The Finance Act, 2006 (No.21 of 2006) has received the assent of the President of India on the 18th April, 2006. The effect of the various provisions of the Finance Act relating to levy of service tax are explained hereinafter.
Service tax leviable on taxable services under section 66 of the Finance Act, 1994 has been increased from 10% to 12% with effect from the date of the assent of the President. In addition to 12%, Education Cess at the rate of 2% of 12% i.e. 0.24% is also leviable. The total tax leviable on taxable services thus works out to 12.24% of the value of taxable services.
The following sections of the Finance Act, 2006 come into force with effect from the date of the assent of the President:
Section 66A – charge of service tax on services received from outside India.
Section 67 – valuation of taxable services for charging service tax.
Section 73(1A) – payment of service tax after issue of show cause notice.
Section 73A – service tax collected from any person to be deposited with Central Government.
Section 73B – interest on amount collected in excess.
Section 73C – provisional attachment to protect revenue in certain cases.
Section 73D – publication of information in respect of persons in certain cases.
Section 76 – penalty for failure to pay service tax.
Section 87 – recovery of any amount due to Central Government.
Section 93A – power to grant rebate.
Section 94(2) – power to make rules.
Section 96(C)(2)(f) – application for Advance Ruling.
Section 66A provides charging of service tax on taxable services received from outside India, from the recipient of services in India, under reverse charge method. Services received in India are taxable under Sections 66A, 93 and 94 read with Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. Services received by individuals other than for the purpose of use in business or commerce, are not chargeable to service tax.
Rule 3 of Export of Services Rules, 2005 has been amended to incorporate the changes in the Finance Act, 2006.
Section 67 provides for valuation of taxable services for charging service tax. Service Tax (Determination of Value) Rules, 2006 is being notified under Section 67.
Section 67 and the Rules notified thereunder provide for valuation of services for charging service tax under different situations wherein the consideration received for provision of service is partly or wholly not consisting of money. The service tax in such cases shall be charged on the basis of the gross amount charged by the service provider for providing similar service to any other person. If the value of similar services is not available, then the service provider on his own shall determine the total money value of the consideration and pay the service tax accordingly. The value of the service so determined by the service provider should not be less than the cost of provision of such service.
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