Question

The legal provisions for the levy and collection of service tax were introduced through the Finance Bill in which of the following years? 
1. 1994
2. 1989
3. 1999
4. 1991

Answer 1

Correct Answer - Option 1 : 1994

The correct answer is 1994.

• The legal provisions for the levy and collection of Service Tax were introduced through Finance Bill 1994.
• The law relating to Service Tax is still governed by Chapter V of the Finance Act, 1994.
  • Initially, the service tax rate was 5% of the gross value of service.
• This was enhanced to 8% in the 2003 Budget.
• In the 2004 Budget, the rate was further enhanced to 10% with the extension of credit across goods and services.
• The rate was enhanced to the present rate of 12%  in the 2006 Budget.

• Service Tax was imposed in 1994 for the first time on telephone services.
• Service Tax applies to the whole of India except the State of Jammu and Kashmir.
  • It also extends to the designated areas in the Continental Shelf and Exclusive Economic Zone of India.