Section 66B of Finance Act, 1994 – Charge of Service Tax

Background

Service tax was first introduced in the year 1994. Since then it was amended time to time by Government of India keeping in mind the practical problems and the need for tax revenue. However, in the year 2012, service tax took a big turnaround, and the whole concept of service tax was changed.

Earlier, the charge was created through section 66 and section 66A. However, these sections have been denotified, and all the new sections were notified.

Applicability

This section is applicable from the 1st July 2012.

Bare text of Section 66B

The bare text of section 66B is available in the annexure, and the same can also be downloaded in the PDF version.

Analysis

Section 66B is the charging section and holds a vital importance in understanding the service tax act. Let us read the bare text first and then try to analyse it;

“There shall be levied a tax (hereinafter referred to as the service tax) at the rate of [fourteen] per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed”

• Fourteen Percent: The service tax rate is 14% consisting of Education Cess (‘EC’) and higher education cess (‘SHEC’).
  
  ​The rate is further increased by two cess:
  • Swachh Bharat Cess: The Swachh Bharat Cess will be charged @ 0.50%. This will be further added to the basic rate of 14%.
  • Krishi Kalyan Cess: Krishi Kalyan Cess will be charged @ 0.50%. This will also be further added to the rate of 14%.

The final rate will be 15% after adding the cess.
 

• The value of all services: The calculation of the value of services holds the important part in the service tax calculation. The valuation of services is done regarding section 67.

• Negative list: The negative list of services means services on which no service tax will be charged. These negative lists of services are defined in the section 66D of Finance Act, 1994.  

• Provided or agreed to be provided: The words “agreed to be provided” are of prime importance. Agreed to be provided means it also covers the cases where services are provided on credit.

• Taxable territory: Taxable territory is defined in Section 65B of the Finance Act 1994. Taxable territory means the territory to which the provisions of this chapter apply, or in other words, taxable territory means India excluding the state of Jammu and Kashmir.
   

Conclusion

The service tax is one of the most complicated taxes and can even confuse the master of this profession. Hence, it is always recommended to consult the expert before reaching any judgment.

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