BUDGET 2018- What Is Service Tax?

The Service Tax was introduced in India around 21 years back on July 1, 1994 at the recommendations of Dr. Raja Chelliah Committee on tax reforms. The introduction of this levy in India can be termed as milestone in Indian Tax history.

This is also an indicator of foresightedness and thoughtfulness of the reformers, economists and the government of India. The tax collection figures themselves state the success story of service tax. Some of the tax collection data are given hereunder:

Perhaps, the reformers in favour of this levy and the government also would not have imagined such grand revenue to come 21 years back. But today, this is the reality.

On July 1, 1994, the service tax was introduced on 3 services only. These were Telephone Services, Non-Life Insurance Services and Stock Brokers’ Services. From July 1, 2012, the concept of Negative List Regime has been introduced. Meaning thereby that all the services, other than those mentioned in the Negative List (as per Section 66D of the Finance Act, 1994 as enacted by the Finance Act, 2012) are liable to service tax if not specifically exempted otherwise.

As per the dictionary meaning, the term service means-

‘A valuable action, deed, or effort performed to satisfy a need or to fulfill a demand or an action of helping or doing work for someone’.

From the economic and taxation point of view, one can say that, service is an activity, (like transportation, communication, repair or maintenance etc.), carried on by one person for another for some consideration measurable in money.