SUDHIR SIR KI SERVICE TAX CLASS-III

CA SUDHIR HALAKHANDI
on 06 August 2009

THE LAW OF SERVICE TAX IN INDIA

-BY CA SUDHIR HALAKHANDI-

NOTICE BOARD

SPECIAL APPEAL TO THE IPCC STUDENTS

Please note that these classes are not substitute of your study material and text books and if you read your study material and text books before and/or after attending these web-classes you will understand the subject better.

This is a unique experiment and you can only be benefited if you follow this special appeal.

The success of this experiment depends on your efforts only.

-CA SUDHIR HALAKHANDI-

THE ADMINISTRATION OF SERVICE TAX

1. The Finance Act, 1994 Section 64 to Section 96 of the Finance Act, 1994 (Including Section 96 A to 96 I)

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

1. THE FINACNE ACT, 1994

CA SUDHIR HALAKHANDI: - GOOD Morning students!! As I told you in my earlier class that no separate service tax Act was provided in our country and in 1994 the service tax was introduced through Chapter V of the Finance Act, 1994. So students we have Income Tax Act, 1961 for Tax on Income and on the same lines for all the practical purpose you can say Finance Act, 1994 as the Act for tax on Services. When ever you required to mention any provision related to Tax on services you have to write Finance Act 1994.

CHETAN: - Sir, once I read somewhere that service tax is a tax of future and also you have stated that the collection from service tax is increasing from year to year then why we dont have a separate service tax Act.

CA SUDHIR HALAKHANDI: - Yes Chetan It seems to be amazing but it is a fact that there is no separate service tax Act in our country.

CHETAN: - Is there any possibility of having a Separate service Tax Act in future?

CA SUDHIR HALAKHANDI: - See now we are moving towards Goods and Service Tax A tax replacing the Central excise, Service Tax and VAT and it is declared by the Finance Minister that the GST will be introduced in 2010 hence now there is no possibility of having a separate Service Tax Act but see students practically it is not making any difference and Finance Act 1994 has served all the purposes of service tax Act.

VIBHA: - Sir, whole the Finance Act, 1994 was devoted to Service Tax?

CA SUDHIR HALAKHANDI: - No! Chapter V of the Finance Act was used to introduce service tax in 1994 and later chapter VA was added to Finance Act 1994 by the Finance Act, 2003.

VIBHA: - Please elaborate the whole scheme of the Act.

CA SUDHIR HALAKHANDI: - Yes see the composition of these chapters:-

CHAPTER	SECTIONS
V OF FINACNE ACT 1994	Section 64 to Section 96- The Basics of service Tax, Definitions, Classification of services, Charge of Service Tax, Charge of service Tax on services received from outside India, Valuation of Taxable services, Payment of service tax , Registration, Returns, Assessments , Penalties, appeals etc.
VA OF FINANCE ACT 1994	Section 96A to 96 I- Advance ruling with respect to a question of law or fact regarding the Liability to pay service Tax.

CHETAN: - Sir, Now it is clear from above that Chapter V and VA of Finance Act, 1994 are the applicable as Act for Taxes on Services. The Chapter V of the Finance Act, 1994 was introduced in 1994 and Chapter VA was added by the Finance Act, 2003 in Finance Act, 1994. Is it OK sir!

CA SUDHIR HALAKHANDI: - Yes Chetan! You have understood well this concept and now add one more thing to it that when Education cess was introduced in 2004 it was also made applicable through chapter VI of Finance Act, 2004 on Service tax also AND further By Finance Act 2007 Secondary and Higher education cess was also imposed on service tax.

2. RULES ON SERVICE TAX

CA SUDHIR HALAKHANDI: - To carry out the various provisions of the Act, rules are necessary and the Government got the power to make rules from the Act. There are two sections in the Finance Act 1994 which gives power to the central Government to make rules for carrying out various provisions of the Act and these are :-

Section 94 of the Chapter V.

Section 96- I of the Chapter VA

And by suing these powers the Government has formulated the following rules which were amended from time to time:-

1. Service tax Rules 1994

2. Service Tax (Advance Ruling) Rules, 2003

3.CENVAT Credit Rules , 2004

4. Export of Service Rules, 2005

5. Service Tax (Registration of Special categories of persons) rules 2006

6. Service Tax (Determination of Value) Rules 2006

7.Taxation of Services (Provided from outside India and Received in India) Rules 2006

KSHITIJ: - Sir, What is the importance of rules?

CA SUDHIR HALAKHANDI: - The statutory provisions are contained in the Act and rules are made to carry out these provisions and these rules should always be read with the provisions of the Act. The rules can not override the provisions of the Act and further these rules can not have any conflict with the Act.

ROHIT: - Sir, Please tell us what is the basic difference between the Act and rules?

CA SUDHIR HALAKHANDI: - Yes, I have already prepared for this question and in my search on web I got the reply of your question in very simple language through a web-site discussion and I am sharing it with you:-

Law is bifurcated in two broad heads

1) Substantive Law-Act

2) Procedural Law- Rules

ACT

Substantive law is the law which creates Rights, Duties of the citizens and also decides punishments. All this is in the Acts passed by the Legislatures.

RULES

Procedural Law is the mechanism to implement substantive law.

The Rules and Policies describe the procedure to implement the substantive law.

3. NOTIFICATIONS

RAMAN :- And what about Notifications sir ?

CA SUDHIR HALAKHANDI: - The government has also got the powers from the Act to issue notifications to

Exempt any service from the service tax and
Also to make rules to carry out any provisions of the Act. These powers are given in Section 93 and 94 of the Chapter V and Section 96-I of the Chapter VA.

By using these powers the Government Issue the Notifications form time to time to exempt the services or to make rules to carry out the provisions of the Act.

4. CIRCULARS AND OFFICE LETTERS (INSTRUCTIONS) ON SERVICE TAX

ROHIT: - And circulars and orders Sir?

CA SUDHIR HALAKHANDI: - The administration of service tax is in the hands of Central Excise and customs (CBEC) and CBEC issue circulars and office Letters (instructions) from time to time to clarify taxability and scope of various services and also the scheme of administration of Service Tax.

Here note that these circulars and instructions should be in the line of provisions of the Act and in any case these should be read with the provisions of the Act. In any case these circulars and office letters can not override the provisions of the Act.

5. ORDERS ON SERVICE TAX

CA SUDHIR HALAKHANDI: - The Rule 3 of the Service tax Rules 1994 empowered the Central Board of Excise and Customs (CBEC) to appoint officers to exercise the powers under Chapter V of the Finance Act, 1994 and from time to time CBEC has issued orders from time to time to define the jurisdiction of the officers for the purpose of administration of Ser vice tax .

6. TRADE NOTICES ON SERVICE TAX

VIBHA: - And what about Trade Notices sir?

CA SUDHIR HALAKHANDI:-The Service Tax/central Excise commissionerates issue trade notices from time to time to explain the various instructions received by them from the CBEC to explain the same to the various trade associations in the form of trade notices. The trade notices along with the circulars and notifications are also distributed to the field officers for their proper adherence. The individual tax payers or citizen can also apply and get the copies of these trade notices.

These contents of trade notices includes the text of Notifications, circulars, letters, orders, name of banks in which service tax can be deposited, clarifications regarding service tax matters etc.

END