INTRODUCTION

1. Growing importance and Revenue Potential of Service Tax

The concept of Service Tax was first time introduced in India in 1994. Its scope has gradually increased, in view of the revenue earning potentials. Service Tax is growing faster than other sectors, the service sector accounted for 48.5% of the country's Gross Domestic Product (GDP) in the Financial Year 20002001. The role of this sector in the economy is quite significant. The Service Tax is fast emerging as an important tool of revenue collection for the Central Government. The Service Tax, that is Indirect Tax, has become a buzzword in the taxation laws and envisaged as the tax of the future. The Central Board of Excise and Customs has included the Service Tax under the existing 'Reward Scheme' of the department. Now, the service tax cases will be eligible for reward to the officers as well as informers. It is expected that now there would be rise in the number of service tax cases which are going to be booked.

2. Legislative provisions and administration of Service Tax

There is no separate enactment for Service Tax, it is governed by the provisions (Sections 65 to 96) of Chapter V of the Finance Act, 1994 and the rules (I to 9) given under the Service Tax Rules, 1994. By the Finance Act, 2003, w.e.f. 14-5-2003 a new Chapter VA (Sections 96A to 96-1) is inserted in the Finance Act, 1994 to provide Advance Rulings in respect of a question of law or fact regarding the liability to pay service tax. The Government has also framed "Service Tax (Advance Rulings) Rules, 2003" w.e.f. 23-7-2003 vide Notification No. 17/2003-ST, dated 23-7-2003. W.e.f. 10-9-2004, the credit of service tax paid on input services and excise duty paid on inputs is available under the CENVAT Credit Rules, 2004.

The Service Tax is administered by the Central Excise Department; however, the Department, which is looking after the Service Tax, has created a separate Cell. The Central Board of Excise and Customs has appointed Director General (Service Tax) [DGST] and Central Excise Intelligence Officer as Central Excise Officer and invests him with all the powers to be exercised by him throughout the territory of India under Finance Act, 1994 and Service Tax Rules, 1994 regarding any taxable service. As per Section 83 of the Finance Act, 1994, many provisions of the Central Excise Act, 1944 have been made applicable in respect of Service Tax too.

3. Service Tax Commissionerates set up

Keeping in view the potential of revenue collection from service tax, the Government has created -separate Service Tax Commissionerates in six cities viz. Delhi, Mumbai, Kolkata, Chermai, Bangalore and Ahmedabad. Blossoming metros like Hyderabad and Pune could also be added to the list of separate service tax Commissionerate. These Commissionerates will have full-fledge operations like Excise Commissionerates. Their job will be to identify new services which can be taxed and to ensure compliance in service tax payments. List of separate commissionerates and their jusrisdication are given hereunder:

S. No.	Designation	Jurisdiction
1	Commissioner of Service Tax, Mumbai	Central Excise Zone of Mumbai-I & II except Raigad Commissionerate.
2	Commissioner of Service Tax, Delhi	Central Excise Zone of Delhi except Commissionerate of Panchkula and Rohtak.
3	Commissioner of Service Tax, Chennai	Commissioner of Central Excise, Chennai-I & II
4	Commissioner of Service Tax, Kolkata	Central Excise Zone of Kolkata except Bolpur, Siliguri and Haldia Commissionerates.
5	Commissioner of Service Tax, Bangalore	Central Excise Zone of Bangalore.
6	Commissioner of Service Tax, Ahmedabad	Commissioner of Central Excise, Ahmedabad-I & II.

4. Constitutional Amendment to share the Service Tax proceed by the States

At present, the item relating to "taxes on services" is not specifically mentioned in any entry either in Union List or in the State List of the Seventh Schedule of the Constitution. The Parliament has the exclusive power to make laws with respect to entry 97 of the Union List for any other matters not enumerated in List 11 or List III including any tax not mentioned in either of those Lists, this is held by the Supreme Court in the case of Union of India v H.S. Dhillon 83 ITR 582. Thus, in exercise of this power, the Central Government has periodically taxed certain services at the rate of five per cent ad valorem.

The Hon'ble Finance Minister Shri Jaswant Singh in his budget speech, on 28-2-2003, said, "To enable levy of tax on services as a specific and important source of revenue, an amendment to the Constitution is proposed. This Constitutional amendment, and the consequent legislation would give the Central Government the power to levy the tax and both the Central and the State Governments sufficient powers to collect the proceeds."

As promised by the Hon'ble Finance Minister in his budget speech, the Constitution (Ninety-Fifth Amendment) Bill, 2003 was introduced in the Parliament, which has also been passed by the Parliament (by Lok Sabha on 6th May, 2003 and by Rajya Sabha on 8th May, 2003). Now, it has to be cleared/ rectified by the mandatory number of states. As per the aforesaid amendment an Article 268A has been inserted in the Constitution, namely:

"268A (1) Taxes on services shall be levied by the Government of India and such tax shall be collected and appropriated by the Government of India and the States in the manner provided in clause (2).

(2) The proceeds in any financial year of any such tax levied in accordance with the provisions of clause (1) shall be

(a) collected by the Government of India and the States;

(b) appropriated by the Government of India and the States,

in accordance with such principles of collection and appropriation as may be formulated by the Parliament by law."

Further, in the Seventh Schedule of the Constitution, in List I - Union List, entry 92C "Taxes on services" is inserted. A consequential amendment to Article 270 of the Constitution has also been made, to enable Parliament to formulate by law principles for determining the modalities of levying the said tax by the Central Government and collection of the proceeds thereof by the Central Government and the States.

As per para 4 of the 'statement of objects and reasons' to the above Constitutional amendment given by the Hon'ble Finance Minister, "The proposed amendment would help in significant augmentation of revenues of the States in accordance with the proposed law, and pave the way for eventual inclusion of services within the purview of State level VAT".

After the aforesaid Constitutional amendment will be rectified by the mandatory number of States, the Central Government will enact a separate Service Tax Bill to operationalise the modalities including collection and appropriation of this tax, up to the prescribed ad valorem limits, by the Centre and the States. To levy the tax on service will be the exclusive right of the Centre.

5. Applicability of Service Tax

The Service Tax is payable on all the taxable services rendered in India (except State of Jammu and Kashmir) (refer to Section 64 of the Act), whether to an Indian or foreign client. However, services rendered abroad shall not attract Service Tax levy as it extends only to services provided within India. Therefore, there shall not be any service tax on export of services, in this regard, to remove all doubt, the Government has issued Circular No. 56/5/2003, dated 25 April, 2003 which has been reproduced and discussed in the Chapter on 'Exemptions from whole of Service Tax -Some Cases'. The CBEC in answer to question No. 3.7 of the 'Frequently asked questions on Service Tax' issued in October 2003 has stated, " the service tax is payable on all taxable services rendered in India, whether to an Indian or foreign client". The Government has granted exemption from the whole of Service Tax in respect of all taxable services, for services provided to United Nations or an International Organisation. Similarly, the exemption, subject to certain conditions, has also been granted for taxable service provided to a developer or units of Special Economic Zone (SEZ). The Government, w.e.f. 20 November, 2003 has restored the exemption, as an interim measure, from the whole of service tax when payment is received in convertible foreign exchange for the taxable services rendered in India provided it was not repatriated from or sent outside India, such exemption was earlier withdrawn w.e.f. 1-3-2003. In relation to taxable services provided in India by a person who is a non-resident or is from outside India, does not have any office in India, w.e.f. 16-8-2002, the person receiving taxable services in India has been made liable to pay Service Tax. The Government has extended the provisions of service tax to the designated area in the Continental Shelf and Exclusive Economic Zone of India vide Notification No. 1/2002-ST (F. No. 334/1/2002-TRU), dated 1-3-2002 (appended as Annexure 1).

6. Rate of Service Tax

Since the year 1994, when Service Tax was first time started, Service Tax was levied on the uniform basis at the rate of 5% ad valorem for all the taxable services. The rate of service tax was enhanced by the Finance Act, 2003 from 5% to 8% ad valorem. The enhanced rate of service tax on all the taxable services came into force w.e.f. 14-5-2003 i.e. from the date of enactment of the Finance Act, 2003, however, the service tax on new services introduced (including three services where the scope had been widened), by the Finance Act, 2003, came into force from 1st July, 2003 vide Notification No. 7/2003-ST, dated 20-6-2003.

The Finance (No. 2) Act, 2004 has substituted the charging section 66, and the rate of service tax is enhanced from 8% to 10% ad valorem. The increase in tax rate has come into force from the date of enactment of the Finance (No. 2) Act, 2004 i.e. 10-9-2004. Further, the Finance (No. 2) Act, 2004 has levied an education cess @ 2% of the service tax, which is also applicable from 10-9-2004. The cess paid on input services shall be available as credit for payment of cess on output services.

7. Basic Exemption

As per the existing provision of Service Tax, no basic exemption or threshold limit for tax has been provided, therefore, Service Tax is liable to be paid by a person providing taxable service irrespective of the turnover of the taxable services provided by him, which appears to be irrational particularly when under all major taxation laws basic exemption limit has been provided. Demands have been made from various quarters to the Central Government to provide the basic exemption/ threshold limit to levy Service Tax to keep out of the ambit small service providers. Honble Finance Minister in the Parliament, addressing the concerns of Members of Parliament, on keeping small fry out of the net, said that tax would be decided by annual turnover levels and specific services. It was nobodys intention to make the plumber, carpenter or electrician liable (source: The Times of India, dated 9-5-2003). Even the expert committee constituted by the Government, in its final report has recommended the threshold limit, which reveals that about 80% of the tax payers have turnover less than rupees ten lakhs and have contributed only about 3% of total tax collection during the year 1999-2000, relevant para of the final report is reproduced below:

"06.2.6 In our interim report, we have recommended that, for the time being, it would be desirable to keep the threshold at Rs.10 lakhs. This limit was determined on the basis of a study conducted by the Directorate of Service Tax on the existing taxpayer profile of 7 major Central Excise Commissionerates, which reveal that while 79.25 percent assessees were having a turnover below Rs. 10 lakhs, they contributed only 2.9 percent of the total receipts during 1999-2000. The exclusion of such large number of assessees with very low revenue potential would reduce the cost of collection considerably. Additionally, stipulating a reasonable threshold also makes the tax system more efficient and acceptable. Therefore, we reiterate our earlier recommendations. We also suggest that this threshold limit of Rs. 10 lakhs could continue until a transition is made to comprehensive VAT on goods and services, when the thresholds for goods and services could be standardized."

8. Legislative History and Widening of Service Tax

The Service Tax was first time levied only on three services by the Finance Act, 1994 and by the Finance Act, 1996 the levy was extended to three more services. Twelve more services were brought under the Service Tax net by the Finance Act, 1997 and its scope was further enlarged by the Finance Act, 1998 when twelve more services were brought under the Service Tax net. Its scope was further widened by the Finance Act, 2001 when Service Tax was extended to fifteen more services. Three services were exempted from the Service Tax by the Finance Act, 1998 and one more service by the Finance Act, 2000. The Finance Act, 2002 has further levied service tax on ten more services. The Finance Act, 2003 brought 8 new services within the ambit of service tax and also extended the scope of three existing services. Further, the Finance (No. 2) Bill, 2004 has proposed to bring 14 new services under the service tax which includes re-introduction of service tax on 3 services and revival of service tax on risk cover in life insurance under the life insurance service.

Now, the Service Tax is on a total of 72 services at the uniform rate of 10% ad valorem.

9. Significant Changes in provisions of Service Tax

Ever since the Service Tax was first introduced in 1994, the amendments were made time to time in the provisions of Chapter V of the Finance Act, 1994 and the Service Tax Rules, 1994 but first time, in the year 1998, by the Finance Act, 1998, w.e.f. 16-10-1998 drastic changes were made in provisions related to Service Tax, to make it more assessee friendly and remove the hassles and hardship caused to the assessee. The provisions (Section 87 to Section 92) related to prosecution for certain specified offences were also omitted which were most stringent and draconian in nature. The time period of payment of tax and filing of return was relaxed, registration procedure was simplified, penalty was reduced and provision related to self-adjustment of excess payment of service tax was introduced. The second drastic changes in provisions related to Service Tax were made in the year 2001, by the Finance Act, 2001, w.e.f. 16-7-2001. The most significant legislative change was introduction of self-assessment procedure. Separate definition of value of taxable service for each service was replaced with a general and common definition besides that certain other changes were also made. For the first time, the provision of input credit is introduced by the Finance Act, 2002, w.e.f. 16-8-2002. The credit of service tax paid shall be allowed only if service tax paid on the services consumed for providing taxable services and services provided fall in the same category of taxable services. The Government has also framed the "Service Tax Credit Rules, 2002" in which specific procedure has been prescribed to avail the credit of service tax. The Finance Act, 2003 has made provisions for advance rulings in respect of question of law or fact regarding the liability to pay service tax. Further, the Finance (No. 2) Act, 2004 has made many changes in the law to make service tax administration more assessee friendly. The penalty provision for delay in registration is omitted, section 71 for compulsory verification of return by the Department and section 72 for best judgment assessment have also been omitted. The most important change made is to allow credit of input tax extended across goods and services and to give effect to this proposal, the Government has made the CENVAT Credit Rules, 2004 vide Notification No. 23/2004-CX (N.T.), dated 10th September 2004, which is a step towards integration of tax on goods and services.

10. Legal base and Constitutional Validity

Article 265 of the Constitution of India states, "no tax shall be levied or collected except by authority of law".

Article 246 of the Constitution of India states, "Parliament has exclusive power to make laws with respect of any matters enumerated in List I (referred as 'Union List') in the Seventh Schedule".

The entry 97 (popularly known as 'residuary entry') of the 'Union List' of Seventh Schedule states, "any other matter not enumerated in List II ('State List') or List III ('Concurrent List') including any tax not mentioned in either of those Lists.

The Supreme Court in the case of Union of India v H.S. Dhillon 83 ITR 582 held that there is no subject in which either the Parliament or State Legislatures cannot legislate. The Central Government has power to make law or impose tax on any matter not covered by the 'State List' and 'Concurrent List'. The ratio of aforesaid case would apply to Service Tax also. The Service Tax is not covered either under 'State List' or 'Concurrent List', therefore, the Central Government gains its authority from the 'residuary entry' to impose the Service Tax.

The service tax on various services had been challenged before the various High Courts on the grounds of it being discriminatory in nature and in violation of Article 14 of the Indian Constitution. In all the cases, some have been mentioned hereunder, the various High Courts dismissed the petitions challenging the constitutional validity of service tax. The Supreme Court in the celebrated decision of Federation of Hotels and Restaurant case AIR 1990 SC 1637 observed that:

"It is now well settled that though taxing laws are not outside Article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal-policy, legislature enjoys a wide latitude in the matter of selection of persons, subject-matter, events, etc. for taxation. The tests of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a. hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of its provisions. A legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. The legislature can exercise an extremely wide discretion in classifying item for tax purposes, so long as it restrains from clear and hostile discrimination against particular persons or classes."

In the case of Advertising Club, Chennai v Central Board of Excise and Customs, New Delhi 2001 (131) ELT 35 (Mad), constitutional validity of the Service Tax provisions was challenged ton the ground that in the matter of calculation of tax, the actual expenses were not excluded and the tax was charged on the gross amount charged by the advertising agency from their clients while in case of other services such expenditure was allowed and permitted to be deducted from the gross amount charged. In this case the Division Bench of the Madras High Court held that on this ground challenge cannot be made particularly relying on Article 14 of the Constitution. The Court recorded a finding that no fault can be found with the taxing provision with reference to the measure of the tax. It was also held that it would be the discretion of the concerned authority to decide as to what are the deductible amounts and which are the others and it could not be decided as to whether a taxing statute is constitutional or otherwise on the basis of the way the calculations are to be made by the taxing authorities. Indeed a nature of the tax cannot be ascertained on the basis of its measure and this proposition is well settled. Even otherwise, the question raised regarding the calculation of the tax would not be apposite (appropriate) to decide the constitutional validity of the provisions much less under Article 14 of the Constitution of India. All the challenges related to the calculations and more particularly in comparison to the other services would have to be rejected on this ground alone.

The Gujarat High Court in the case of Addition Advertising v Union of India (1998) 98 ELT 14 has held that levy of tax on advertising service is Constitutionally valid and it is not a tax on any profession, trade, calling or employment, but in respect of service rendered. The Bombay High Court in its order dated 22-2-2001, dismissed the writ petitions filed by the Chartered Accountants (Writ Petition No. 142/99) and Architects (Writ Petition No. 1174/2000) challenging the Constitutional validity of Service Tax as imposed upon them. The Gujarat High Court in the Case of Chartered Accountants Association v Union of India (2001) 115 Taxman 543 held that levy of Service Tax is Constitutionally valid and also held that professional tax and service tax are two different taxes. The professional tax is a tax for privilege for having the right to exercise that particular profession whereas Service Tax is the tax on the services rendered for fee or remuneration.

In the case of V. Shanmughavel (Dr.) v Commissioner of Central Excise, Chennai-11 (2001) 131 ELT 14 (Mad), the court held that service tax on Consulting Engineering service does not violate Article 14 of the Indian Constitution, the consulting engineering is a 'class' by themselves, therefore, argument that tax on Consulting Engineering service is arbitrary because the other professionals are not taxed, is clearly untenable.

In the case of Kerala Colour Lab. Association v Union of India (2003) 156 ELT 17 (Ker) it was held that service tax on photography studio or agency is not tax on the profession, trade, calling or employment but within the legislative competence of Parliament relatable to Article 248 read with entry 97 of List 1 of Seventh Schedule to the Constitution, hence constitutionality valid. The Court also held that "Parliament by imposing service tax has neither taxed the material, nor the sale thereof. What has been taxed is the service rendered by the photography studio and agencies, which was hitherto untouched. We are, therefore, unable to accept that Parliament has no competence to enact the legislation for the levy of service tax ".

The Supreme Court, in the case of Tamil Nadu Kalyana Mandapam Association v Union of India (2004) 167 ELT 3 (SC), while upholding the Constitutional validity of service tax on mandap keeper services, held that "a levy of service tax on a particular kind of service could not be struck down on the ground that it does not conform to a common understanding of the word "service" so long as it does not transgress any specific restriction contained in the Constitution".

11. Main features of service tax

§ No basic exemption limit

§ No registration fee

§ Deemed registration, if registration not granted within 7 days

§ No specific records have been prescribed

§ Tax on uniform rate i.e. 10% of value of taxable service for all taxable services

§ Exempt from whole of service tax for services provided to United Nations or an International Organisation and subject to certain conditions, service provided to a developer or units of Special Economic Zone (SEZ).

§ Payment of tax on realization of value of taxable service

§ Payment of tax on quarterly basis for non-corporate assessee and monthly for corporate assessee.

§ Simple interest on delay of payment of tax

§ Hefty penalty on delay of payment of tax

§ Return on half yearly basis for all assessees;

§ General penalty for contravention of any provision or rule where no penalty has been prescribed

§ Self adjustment of excess service tax paid in some cases

§ Credit of service tax paid on input service and excise duty paid on inputs.

§ Self assessment

§ Refund of service tax

§ Penalty for concealment

§ Wide power to search premises and seize the documents, books or other things

§ Administered by Central Excise Department, however in selected cities separate service tax commissionerate set up for better compliance.

12. Collection of service tax

The growing importance of service tax can be gauged by the collection of tax, figures of which are as under:

Year Revenue in Rs. crores

1994-95 407

1995-96 862

1996-97 1059

1997-98 1586

1998-99 1957

1999-2000 2072

2000-2001 2612

2001-2002 3200

2002-2003 4123

2003-2004 7750

2004-2005 (Target) 13500

Annexure I

Extension of Service Tax to Continental Shelf and Exclusive Economic Zone of India

[Notification No. 1/2002-ST [F. No. 334/l/2002-TRU], dated 1-3-2002]

In exercise of the powers conferred by clause (a) of sub-section (6) of section 6, and clause (a) of sub-section (7) of section 7, of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (80 of 1976), the Central Government hereby extends the provisions of Chapter V of the Finance Act, (32 of 1994) to the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the Notifications of the Government of India in the Ministry of External Affairs Nos. SO 429(E), dated the 18th July, 1986 and SO 643(E), dated the 19th September, 1996 with immediate effect.

Table 1

'Service tax' provisions at a glance

Sr. No.	Taxable Services[Section 65(105)]	Value of taxable services Redefined by Finance Act, 2001 w.e.f. 16-7-2001 [Section 67]	Persian liable to pay service tax [Section680) read with section65 (105)]	Applicable date	Relevant Notification No.- and date	Rate of tax [Sec. 66]
1.	Stock booking	Aggregate of the commission or brokerage charged on sale or purchase of securities (includes the commission or brokerage paid by him (a any sub-broker).	Stock broker	1-7-1994	1/94 dated: 286-1994	10%*
2,	Telephone services	Gross amount (excluding initial deposits but including adjustment from initial deposit) charged from the subscribers.	Telegraph authority (see note 1)	1.7-1994	1/94 dated: 28-6-1994	10 %*
3.	Pager services	Gross amount (excluding initial deposits but including adjustment from initial deposit) charged from the subscribers	Telegraph authority(see note 1)	1-11-1996	6/96 dated: 31-10-1996	10%*
4,	General Insurance business services	Amount of the premium charged from the policy holder.	Insurer (see note 2)	1-7-1994	1/94 dated28-6-1994	10 %*
5	Advertising services	Gross amount charged from the clients for services in relation to advertisements.	Advertising agency	1-11-1996	6/96 dated: 31-10-1996	10%*
6.	Courier services	Gross amount charged from the customers in relation to transportation of time-sensitive documents, goods and articles.	Courier agency	1-11-1996	6196 dated: 31-10 1996	10 %*
7.	Consulting engineer's services	Gross an t charged from the clients in respect of engineering services,	Consulting engineer	7-7-1997	23/97 dated2-7-1997	10%*
8.	Custom house agent's... vice,	Gross amount charged from client in relation to entry or departure of conveyances or the import or export of goods	Custom house agent	15-6-1997	17/97 dated: 6-6-1997	10 %*
9.	Steamer agent's	Gross amount charged in relation to shipping line.	Steamer agent	15-6-1997	17/97 dated: 6-6-1997	10%*
10	Clearing and forwarding agents' services	G ass amount charged from the clients for services of clearing and forwarding operations. But, it is further prescribed in rule that gross amount of remuneration or commission paid to such agent by the client [rule 6(8)].	Clearing and forwarding agent (see also note 3)	16-7-1997	26/97 dated: 11-7-1997	10 %*

11	Manpower recruitment agency’s services	Gross amount charged from the clients in relation to the recruitment of manpower	Manpower recruitment agency	7-7-1997	23/97 dated: 2-7- 1997	10%*
12	Air travel agent s services	Gross amount charged from the customer, in relation to booking of passage for travel by air including the commission received from airline by air travel agent excluding air fare	Air travel agent	1-7-1997	19/97 Date &26-6-1997	10%* also refer to rule 6(7).
13.	Good, transport operator's services	Gross amount charged from a customer relation to transport of goods by road	Goods transport agency	+	Re- introduced by Finance (No. 2) Act, 2004	10%+
14.	Outdoor caterer" services	Gross amount charged train a client in relation to outdoor caterer service	Outdoor caterer	10-9-2004	Re introduced by Finance (No. 2) Act, 2004	10%**
15.	Pannell or shanniana contractors services	Gross amount charged freer a client in relation to a panda [or shiumana	Pardalor shamans contractor	10-9-2004	Re- introduced by Finance (No 2) Bill2004	10 %**
16.	Marital, keeper', service,	Gross amount charged from the clients for the use of mandap including other facilities and charges for catering.	Mandap keeper	1-7-1997	19/97 dated: 26-6-1997	10 %*
17	Tom, operator's services	Gross amount charged from any person in relation to a tour.	Tour operator	1-9-1997(see note 6)	37/97 dated: 22-8-1997	10%*
18.	Rent-a-cal, scheme operator's service,	Gross amount charged fro in any person in relation to renting a cab.	Rent-a-cab scheme Operator	16-7-1997(see note7)	26/97 dated: 11-7-1997	10%*
19.	Architect's services	Gross amount charged from the clients for service s rendered in professional capacity,	Architect	16-10-1998	53/98 dated: 7-10-1998	10 %*
20.	Interior decoraka's services	Gross mount charged from the clients in relaucat to planning, design or beautification of space,	Interior decorator	16-10-1998	53/98 dated: 7-10-1998	10 %*
21,	Management consltant’s services	Cross amount charged from the client, in connection with management of any organization.	Management consultant	16-10-1998	53/99 Date, 7-10-1998	10%*

22,	Pictisirg chartered accountant's services	Gross amount charged from the clients for service., rendered in professional capacity. (Refer to Notification 59/98. dated 16-10-1998)	Practising chartered accountant	16-10-1998	53/98 dated: 7-10-1998	10%*
21	Practising cost accountant's services	Gross amount charged from the client, for services tendered in professional capacity. (Refer to Notification No. 59/98, dated16-10-1998)	Practising cost accountant	16-10-1998	53/98 dated7-10-1998	10 %*
24.	Practising company secretary', services	Gross amount charged from the clients for services rendered in professional capacity. Refer to Notification No 59198, dated 16-10-1998)	Practising company secretary	16-10-1998	53/98 dated: 7-10-1998	10%.*
25.	Real estate agency’s services	Gross amount charged from the client., in relation to real estate.	Real estate agent	16-10-1998	53/98 dated: 7-10-1998	10 %*
26	Security agency's services	Gross amount charged from the clients in connection with security of any property or person by providing security personnel, includes investigation, detection or verification.	Security agency	16-10-1998	53/98 dated: 7-10-1998	10%*
27.	Credit rating agency' services	Gross amount charged from the clients in connection with credit rating of any financial obligation, instrument or	Credit rating agency	16-10-1998	53/98 dated7-10-1998	10%*
29.	Market research agency s services	Gross amount charged from the clients in connection with market research of any product. service or any utility.	Market research agency	16-10-1998	53/98 dated 7-10-1998	10%*
29.	Under- writer', services	Gross amount charged from the clients in relation to underwriting.	Underwriter	16-10-1998	53/98 dated: 7-10-1998	10%*
30.	Mechanized - slaughter house's services	Exempted.	N.A.	(see note 8)	(see note 8)	N.A.
31.	Scientific or Technical Consultancy services	Gross amount charged from the client in relation to advice consultancy or scientific or technical assistance.	Scientist or technocrat or science or technology institution, or organization.	16-7-2001	4/2001 dated: 9-7-2001	10%*

32	Photography services	Gross amount charged from the customer in elation to still, motion picture, laser, aerial and fluorescent photography, But does cut include the cost of unexposed photography film sold to the customer during the course of providing the services	Photography studio or agency	16-7-2001	4/2001 dated: 9-7-2001	10%*
33,	Convention services	Gross amount charged from the client in elation to holding formal meeting or assembly not open to the public.	Commercial concern	16.7-2001	4/2001 dated 9-7,2001	10%.*
34,	Lease Circuit, services	Gross amount (excluding initial deposits but including adjustment from initial deposit) charged from the subscribers.	Telegraph authority(see note 1)	16.7-2001	4/2001 dated9-7-2001	10 %*
35.	Telegraph services	Gross amount (excluding initial deposits but including adjustment from initial deposit) charged from the subscii1bers.	Telegraph authority(see note 1)	167-2001	4/2001 dated-9-7-2001	10%*
36.	Telex services	Gross amount (excluding inifial deposits but including adjustment from initial deposit) charged from the subscribers.	Telegraph authority (see note 1)	16-7-2001	4/2001 Dated 9-7 2001:	10%*
37.	Facsimile (Fax) services	Gross amount (excluding initial deposits but including adjustment from initial deposit) charged from the subscribers.	Telegraph authority (see note 1)	16-7-2001	4/2001 dated: 9-7-2001	10%.*
38.	On line information and data base access and/or retrieval services	Gross amount charged from customer to elation to such services.	Commercial concern	16-7-2001	4/2001 dated9-7-2001	10%*
39	Video tape production services	Gross amount charged from the client in relation to process of recording of any programme, event or function on a magnetic tape and in, ludes editing thereof, but does not include the cost of unrecorded magnetic tape or such other storage devices sold to the client during the course of providing the services.	Video production agency	16-7-2001	4/2001 dated9-7-2001	10%*

40	Sound recording services	Cross amount charged from the client in relation to recording of sound an a magnetic storage device and editing thereof but does not include the cost of unrecorded magnetic tape or such other storage devices sold to the client during the course of providing the services.	Sound recording Studio or agency	16-7-2001	4/2001 dated. 9-7-2001	10%.*
41,	Broadcasting (Radio ad Television) services	Gross amount charged from the client in relation to broadcasting services.	Broadcasting agency or organization	16-7-2001	4/2001 dated: 9-7-2001	10%*
42	Insurance auxiliary service,	Gross amount charged for such services and includes Commission fee or any other sum received from the insurer. But rule has prescribed that where Service is provided by insurance agent, gross amount of commission, fee or any other sum paid to such agent by the insurer [rule 6(9)].	Actuary or intermendiary or diary or insurance intermediary or insurance agent (see note 9)
	(a) concerning general insurance business			16-7-2001	4/2001 dated: 9-7-2001	10%*
	(b) concerning life insurance business			16-9-2002	8/2002 dated: 1-8-2002	10%*
43.	Banking and financial service,	Cross amount charged from the customer in relation to banking and other specified financial service.	(a) Banking company or financial institution or a man- banking financial institution	16-7-2001	4/2001 dated: 9-7-2001	10%*
			(b) Any other body corporate	16-8-2002	8/2002 dated: 1-8-2002	10%.*
			(c) any forex broker(which is Not covered earlier)	Added by the Finance Act, 2003, w.e f,1-7-2003	7/2003, dated20-6-2003	10%*

44.	Banking services	Gross amount charged from any person for services in relation to vessel or goods.	(a) Any port or any person authorised by the port	16.7-2001	4/2001 dated9-7-2001	10%.*
			(b) other Port or person authorised by such part	Added by the Finance Act. 2003, w.e.f. 1-7-2003	7/2003, dated20-6-2003	10%.*
45.	Service or repair of (a) motor car, or two- wheeled motor vehicles	Gross amount charged from customer in relation to any service or repair of motor car, maxicat, or two wheeled motor vehicle, and include, reimbursement received from manufacturer but dues not include cost of part or accessories, or consumable sold to the customer during the course of service or repair.	(a) Authorized service start	16-7-2001	4/2001 dated9-7-2001	10%*
	(b) light motor vehicle		(b) Authorized service station	Added by the Finance Act, 2003, w.e.f1-7-2003	7/2003, dated20-6-2003	10%*
46	Beauty parlour’s services	Gross amount charged from a customer in service in relation to beauty treatment.	Beauty parlour	16-8-2002	8/2002 dated: 1-8-2002	10%*
47	Cargo handling services	Gross amount charged from any person in relation to cargo handling services	Cargo handing agency	16-8-2002	8/2002 dated1-8,2002	10%*
48.	Cable services	Gross amount charged from subscribe, in relation to cable services	Cable operator	16-8-2002	8/2002 dated: 1-9-2002	10%*
49	Dry cleaning service,	Gross amount charged front customer in relation to dry cleaning	Dry cleaner	16-8-2002	8/2002 dated1-8-2002	10%*
50	Event management service	Gross amount charged from a client in relation to "ant management	Event manager	16-8-2002	8/2002 dated: 1-8-2002	10%*
51	Fashion Designer’s service	Gross amount charged from any person in relation to fashion designing	Fashion designer	16-8-2002	8/2002 dated: 1-8-2002	10%*
52.	Health club and fitness centre's services	Gross amount charged from any person in relation to health and times,, services	Health club and fitness centers	16-8-2002	8/2002 dated: 1-8-2002	10%*

53	Life insurance business services.	Amount charged for risk cover	Insurer	10-9-2004	Re- introduced by Finance (No. 2) Act, 2004	10%**
54.	Rail travel agent, services	Gross amount charged from the customer in relation (a booking passage for travel by rail including the commission received from Railways but excluding the rail fare	Rail travel agent	16.8-2002	8/2002 dated1-8-2002	10%*
55	Storage and warehousing services	Gross amount charged from any person in relation to storage and warehousing of goods	Storage or warehouse keeper	16-8-2002	8/2002 dated: 1-8-2002	10%*
56.	Business auxiliary service,	Gross amount charged from a client in relation to business auxiliary services	Commercial Concern	1-7-2003	7/2003, dated 20-6-2003	10%*
57.	Commercial training or coaching services	Gross amount charged from any person in relation to commercial training or coaching services	Commercial training - or coaching centre	1-7-2003	7/2003, dated 20-6-2003	10%*
58.	Commission ing or installation services	Gross amount charged from a customer in relation to commissioning or installation services	Commission ing or installation agency	1-7-2003	7/2003. dated 20-6 2003	10%*
59.	Franchise services	Gross amount charged from a franchisee in relation to franchise	Franchisor	1-7-2003	7/2003, dated 20-6-2003	10%*
60.	Internet carte, services	Gross amount charged from any person in relation to access of internet	Internet cafe	1-7-2003	7/2003 dated 20-6-2003	10%.*
61	Maintenance or repair services	Gross amount charged from a customer in relation to maintenance or repair	Any person providing such	1.7-2003	7/2003, dated 20-6-2003	10%*
62.	Technical testing and analysis services	Gross amount charged from any person in relation to technical testing and analysis	Technical testing and analysis agency	1-7-2003	7/2003, dated 20-6-2003	10%*
63.	Technical inspection and analysis services	Gross amount charged from any person in relation to technical inspection and certification	Technical inspection and certification that agency	1-7-2003	7/2003 dated. 20-6-2003	10%*
64	Airport services	Gross amount charged from any person in relation to airport services	Airports authority or any person authorised by it	10-9-2004	Introduced by Finance (No. 2) Act. 2004	10%**

65.	Transport of goods by air service,	Gross amount charged form any person in relation to transport of goods by aircraft	Aircraft operator	10-9-2004	Introduced by Finance (No. 2) Act, 2004	10%**
66	Business exhibition service	Gross amount charged from any person in relation to business exhibition	Organiser of a business exhibition	10-9-2004	Introduced by Finance (No 2) Act, 2004	10%**
67	Construction service	Gross amount charged from any person in relation to Construction service	Commercial concern	10-9-2004	Introduced by Finance (No 2) Act, 2004	10%**
68	Intellectual property service	Gross amount charged from any person in relation to intellectual property service	Holder of intellectual property right	10-9-2004	Introduced by Finance (No. 2) Act, 2004	10%**
69.	Opinion poll service	Gross amount charged from any person in relation to opinion poll opinion poll	Opinion poll agency	10-9-2004	Introduced by Finance (No. 2) Act, 2004	10%**
70.	TV or radio programme services	Gross amount charged from any person in relation to a programme programme	Programme producer	10-9-2004	Introduced by Finance (No. 2) Act, 2004	10%**
71.	Survey and exploration of mineral service	Gross amount charged from a customer in relation to survey and exploration of mineral	Any person	10-9-2004	Introduced by Finance (No. 2) Act, 2004	10%**
72.	Travel agent service	Gross amount charged from a Customer in relation to the booking of passage for travel	Travel agent	10-9-2004	Introduced by Finance (No. 2) Act, 2004	10%**
73,	Forward contract service	Gross amount charged from any person in relation to a forward contract	Member of a recogrised association or a registered association	M9-2004	Introduced by Finance (No.2) Act, 2004.	10%**

Notes:-

1. As per sub-clause (i), clause (d) of sub-rule (1) of rule 2, in relation to telephone or pager or a communication through telegraph or telex or a facsimile communication or a leased circuit service, the person liable to pay service tax means-

(a) the Director General of Posts and Telegraphs, referred to in clause (6) of section 3 of the Indian Telegraph Act, 1885 (13 of 1885); or

(b) the Chairman-cum -Managing Director, Mahanagar Telephone Nigam Ltd., Delhi, a company registered under the Companies Act, 1956 (1 of 1956); or

(c) any other person who has been granted a licence by the Central Government under the first proviso to sub-section (1) of section 4 of the Indian Telegraph Act, 1885 (13 of 1885);

2. As per sub-clause (ii), clause (d) of sub-rule (1) of rule 2, in relation to general insurance business services, the person liable to pay service tax means

(a) the Chairman of the General Insurance Corporation of India, Mumbai; or

(b) the Chairman-cum-Managing Director of the National Insurance Company Ltd., Calcutta; or

(d) the Chairman-cum-Managing Director of the Oriental Insurance Company Ltd., Delhi; or

(e) the Chairman-cum-Managing Director of the United India Insurance Company Ltd., Chermai; or

(f) any other person carrying on general insurance business and who has obtained a certificate of registration under section 3 of the Insurance Act, 1938 (4 of 1938).

3. Earlier in respect of services rendered by the 'clearing and forwarding agent', the person who engaged such agent was liable to pay service tax, that was done away by Notification No. 7/99, dated 23-8-1999, w.e.f. 1-9-1999. The Finance Act, 2003 has made amendment with retrospective effect to validate the service tax collected from the service receiver from C & F agent for the period from 16-7-1997 to 16-10-1998.

4. Service tax on services rendered by 'goods transport operator' was levied w.e.f. 16-11-1997 vide Notification No. 41/97, dated 5-11-1997. The service tax in respect of 'goods transport operator' was withdrawn w.e.f. 2-6-199S vide Notification No. 49/98 of even date. The Finance Act, 2003 has made amendment with retrospective effect to validate the service tax collected from the service receiver from Goods transport services for the period from 16-11-1997 to 2-6-1998. The Finance (No. 2) Act, 2004 has reimposed the tax on this service.

5. Service tax on services provided by 'outdoor caterer' and 'pandal or shamiana contractor' was levied w.e.f. 1-8-1997 vide Notification No. 28/97, dated 25-7-1997. The service tax in respect of both the services has been withdrawn w.e.f. 2-6-1998 vide Notification No. 49/98 of even date. The Finance (No. 2) Act, 2004 has reimposed the tax on these services.

6. Service provided by 'tour operator' was exempted from service tax w.e.f. 18-7-1998 till 31-3-2000 vide Notification No. 52/98, dated 18-7-1998.

7. Service provided by 'rent-a-cab scheme operator' was exempted from service tax w.e.f. 25-2-1999 till 31-3-2000 vide Notification No. 03/99, dated 28-2-1999.

8. Service tax on services rendered by 'mechanized slaughter house' initially was levied w.e.f. 16-10-1998 vide Notification No. 53/98, dated 7-10-108. The service tax in respect of 'mechanised slaughter house' has been withdrawn w.e.f. 1-3-2000 vide Notification No. 2/2000 of even date.

9. As per sub-clause (iii), clause (d) of sub-rule (1) of rule 2, in relation to insurance auxiliary service by an insurance agent, the person liable to service tax means any person carrying on general insurance business or the life insurance business, as the case may be, in India, who appoints such agent.

10. While, in the Finance Act, 2002, the provision was made to levy the service tax on service provided to a policy holder, by an insurer carrying on life insurance business, but when Central Government issued Notification No. 8/2002, dated 1-8-2002 to levy the service tax w.e.f. 16-10-2002, on all the new services introduced by the Finance Act, 2002, the Central Government issued another Notification No. 9/2002, dated 1-8-2002, and exempted the taxable service provided to a policy holder, by an insurer carrying on life insurance business from the whole of service tax. As a result, service tax was non starter on the service provided by an insurer to a policy holder in relation to life insurance business and consequently, in this regard, provisions [section 65(51) and section 65(90)(zx)] inserted by the Finance Act, 2002 have become redundant. The Finance (No. 2) Act, 2004 has revived the tax on this service to the extent of risk covered in life insurance.

Table 2

'Service tax' - Penal provisions at a glance

Section	Type of default	Quantum of interest/ penalty
75	Delayed payment of Service Tax	1 Simple interest at the rate of thirteen per cent per annum for the period of delay on the amount by which crediting of tax or any part thereof is delayed.
75A	Penalty for non- registration	2 Five hundred rupees, if the assessee fails to make the application for registration for service tax.
76	Failure to pay Service Tax	3 In addition to paying service tax and interest under section 75, not less than one hundred rupees but which may extend to two hundred rupees for every day during which the failure continues. However, the penalty shall not exceed the amount of service tax that assessee has failed to pay.
77	Failure to furnish prescribed return	4 Penalty which may extend to an amount not exceeding one thousand rupees.
78	Suppressing value of taxable service	5 In addition to service tax and interest, a sum which shall not be less than, but which shall not exceed twice, the amount of service tax sought to be evaded.
79	General penalty	6 A sum which shall not be less than ten per cent but which shall not exceed fifty per cent of the amount of the service tax that would have been avoided,

Notes. - (1) The department has clarified, on the representation made to the Commissioner, Central Excise & Customs, New Delhi, "Assessee is required to file service tax return even for Nil tax in terms of section 70 of Finance Act, 1994 read with rule 7 of Service Tax Rules, 1994. Penalty under section 77 is leviable for non-filing of returns".

(2) The penalty under section 76, 77 or 78 shall not be levied if the assessee proves that there was reasonable cause for the failure referred in these sections [section 80]. The department has clarified, on the representation made to the Commissioner, Central Excise and Custom, New Delhi, "There is no provision of levying penalty without issuing show cause notice".

Table 3

'Service tax' - Obligations and Time Limits at a glance

Sections/	Obligations	Frequency	Time Limit	Prescribed
Rules				Form
68 read with rule 6(1)	Payment of Service Tax	Monthly	For corporate assessees by 25^th of the following month	TR-6 Challan
68 read with rule 6(1)	Payment of Service Tax	Quarterly	For individuals and firms by 25^th of the following month of the quarter ending	TR-6 Challan
68 read with rule 4(1)	Registration under Service	One time	Within 30 days from the date on which tax is levied or commence the business	Form ST-1
Role 4(5)	Grant of Certificate of registration	One time	Within 7 days of registration application: otherwise, it will be deemed to have been granted.	Form ST-2
70 read with rule 7(1) &7(2)	Return of Service Tax	Half-yearly	Within 25 days of end of each half year	For ST-3/ST-3A (in triplicate) along with copy of Form TR-6
Rule, 6(4) & 6(5)	A statement giving details of the difference between the service tax deposited and service tax liability to be paid for each month, when assessee opted for provisional assessment.	Monthly or quarterly. as the case may be	Not prescribed	Form ST-3A
* 85 read With rule, 8(1) & 8(2)	Appeals by an assessee to Commissioner of Central Excise (Appeals)	If required	3 mouth,, of the receipt fit order sought to be appealed	Form ST-4 (in duplicate with copy of order)
86(l) & (3) read with rule 9(1)	Appeals by an assessee, against the order of commissioner u/s 84 or commissioner (Appeals) u/s 85, to the Appellate Tribunal	If required	3 months of the receipt of order sought to be appealed	Form ST 5 (in quadruplicate With copy of order and one certified copy of copy)
86(2) & (3) read with rule 9(2)	Appeals by Commissioner, on the direction of Board. against the older of Commissioner u/s 84, to the Appellate Tribunal	If required	3 months of the receipt of order sought to be appealed	Form ST-7 (in quadruplicate with copy of older with one certified copy and copy of Board's order)
86(2A) &(3) read with rule9 (2A)	Appeal by Assistant/ Deputy Commissioner, on the direction of Commissioner, against the order of Commissioner (Appeals) U/s 85 to the Appellate Tribunal	If required	3 months of the receipt of order sought to be appealed	Form ST-7 (in quadruplicate With copy of order with one certified copy and copy of Commissioners order)

86(4) read with rule 9(3)

Memorandum of cross objection by commissioner or Deputy/Assistant commissioner or assessee, as the case may be

When route, of appeal received

Within 45 day of the receipt of notice

Form ST-6 (in quadruplicate)