No Service Tax from 1.7.2012?
DDT 1880 - 15.06.2012, reported that Service Tax could not be collected from 1.7.2012 as the new charging Section 66B was not mentioned in Section 68. DDT wrote, "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?"
All hell broke loose and the Government in a quick damage control exercise, exercised the power under Section 95 1(I) and issued a Service Tax (Removal of Difficulty) Order No. on the very same day that DDT broke the news – 15.06.2012. The Order Stipulated, “In sub-sections (1) and (2) of section 68 of the Finance Act, for the figures “66”, the figures and letter “66B” shall be substituted.”
It was doubtful whether the Government could amend an Act passed by Parliament in the name of removing a difficulty.
DDT 1881 - 18.06.2012, commented,
If there is a difficulty, the Government can remove it, but can they amend an Act passed by Parliament? If the Parliament wanted the tax to be levied at a rate prescribed in one section of the Act, can a Babu in the North Block amend it to read as another Section in the name of removing a difficulty? If that could be so, they may as well make Parliament to pass a one line Act that there shall be levied a Service Tax at such rates and under such conditions at the whims and fancies of the Under Secretary working for the time being in the TRU Section of the CBEC in the Revenue Department of the Finance Ministry.
All Laws can be simplified and the Babus can legitimately usurp the powers and jurisdiction of the Parliament of India, for which they in any case have only scant respect. They may also add a proviso that the Supreme Court cannot poke its nose into the scholarly legislation brought out by the babus.
After all, if you want to administer taxes the way you want to, it is absolutely essential to keep the Parliament and the Supreme Court out of the way.
Now, the Government seems to have realised that the “removal of difficulty order” is not enough and so they have included in the Finance Bill 2013 a provision to insert a new Section 66BA, which would read as,
"66BA. (1) For the purpose of levy and collection of service tax, any reference to section 66 in the Finance Act, 1994 or any other Act for the time being in force, shall be construed as reference to section 66B thereof.
(2) The provisions of this section shall be deemed to have come into force on the 1st day of July, 2012."
The damage is sought to be rectified retrospectively with effect from 1.7.2012. If the “removal of difficulty order” was enough to diffuse the damage, why should there be a retrospective insertion of Section 66B in the Act?
Now, until the Finance Bill 2013 gets enacted as Finance Act 2013, the new Section 66B will not come into force and we are back to square One – No Service Tax from 1.7.2012. In view of the proposed amendment, at least from today, till the Finance Bill is enacted, no Service Tax is payable!!