Read the article to find out the rules about applicability of service tax in India.

In India, all the taxable services provided by an individual or entity are included in the list of services on which service tax is applicable. Service Tax, as per the Service Tax Act is levied on various kinds of ‘services’ provided in India. The services can be further defined as any activity provided carried on by one person for another for consideration. Apart from this, it should be noted that service tax is not levied on any activity that includes only the transfer of title of goods or a transfer, delivery or supply of goods which in reality is a sale of goods and transaction in money. This article throws light at the details of service tax applicability in India.

Taxable Services

• Service is provided or is agreed to be provided by one person to the other.

• Service in the past or in the future is/was not to be provided in a taxable territory in India.

• The service in question should not be a part of the negative list that includes services exempted from service tax.

Service Agreed to be Provided is Taxable

It must be noted that once a taxable service is provided, the service provider then becomes liable to pay service tax. Contrarily, according to the service tax regulations, a service provider is also liable to pay service tax on service which he has agreed to provide. Thus services that have been agreed to be provided and may still not be provided are also taxable. This means that receipt of advances which are given for services on which one has agreed to work, become taxable, on the payment of the advance fee. However, if in case the advances are retained by the service provider, the service provider becomes liable to pay service tax. It is also the same in case of cancellation of the contract of service.

Service Provided in the Taxable Territory

Section 65B of the Service Tax Act defines Taxable territory as the territory to which the Service Tax Act applies. In India the jurisdiction of service tax act covers the whole of India except the State of Jammu and Kashmir.

Service Not in Negative List

Inclusion in the negative list for a service means service tax is not levied on that particular service. In other words it means that the Negative list contains all those services that are exempted from service tax.