Dr. Sanjiv Agarwal, FCA, FCS
Who would have ever thought of in the decade of nineties that we will have a levy called ‘Service Tax’ in India after over 45 years of independence which will continue for as long as 23 long years without even a proper tax law of its own !! Yes, it happened. Circa 1994, yes, it was on July 1, 1994 when the then Union Finance Minister, Dr. Manmohan Singh introduced Service Tax in India with bare three services in Service Tax basket, viz, stock brooking, telephone (not telecom) and general insurance as an experiment @ 5 percent. It fetched Rs. 425 crore in first year and we followed selective approach to reach a level of 120 odd services by 2012. It was from July 1, 2012 that India moved to negative list approach wherein all services were taxed barring the negative list of 17 services and about 40 exemptions. The levy of Service Tax, was administered by Finance Act, 1994 and it was amended every year in last 23 years. For fiscal 2017-18, the Budget estimates are for Rs. 2,75,000 crore (full year) making Service Tax an important central indirect tax. July 1 has gained important once again as GST has been introduced from July 1, 2017.
Lot of ups and downs have been witnessed by Service Tax in every sphere – growth of tax net, growth of revenue, assessee base, tax cesses, number of assessees and tax Commissionerates and obviously disputes and litigation. Today in indirect taxes, Service Tax is at top so far as litigation and tax revenue blocked in appeals is concerned. The Cestat benches too grew from just four to over a dozen, particularly in last three years. There have been disputes ranging from micro issues to Constitutional validity so much so that Government could never levy Service Tax on chit funds and had to come out with a concept of declared services (a deeming fiction) on the statute book.
In the first year of Service Tax itself, 1994, I wrote my book on Service Tax, that time for just Rs. 150 with just 150 odd pages. That was the first book on Service Tax in India, forwarded by none other than Dr. Raja J. Chelleah, author of GST and VAT. I never had the formal education of indirect taxation as in those days (1980-83), it was not a subject in CA syllabus. Nevertheless, I ventured in this unexplored territory to find myself amongst handful of professionals (mainly dominated by legal fraternity) dealing in indirect taxes, mainly central excise. Time passed by and I continued my journey on the path of Service Tax which largely became my domain practice area (something different from corporate laws, capital market and corporate governance). I should complement the legal profession to see that indirect taxes too are important for a nation and a handful of legal professionals ventured in indirect tax practice and excelled therein.
Service Tax law, which resulted in too much of litigation, also provoked me to undertake a project of Service Tax Case Digest wherein I digested over 8000 judicial pronouncements of Supreme Court, various High Courts and Tribunals. This proved to be handy for me as well as thousands of other professionals dealing in Service Tax litigation practice. This is the only book of its kind available in the country today. Perhaps, with service tax gone, this may still have some life left in view of the fact that Service Tax litigation may go on for some more years.
Service Tax saw the widest possible range of disputes between the taxpayers and revenue department. There have been small issues of waiver of penalty or invoking of section 80 for reasonable cause, valuation, classification, Cenvat credit and challenge to constitutional validity. Appeals went up to Supreme Court on constitutional challenge which was mainly from CAs, advocates, architects etc and services in relation to lotteries, works contracts, renting of immovable properties, photography services, consulting engineers etc, to name a few.
It is hard to believe that today that Service Tax is no longer there. Good for future, of course, economy and all stakeholders but it is difficult to detach yourself with one you have loved and lived with.
I am sure, GST in going to be a better, forward looking and objective tax which will change the way businesses are done and conducted, taxes are levied and collected and way services ought to be rendered by the professionals. My suggestion to fellow professional which are large in numbers today, would only be to read, understand and interpret the law keeping legislative intention in mind before implementing the same on any client including one self.
Bye Bye Service Tax : Welcome GST, we embrace you.