SERVICE TAX Class-2 Sudir Halakhandi

8/14/2019 SERVICE TAX Class-2 Sudir Halakhandi

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SERVICE TAX

IPCC

SUDHIR SIR KEE CLASS- 2

THE LAW OF SERVICE TAX

-CA SUDHIR HALAKHANDI

NOTICE BOARD

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CA SUDHIR HALAKHANDI


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1.CONSTITUTIONAL POWER TO INTRODUCE SERVICE TAX

CA SUDHIR HALAKHANDI: - Students after going through the brief of service tax inmy earlier class, today we will talk about the law of service tax in our country and I willtell you how the Government of India got the power to tax the services and further howthis tax is being administered legally in the country.

SHEFALI: - Sir, Government needs any power to introduce the taxes?

CA SUDHIR HALAKHANDI: - Yes it needs and the power is given by the Constitutionof India and without authorization from constitution no tax can be imposed.

Article 265 of constitution of India says that:-

No tax shall be levied or collected except by the authority of Law.

The taxes can only be imposed under the authority of law given by the Constitution of

India. The constitution on India through its schedule VII has made the three lists andthese list are related to the powers of Central Government and State Governments tomake laws and details of there three lists are as under:-

LIST ONE

1. Union List- The list contains the matters in respect of which Central Governmentcan make the law.

LIST TWO

2. State List: - The list contains the matters in respect of which State Governments can

make the law.

LIST THREE

3. Concurrent List: - The list contains the matters in respect of which Central and StateGovernments both can make the law.

So students do you understand that any law including the taxes can not be imposedwithout constitutional authority and constitutional authority of the central Governmentand the state Government is well defined in the Constitution of India.

IS THAT OK????


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STUDENTS: - YES SIR!!!!!

NITIN: - Sir, our constitution was made in early fifties and service tax law was introduced in1994. Is there any power in the constitution to authorize the Central Government to introducetax on services? I think sir, in early fifties the role of service sector was not so prominent inour country.

CA SUDHIR HALAKHANDI: - Very intelligent question!! Yes when constitution wasmade in early fifties there were very low contribution from the service sector in the GDP

hence no specific provision was made in the constitution with respect to service tax butsee in List first (Union List) there is a entry which I am narrating you :-

Entry No. 97:- Any other matter not enumerated in List II or List III including anytax not mentioned in either of those lists.

This is residuary entry and according to it if any thing including any tax not mentioned inList II (the state subject) or List III (The concurrent subject- both Central and state hasthe power) will be covered under it i.e. in List I (The Union List-Central List)

By using this power of entry No. 97 (List I), Central Government introduced Service Taxin 1994.

Is that Clear????

STUDENTS: -YES SIR!!!!!!

LOVKESH: - Sir, still service tax is not specifically authorised in the constitution?

CA SUDHIR HALAKHANDI: - No this is not the present situation , the 92nd

Amendment in the constitution has made the entry clear and in List I i.e. in union listentry No. 92 C was added as under :-

92C:- Taxes on Services

It is effective from 7-01-2004.


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VINITA: - Sir, it means now there is a clear entry in the union list to authorize theGovernment to introduce Tax on services but sir what about the situation between 1994 an2004 ? The introduction of Service tax in 1994 was perfectly constitutional?

CA SUDHIR HALAKHANDI: - I earlier told you that in 1994 it was introducedthrough entry No. 97 (Residuary entry as mentioned above) and through this entry it wasalso constitutionally valid.

A new article 286A was also inserted in the constitution and also amendment has beenmade in the Article 270 which I will discuss in any of the next class. These are also

related to the powers of the Government to introduce and administer the Service Tax.

NATURE OF SERVICE TAX

CA SUDHIR HALAKHANDI: - See students, Service tax is a tax on services thoughin most of the cases it is collected and deposited by the Service provider but it is anindirect tax and the service provider collects it from the service receiver hence he is

passing on the burden of tax on the other persons and only acting as an colleting agent.So service Tax is a??????????

STUDNETS: - INDIRECT TAX SIR!!!!!

CA SUDHIR HALAKHANDI: - Ok Now it is clear that service tax is an Indirect taxand further you should note that it is not a tax on a particular profession, trade oremployment but it is a tax on services rendered.

See the Websters Concise Dictionary and get the meaning of services.

Service means a useful result or product of Labour, which is not a tangiblecommodity.

Thus see basically service is a value addition that can be perceived but which can not beseen hence it is an intangible value addition. Selling goods is a tangible activity but

providing services is not a tangible commodity but none the less it also provides valueaddition.


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See it the CHA (Custom House agent) is providing his services to the exporter of Goods.The manufacturer of goods supplied the goods to the exporter but the same can not beexported without services of the CHA. Hence the services provided by the CHA are also

adding the value to the goods.

SERVICE TAX IS NOT A TAX ON PROFESSION OR TRADE

NITIN: - Sir, Chartered accountants, Company secretaries, cost accountants and Customhouse agents etc. are covered under the net of service Tax. Sir is it a tax on these profession?

CA SUDHIR HALAKHANDI: - Here see that Service tax is a tax on services not on aprofession or trade. If A is a Custom house agent and providing services to variousexporters then the tax is imposed only when he provides services and if during a certain

period he fails to get any client then no tax is payable since it is a tax on services and noton a particular profession or trade.

NITIN: - Sir, How can we differentiate the Providing services or selling Goods especiallywhen Goods are also used in providing services?

CA SUDHIR HALAKHANDI: - Yes, then we have to go for predominant factor and ifusing the goods is only incidental to the providing the services then it can not be said thatno services is provided.

APPLICABILITY OF SERVICE TAX

ROHAN: - Sir, you told us that the service tax law is applicable through out India exceptJammu and Kashmir. See sir , if the services are provided in Maharashtra by a person whohas his office or establishment at J&K then what will be the situation?

CA SUDHIR HALAKHANDI: - Yes Rohan it is also an important question. As I toldyou that service tax is a tax on services and not on particular profession or trade and onthe same footing the services provided in the J&K are not liable to service tax but if theservices are provided at any place other than J&K by the person who has hisestablishment in J&K then service tax will be applicable.


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SANJAY :- And sir, I a person having his office at New Delhi and providing some services inJ&K then what will be the situation ?

CA SUDHIR HALAKHANDI: - Yes since service tax is not applicable in J&K then the

service provided in J&K even by the person having his establishment outside J&K willalso be not taxable.

So students please remember for the examination point of view also The servicesprovided by a person outside J&K who has his office or establishment in J&K will betaxable and the services provided by a person in J&K will not be taxable even if the

person providing services has his office or establishment outside J&K.

It is the place where services are provided is important and not the place from whereservice provider belongs or has his office or establishment is important.

Is that Clear?????

STUDENTS: - YES SIR!!!!!

INFORMATION FOR NEXT CLASS

THE SERVICE TAX LAW

CA SUDHIR HALAKHANDI:- As I told you in the earlier class that No separateservice tax Act is made in our country and service tax is introduced in India throughChapter V of the Finance Act, 1994 and further the law of service tax is Governed in ourcountry through the following :-

1. The Finance Act, 1994 Section 64 to Section 96 of the Finance Act,1994

2. The Service Tax Rules, 1994

3. The Notifications issued by the Central Government.

4. Circulars and Office Letters (instructions) on Service tax

5. Orders on Service tax

6. Trade Notices on service Tax


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In the next class we will see in detail all these Six and also the administration of servicetax in our country.

Till then Good bye students, have a nice day!!!!!

STUDNETS: - THANK YOU SIR!!!!!!

End

Also Visit Class I
http://www.caclubindia.com/articles/article_list_detail.asp?article_id=2699http://www.caclubindia.com/articles/article_list_detail.asp?article_id=2699http://www.caclubindia.com/articles/article_list_detail.asp?article_id=2699http://www.caclubindia.com/articles/article_list_detail.asp?article_id=2699

SERVICE TAX Class-2 Sudir Halakhandi

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