No Service Tax from 1.7.2012?
NO, it is not a joke - It is a startling chilling fact! The Parliament of India has virtually abolished Service Tax in India with effect from 01.07.2012.
Read on for the shocking details.
The shift from the positive list to the negative list looked very positive with some carefully drafted amendments to the Finance Act, 1994 being notified with effect from 01.07.2012. It will be curtains down on some important sections of the Finance Act, 1994 and some new Sections are going to be effective from 01.07.2012. But it appears that the Team TRU has carefully put bones, muscles and nerves together but forgot to put the most important LIFE in it resulting in a lifeless body from 01.07.2012. Yes, there is no requirement to pay service tax from 01.07.2012 as under Section 68, an assessee is required to pay service tax at the rates mentioned under Section 66, a dead Charging Section from 1 st July 2012.
Upto 30.06.2012, the charging Section is Section 66 of the Finance Act, 1994 according to which service tax is levied at the rate of 12% on all taxable services. With effect from 01.07.0212, Section 66 will no longer be in force and a new charging section 66B will take its place.
Section 68 stipulates that service tax is payable by the service providers at the rate specified under Section 66 in such manner as may be prescribed. This Section is continued in the Finance Act, 1994 even from 01.07.2012. The provisions of this Section upto and from 01.07.2012 read as under:
Upto 30.06.2012:
SECTION 68. Payment of service tax. - (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
From 01.07.2012 (after incorporating the amendments made vide Finance Act, 2012)
SECTION 68. Payment of service tax. - (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1), in respect of such taxable services as may be notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
"Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider.";
So, with effect from 01.07.2012, the assessees are required to pay service tax at the rate specified under Section 66, but there would be no Section 66 in the Statute. AND SO, THEY NEED NOT PAY ANY TAX. Hence, all the exercise of moving to negative list will go down the drain because of not amending Section 68 to substitute the charging section referred therein with the new charging section, i.e., 66B.
The Government has to do something urgently - in any case not later than 30.06.2012 - if they want to collect Service Tax from 1.7.2012. But what can they really do, notwithstanding Section 95 1(I)? Can the babus amend an Act passed by Parliament even if it is to remove difficulties?
DDT is grateful to Rajendra Rathi, Cost and Management Accountant, who provided valuable input on this Section 66/68 fiasco.