No Education Cess from 01-07-2012!
IN DDT 1880 - 15.06.2012, we pointed out that Service Tax could not be levied from 1.7.2012. That sent shock waves all over and a few TV channels contacted us, but could not understand the complexities of Section 68, 66 and 66A. We asked them to approach the Board for better clarification. The wise Board told them that it was only a numbering mistake, which was being corrected! Anyway, Board acted in unusual haste and issued an order called the Service Tax (Removal of Difficulty) Order, 2012, by which they corrected Section 66 as 66B in Section 68.
Now, they are in for another shock.
Education Cess on taxable services: This was imposed in 2004. As per Section 95 of the Finance Act 2004, this tax is collected at the rate of 2 percent of the tax levied and collected under Section 66 of the Finance Act, 1994.
Secondary and Higher Education Cess on taxable services: This was imposed in 2007. As per Section 140 of the Finance Act 2007, this tax is collected at the rate of 1 percent of the tax levied and collected under Section 66 of the Finance Act, 1994.
And as we know, Section 66 ceases to have effect from 1.7.2012. So there is no provision to collect Education Cess and SHE Cess on Service Tax from 1.7.2012.
And this time around, the Board has no escape route. They cannot amend Finance Act 2004 and Finance Act 2007 by an order!
For a more detailed write up, please see an article by Advocate Vaitheeswaran in SERVICE TAX - NEW LAW +VE or -VE