8515 / 2410 2587

Email address - [email protected] , [email protected]

Sr.
No.
Name Designation Tel. No.
1 Smt. Sanghamitra Panda Director General 2410 2585
(D) 2418 1417
2 Shri C.P. Srivastava Additional Director General 2418 1418
3 Shri Yashodhan Wanage Additional Director 2411 5812
4 Shri Raju Sakthivel Additional Director 24181420
5 Shri Bharat Singh Deputy Director 2418 1421
6 Shri S.R. Bhatti Deputy Director 2411 2844
7 Shri S.B.Samant Deputy Director 2418 1419
8 Shri A.J.Kanojia Assistant Director 2410 2589

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