New Services and new rate – not yet in force – Budget is not enacted –wait till the 2^nd week of May.

By Vijay Kumar

We receive many enquiries as to whether the Secondary and Higher Education Cess imposed in this budget is already effective as many service providers had already started collecting it. It was to dispel such misconceptions that we carried an article recently Changes in rates of Indirect Taxes - Effective dates demystified !

But still doubts seem to be persisting. Yesterday a consultant from Mumbai called up and asked me whether the Finance Bill was enacted and that Service providers have already started collecting 12.36% Service Tax. He asked me to highlight in TIOL that the new 1% SHE would be effective only after the Finance Bill is enacted. I told him it is obvious and has been clarified several times, but he persisted and told me, “I know, but if you report it, people will take it as authentic, and please clarify again as there is a lot of confusion”

DDT confirms that the new 1% Secondary and Higher Education Cess on Service Tax will be effective only after the enactment of the Finance Bill and the Finance Bill 2007 has not yet become the Finance Act 2007 and is likely to be enacted in the second week of May 2007. TIOL will keep you informed about the enactment.

And the new services introduced in the budget will be effective only from a date to be notified and not from the date of enactment. The new services are likely to be notified as effective from 1^st June 2007.

And I have a vested interest in carrying this news- the Mumbai consultant has offered to take me out for lunch, the next time I am in Mumbai.