Service Tax :-Service Taxis a tax imposed byGovernment of Indiaon services provided inIndia. The service provider collects the tax and pays the same to the government. It is charged on all services except the services covered in the negative list (Section 66d of Finance Act'1994) of services & services covered under Mega Exemption Notification (Notification NO. 25/2012 ST dated 20.06.2012). The current rate is 14.% on gross value of the service.Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers.

Definition:Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994.

Description:In this case, the service provider pays the tax and recovers it from the customer. Service Tax was earlier levied on a specified list of services, but in the 2012 budget, its scope was increased. Services provided by air-conditioned restaurants and short term accommodation provided by hotels, inns, etc. were also included in the list of services.

It is charged to the individual service providers on cash basis, and to companies on accrual basis. This tax is payable only when the value of services provided in a financial year is more than Rs 10 lakh. This tax is not applicable in the state of Jammu & Kashmir.

History of Service Tax :-Dr.Raja chelliah committee on tax reforms recommend the introduction of service tax. Service tax had been first levied at a rate of five per cent flat from 15 July 1994 till 13 May 2003, at the rate of eight percent flat w.e.f 1 plus an education cess of 2% thereon w.e.f 10 September 2004 le services provided by service providers. The rate of service tax was enhanced to 12% by Finance Act, 2006 w.e.f 18.4.2006. Finance Act, 2007 has imposed a new secondary and higher education cess of one percent on the service tax w.e.f 11.5.2007, increasing the total education cess to three percent and a total levy of 12.36 percent. The revenue form the service tax to theGovernment of Indiahave shown a steady rise since its inception in 1994. The tax collections have grown substantially since 1994-95 i.e. from Rs. 410 crores in 1994-95 to Rs.132518 crores in 2012-13. The total number of Taxable services also increased from 3 in 1994 to 119 in 2012. However, from 1 July 2012 the concept of taxation on services was changed from a 'Selected service approach' to a 'Negative List regime'. This changed the taxation system of services from tax on someSelected servicesto tax being levied on the every service other than services mentioned inNegative list.

Collections :-The collections under the Service tax from the year of original levying year of 1994 are constantly growing. The collections are shown as in the following table

Financial YearRevenue Rupees(in crores)Number of servicesNumber of Assessees

1994-199540733943

1995-199686264866

1996-19971059613982

1997-199815861845991

1998-1999195726107479

1999-2000212826115495

2000-2001261326122326

2001-2002330241187577

2002-2003412252232048

2003-2004789162403856

2004-20051420075774988

2005-20062305584846155

2006-20073759899940641

2007-2008513011001073075

2008-2009609411061204570

2009-2010584221091307286

2010-2011710161171372274

2011-2012975091191535570

2012-2013132518Negative List Regime1712617

APPLICABILITY OF SERVICE TAX :-1) Territorial Application State of Jammu & Kashmir excludedThe provisions related toService Taxareapplicableto the whole of India except tothe Stateof Jammu & Kashmir. As a result, the services provided within the territorial limits ofthe Stateof Jammu & Kashmir are excluded from the ambit of the levy ofservice tax.

In other words as clarified by the Department that any service provider who has his place of business inthe Stateof Jammu & Kashmir but provides taxable services to the clients in other parts ofthe countryare liable for payment ofservice tax. Further any service provider who has his place of business in any of the Indian States other thanthe Stateof Jammu & Kashmir who provides the services to the persons inthe Stateof Jammu & Kashmir , is not liable to payservice tax. Accordingly when the recipient of the taxable service is inthe Stateof Jammu & Kashmir ,the serviceis outside theservice taxnet.

2) Levy of Service TaxTheService Taxis livable on notifiedservice taxproviders in respect of the value of the taxable service. In other words,service taxis levied only in respect of notified service providers and not on all service providers. Further a taxable service cannot be subjected toservice taxtwice under different classifications and is liable to tax only once.

3) Levy of Service Tax- Threshold ExemptionWith effect from 1-4-2008, i.e. from the Financial Year 2008-2009, the threshold exemption is raised upto Rs. 10 lakhs vide Notification NO.8/2008-ST,dt. 1-3-2008.

The expression aggregate value of taxable services means the aggregate value of services for whichservice taxis payable and exclusive of services which are exempt fromservice taxby way of any general / specific exemption.

The eligibility to avail threshold limit exemptions of Rs. 8 lakhs, Rs. 10 lakhs as the case may be is burdened with various conditions. They are ,1. No CENVAT Credit is availed on theservice taxpaid on input services used to render the subject taxable service.2. Similarly no CENVAT Credit is availed in respect of capital goods and inputs till the date of exhausting threshold exemption.3. Only capital goods and inputs received after the completion of availing exemption limit can alone qualify for input credit.4. Input Credit in respect of goods lying in stock or unutilized input credit lying in the books tothe creditofthe serviceprovider should not be utilized and shall also be reversed to the extent toservice taxpayable.5. The aggregate value taxable services rendered bythe serviceprovider shall not exceed Rs. 9 lakhs in the preceding Financial Year.6. With effect from 1-4-2008, i.e. from the Financial Year 2008-2009, the threshold exemption is raised upto Rs.10 lakhs vide Notification No. 8/2008-ST,dt. 1-3-2008.

4) Levy of Service Tax- Not applicableThe levy ofservice taxon taxable services will not extend to the following receipt as there is no elementof servicein such receipts and / or consideration is involved. Value of goods and materials sold bythe serviceprovider subject to the condition that they should be quantified and shown separately in the invoice. Reimbursement of out-of-pocket expenses on actual basis subject to the condition that such expenses are specified separately in the bills raised bythe serviceproviders under certain circumstances. Taxable service provided free of charge without any consideration thoughtthe serviceis otherwise taxable.

Interest & Penalities of Late Tax Payment :-

From 01.04.2011, the interest rate is 18% per annum is payable for late payment of Service Tax. For the assesses having less than 60 lakh Taxable Service, interest rate is @ 15%. And penalty for late tax payment is Rs.100/- for each day or 1% of tax whichever is higher (Total amount of penalty shall not exceed 50% of tax payable). After going through the Negative List of Services, Mega Notifications For Exemption Of Services, Declared Services Partially / Fully Reverse Charge Mechanism, Place Of Provision Of Services and such new amendment of service Tax Law from 01/07/2012 and the latest amendments upto the end of year 2014 and updates. we properly guide in the matter. As per ammended Finance Act 2013, themaximum penaltyimposable forfailure to obtain registration will be Rs.10,000/- only.

A new section is also being introduced to impose penalty on directors and officials of the company for specified offences in cases of willful actions.who is in any manner knowingly concerned with specified contraventions; And further, punishment of imprisonment for minimum 6 months to 7 years have been proposed in Finance Act 2013 for specified offences. So, our timely and proper advice to our client, save them from interest, penalties and prosecutions. FURTHER from 01.10.2014 variable rate of interest will be applicable on delay in tax payments.

S.No.Period of DelayInterest Rate

1Upto 6 months18%

2More than 6 months and upto 1 year18% for 1st 6 months of delay and 24% for the delay beyond 6 months

3More than 1 year18% for 1st 6 months of delay, 24% for the delay beyond 6 months upto 1 year and 30% for any delay beyond 1 year

Negative List :-

The negative list is given under Section 66D. It contains 17 activities. It would be appropriate to call the negative list, a list of activities rather than a negative list of services because some of the activities mentioned in said list are not services.

The Negative lists of services are as under:

1) Services provided by Government or Local authorityMost of the services provided by the Central or State Government or Local authorities are in the negative listexcept the following:a) Services provided by the Department of Posts by way of speed post, express parcel post, life insurance and agency services carried out on payment of commission on non government business;b)Services in relation to a vessel or an aircraft inside or outside the precincts of a port or an airport;c)Transport of goods and/or passengers;d)Support services, other than those covered by clauses (a) to (c) above, to business entities.

2) Services provided by Reserve Bank of IndiaAll services provided by the Reserve Bank of India are in the negative list. Services provided to the Reserve Bank of India are not in the negative list and would be taxable unless otherwise covered in any other entry in the negative list.

3) Services by a Foreign Diplomatic Mission Located in IndiaAny service that is provided by a diplomatic mission of any country located in India is in the negative list. This entry does not cover services, if any, provided by any office or establishment of an international organization.

4) Services relating to agricultureThe services relating to agriculture that are specified in the negative list are as below:a)agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or seed testing;b) supply of farm labour;c) processes carried out at the agricultural farm including tending, pruning, cutting, harvesting, drying cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter essential characteristics of agricultural produce but makes it only marketable for the primary market;d) renting of agro machinery or vacant land with or without a structure incidental to its use;e) loading, unloading, packing, storage and warehousing of agricultural produce;f)agricultural extension services;g)services provided by any Agricultural Produce Marketing Committee or Board or services provided by commission agent for sale or purchase of agricultural produce;h)Testing activities in relation to agriculture and agricultural produceFurther the activities like breeding of fish (pisciculture), rearing of silk worms (sericulture), cultivation of ornamental flowers (floriculture) and horticulture, forestry is also included in the definition of agriculture. The plantation crops like coffee, tea are also covered in agricultural produce.

5) Trading of GoodsTransfer of title of goods is one of the essential conditions for a transaction to come under the ambit of trading of goods. However, the services supporting or ancillary to the trading of goods would not come under the above item of Negative List.

6) Processes amounting to Manufacture or Production of GoodsThe phrase processes amounting to manufacture or production of goods has been defined in section 65B of the Act as a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944) or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act.This entry, therefore, covers manufacturing activity carried out on contract or job work basis provided duties of excise are leviable on such processes under the Central Excise Act, 1944 or any of the State Acts.

7) Selling of Space or Time Slots for Advertisements other than Advertisements Broadcast by Radio or TelevisionSale of space for advertisement in print media, bill boards, public places, buildings, conveyances, cell phones, automated teller machines, internet, Aerial advertising are covered in negative list.However, Sale of space or time for advertisement to be broadcast on radio or television and sale of time slot by a broadcasting organization are the taxable services.

8) Access to a Road or a Bridge on Payment of Toll ChargesThe negative list entry covers access to a road or a bridge on payment of toll charges. The access to National highways or state highways, which are also roads, is hence covered in this entry.

9) Betting, Gambling or LotteryBetting or gambling has been defined in section 65B of the Act as putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring. The State Government levy a betting tax on such activities.

10) Entry to Entertainment Events and access to Amusement FacilitiesEntertainment event has been defined in section 65B of the Act as an event or a performance which is intended to provide recreation, pastime, fun or enjoyment, such as exhibition of cinematographic films, circus, concerts, sporting events, fairs, pageants, award functions, dance performances, musical performances, theatrical performances including cultural programs, drama, ballets or any such event or program.Amusement facility has been defined in the Act as a facility where fun or recreation is provided by means of rides, gaming devices or bowling alleys in amusement parks, amusement arcades, water parks, theme parks or such other place but does not include a place within such facility where other services are provided.

11) Transmission or Distribution of ElectricityAn electricity transmission or distribution utilityhas also been defined in section 65B of the act to means the following: the Central Electricity Authority a State Electricity Boardthe Central Transmission Utility (CTU). a State Transmission Utility (STU) notified under the Electricity Act, 2003 (36 of 2003)a distribution or transmission licensee licensed under the said Actany other entity entrusted with such function by the Central or State Government

12) Specified services relating to EducationThe following services relating to education are specified in the negative list a) pre-school education and education up to higher secondary school or equivalentb)education as a part of a prescribed curriculum for obtaining a qualification recognized by any law for the time being in force;c) education as a part of an approved vocational education courseApproved vocational education courses have been specified in section 65B of the Act. These area)a course run by an industrial training institute or an industrial training centre affiliated to the National Council for Vocational Training, offering courses in designated trades as notified under the Apprentices Act, 1961 (52 of 1961)b)a Modular Employable Skill Course, approved by the National Council of Vocational Training, run by a person registered with the Directorate General of Employment and Training, Ministry of Labour and Employment, Government of India;c)a course run by an institute affiliated to the National Skill Development Corporation set up by the Government of India.d)Vocational courses offered by institutes affiliated to the State Council of Vocational Training;

13) Services by way of Renting of residential dwelling for use as residenceRenting has been defined in section 65B as allowing, permitting or granting access, entry, occupation, usage or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property.

14) Financial SectorThe services of loans, advances or deposits are in the list in so far as the consideration is represented by way of interest or discount. Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration. Some examples:Fixed deposits or saving deposits or any other such deposits in a bank for which return is received by way of interest.Providing a loan or over draft facility for a credit limit facility in consideration for payment of interest. Mortgages or loans with a collateral security to the extent that the consideration for advancing such loans or advances are represented by way of interest. Corporate deposits to the extent that the consideration for advancing such loans or advances are represented by way of interest or discount.The Invoice discounting is covered only to the extent consideration it is represented by way of discount. Any charges or amounts collected over and above the interest or discount amounts would represent taxable consideration. Services provided by banks or authorized dealers of foreign exchange by way of sale of foreign exchange to general public are not covered in Negative List.

15) Service relating to Transportation of PassengersThe following services relating to transportation of passengers, with or without accompanied belongings, have been specified in the negative list. Services by:a stage carriage;railways in a class other than (i) first class; or (ii) an AC coach;metro, monorail or tramway;inland waterways;public transport, other than predominantly for tourism purpose, in a vessel between places located in India ; andmetered cabs, radio taxis or auto rickshaws.The various other equivalent modes of transport not specified herein could be cause of dispute as the above list is not complete within each segment.

16) Service relating to Transportation of GoodsThe following services provided in relation to transportation of goods are specified in the negative list:-a)by roadexceptthe services of (i) a goods transportation agency; or (ii) a courier agencyb) by aircraft or vessel from a place outside India up to the customs station of clearance in India; orc)By inland waterways. (Services provided as agents for inland waterways are not covered in the negative list.)

17) Funeral, Burial, Crematorium or Mortuary services including transportation of the deceasedThis entry exempts services in relation to cremation, etc. of dead.Revised Negative List of Service Tax for 2014-15 (Section 66D)Revised Negative List of Service Tax for 2014-15 (Section 66D)

The charging section of theFinance Act, 1994,Section 66Bprovides that service tax should be levied on all services except the services which are specifiedin Section 66Dof the said Act.As per Section66D of the Financial Act, 1994, Negative list of Service Tax are introduced (byFinance Act 2012)and further amended (byUnion Interim 2014- Interim). There are currently 17 heads of Services which are given in the negative list.

Two more services have been included in the negative list for service tax through the amendment.

This can also be called as the comprehensive approach. Since there was a considerable increase in the list of services being brought under service tax, it added gravity to the administrative challenge. As a result of the comprehensive approach, now, all the services would be taxable except those that are specifically excluded or exempt.This Negative list of service tax is very important because every activity not covered under this list is chargeable to Service Tax. This is basically an exclusive tendency towards the amendment being brought to the law, whereby the tax is imposed based upon the exclusions approach.

Two more services have been included in the negative list services in interim Budget 2014, as mentioned below:-a) loading, unloading, packing, storage and warehousing of rice andb) Services provided by cord blood banksNotification of changes in service tax is issued as on 17/02/2014 is attached below.