Blog 1 : Change in Service Tax from July 2012.

Service Tax under erstwhile provision in Positive List Concept till 1^st July 2012 :

Under positive list based taxation, the question of taxing a service would arise where the service that is provided by the service provider happens to be covered under the any of the sub-clauses of section 65(105). Once the relevant clause is identified, the concept of “service provider” and “service receiver” would also have to be satisfied in order to tax the concerned service.

Where the criteria mentioned above are satisfied, the tax would be levied on the service provider who would be liable to collect the service tax amount from the service receiver and remit it to the government in the manner prescribed.

Since the levy of service tax is on the provision of service, the services provided before the date on which such services were brought under the tax net, would not be subjected to service tax. It may noted that even if the bills for the services provided are raised by the service provider after the date on which the service became taxable, there would be no liability as the services had been provided during the period when the service was not taxable at all.

Classification :

The service provider should ensure that the service / activity is classified properly as this would enable him to ascertain his liability properly. Correct classification is critical and if the classification is not proper, the service provider may either end up paying more than what is required or even face a liability.

Service Tax under new provision in Negative List Concept from 1^st July 2012 :

• Now, the Service Tax law has undergone a sea change with the term ‘service’ by itself being defined and all the activities which satisfy the definition criterion fall under the service tax net.  The term ‘Service’ has been defined. Also the charge of service is specifies on all the services provided or agreed to provide from Taxable Territory.
•  Negative list of Services is specifies.
•  The rules of Point of Taxation & Place of Provision of services are specified.
•  Declared services are introduced to remove the confusion on certain services.
•  Some exempted services are put in Mega Exemption Notification.