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Basic Propositions

  1. Introduced for the first time in the year 1994 on three services.
    • Telephone
    • General Insurance
    • Stock Broking
  2. Currently it covers 100 services (April, 2006)Service tax is leviable on services in respect of which charge of tax has been created under the Act, at the prescribed rates.
  3. Service Tax is administered by Central Excise Department.
  4. Obligation to pay Service Tax has been imposed on Service Provider except in situations provided in Rule 2(1)(d)(v) [Service Tax on Goods Transport Agency] of the Service Tax Rules. In such situations, Service Receiver is liable to pay Service Tax.
  5. Credit of Service Tax and Excise Duty is extended across goods and services with effect from 10th September, 2004.
  6. Service Tax does not extend to Jammu and Kashmir.

Composite Services

Where Service provided predominantly contains Material Cost, Government provides specific exemptions from Gross Amount charged (known as Abatement). At present such abatements are provided in following services.

Sr. No.ServiceAbatementNotification
(1)Commercial or Industrial Construction Service67%1/2006 Dtd. 1st March, 2006
(2)Transport of Goods by Road Service75%1/2006 Dtd. 1st March, 2006


  • Service Provider should not avail Cenvat Credit on Service Tax paid on Input Services. (In case of GTA, Service Receiver will have to obtain undertaking from GTA that he has not availed any Cenvat Benefit).
  • Commercial Concern is not the exclusive provider of Finishing and Completion Services. He should also provide other services in respect of Building Construction.
  • Gross amount charged by Commercial Concern for Construction Service should include value of goods and materials supplied for providing the service.

General Exemptions from Service Tax:

  • Services provided to United Nations or specified International Organizations.
  • Services provided to units located in SEZ.
  • Aggregate value of services rendered by a service provider of taxable service from one or more premises has not exceeded Rs. 8 Lacs in the preceding financial year.