BASICS, HISTORY & ADMINISTRATION OF SERVICE TAX

BASICS, HISTORY & ADMINISTRATION OF SERVICE TAX

1. VITAL STATISTICS OF SERVICE TAX

The service tax collections have shown a steady rise since its inception in 1994. The tax collections have grown manifolds since 1994-95. Service tax collection is primarily from metro areas and bigger towns.

There is a substantial growth in the assessee base from 403856 nos. in 2003-04 to 7,74,988 nos. in 2004-05. It indicates a growth of almost 91%, which is significantly robust ever after 1994-95. The revenue and assessee statistics from the year 1994-95 to 2004-05 is shown in the Table below:

Year	No. of assessees	Gross Collections (Rs. Crores)	Percentage (%) of growth	No. of Services
1994-1995	3943	410	Base Year	3
1995-1996	4866	846	101	3
1996-1997	13982	1022	24	6
1997-1998	45991	1515	49	18
1998-1999	107479	1787	18	30
1999-2000	115495	2072	16	27
2000-2001	122326	2540	23	26
2001-2002	187577	3305	26	41
2002-2003	232048	4125	25	51
2003-2004	403856	7890	91	58
2004-2005	774988	14196	79.93	71

Trends of revenue indicate that the service tax collection is growing at fast rate since its inception.

1. ADMINISTRATION OF SERVICE TAX

The Department of Revenue of the Ministry of Finance exercises control in respect of matters relating to all the direct and indirect taxes through two statutory Boards, namely:

• Central Board of Direct Taxes (CBDT); and
• Central Board of Excise and Customs (CBEC).

Matters relating to the levy and collection of all the direct taxes (income tax, wealth tax etc.) are looked after by CBDT, whereas those relating to levy and collection of indirect taxes (customs duties, central excise duties etc.) fall within the purview of CBEC.

Director General (Service Tax):

Considering the increasing workload due to the expanding coverage of service tax, it was decided to centralise all the work and entrust the same to a separate unit supervised by a very senior official. Accordingly, the office of Director General (Service Tax) was formed in the year 1997. It is headed by the Director General (Service Tax). The functions and powers of Director General (Service Tax) are as follows:

(1)          To ensure that proper establishment and infrastructure has been created under different Central Excise Commissionerates to monitor the collection and assessment of service tax.

(2)          To study the staff requirement at field level for proper and effective implementation of service tax.

(3)          To study as to how the service tax is being implemented in the field and to suggest measures as may be necessary to increase revenue collection or to streamline procedures.

(4)          To undertake study of law and procedures in relation to service tax with a view to simplify the service tax collection and assessment and make suggestions thereon.

(5)          To form a data base regarding the collection of service tax from the date of its inception in 1994 and to monitor the revenue collection from service tax.

(6)          To inspect the service tax cells in the Commissionerate to ensure that they are functioning effectively.

(7)          To undertake any other functions as assigned by the Board from time to time.

The Directorate of Service Tax coordinates between the CBEC and Central Excise Commissionerates. It also monitors the collection and the assessment of service tax. It compiles the service tax revenue reports received from various Central Excise Commissionerates and monitors the performances of the Commissionerates. It scrutinizes the correspondences received from field formations and service providers and replies to the clarifications sought for, wherever possible. In cases where the doubts/clarification sought involves policy matter, the Directorate apprises the Board for issuing clarification/instruction.

VII.         ROLE OF A CHARTERED ACCOUNTANT

A chartered accountant plays a major role in nation building. He is of great importance in successful implementation of service tax law and procedures in the country.

1. With the selective coverage of service tax on certain specified services a great deal of professional acumen is required to interpret and understand the law and advise the applicability of service tax qua an activity or service.
2. Registration, payment of tax, filing returns and assessments involving interface with the excise department. A chartered accountant with his experience and expertise is the best person to assist the assessees in all these compliance
3. A chartered accountant is allowed to appear before the assessment authority, Commissioner (Appeals) and Tribunal.
4. In the ensuing years, the department would have to evolve a mechanism where it may choose certain returns on test basis which require detailed scrutiny. In this mechanism, a chartered accountant could be of great assistance. Service tax returns and financial statements could be certified by the Chartered Accountant from the perspective of service tax similar to an audit under section 44AB of the Income-tax Act.
5. Service tax law is very detailed with several rules, notifications, circulars amendments issued on a regular basis. Clients require opinion of a professional to know the impact of service tax on these transactions. Chartered Accountants are one of the most trusted names in tax consultancy arena.

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