Service Tax
INTRODUCTION
Service tax is a tax on Services. Service tax is not a tax on profession / trade but it is a tax on the service provided in exercise of the profession / trade. It is leviable only if there is provision of service.
SALE V/S SERVICE
Service is different from sale. The fact that some goods have been used in the course of providing service’ doesn’t make that transaction a sale. The nature of the transaction depends on the intention of the parties. If the parties intended to enter into a transaction of purchase and sale of ‘goods’ the transaction will be ‘sale’ even though some services might have been provided, which will be taxed separately. However, in case where goods have been used in providing services or in case where the sale of goods is incidental to the provision of services, the transaction would primarily be that of service.
Therefore, if the predominant factor in a transaction is ‘sale’, the transaction would be classified as ‘sale’, however, if the predominant factor in a transaction is ‘service’, the transaction would be classified as ‘service’ only.
CONSTITUTION
The constitution of India, is the Supreme authority, contains separate provisions to regulate power of taxation and to ensure distribution of such power between the Central Government and the States. The power to levy service tax is being exercised by the parliament in terms of entry 97 of the union list, Seventh Schedule to the constitution of India. Entity 97 is a residual entry. Entry 92C introduced w.e.f. 15-01-2004 of the list I empowers the union to levy “Tax on Services”.
The constitutional validity of Service tax was challenged unsuccessfully various times in the courts. However, the courts opined that Service tax is a tax on Service provided or to be provided by the Service provider. Further the tax is not on sale or purchase of goods.
EXTENT & SCOPE OF SERVICE TAX LAWS
Service tax has been imposed as an indirect tax which is demanded from a person on the
Service tax is a tax on Services. Service tax is not a tax on profession / trade but it is a tax on the service provided in exercise of the profession / trade. It is leviable only if there is provision of service.
SALE V/S SERVICE
Service is different from sale. The fact that some goods have been used in the course of providing service’ doesn’t make that transaction a sale. The nature of the transaction depends on the intention of the parties. If the parties intended to enter into a transaction of purchase and sale of ‘goods’ the transaction will be ‘sale’ even though some services might have been provided, which will be taxed separately. However, in case where goods have been used in providing services or in case where the sale of goods is incidental to the provision of services, the transaction would primarily be that of service.
Therefore, if the predominant factor in a transaction is ‘sale’, the transaction would be classified as ‘sale’, however, if the predominant factor in a transaction is ‘service’, the transaction would be classified as ‘service’ only.
CONSTITUTION
The constitution of India, is the Supreme authority, contains separate provisions to regulate power of taxation and to ensure distribution of such power between the Central Government and the States. The power to levy service tax is being exercised by the parliament in terms of entry 97 of the union list, Seventh Schedule to the constitution of India. Entity 97 is a residual entry. Entry 92C introduced w.e.f. 15-01-2004 of the list I empowers the union to levy “Tax on Services”.
The constitutional validity of Service tax was challenged unsuccessfully various times in the courts. However, the courts opined that Service tax is a tax on Service provided or to be provided by the Service provider. Further the tax is not on sale or purchase of goods.
EXTENT & SCOPE OF SERVICE TAX LAWS
Service tax has been imposed as an indirect tax which is demanded from a person on the