IN its nearly 15 years of existence, it is for the first time that the Government has effected an across the board reduction in the rate of service tax, i.e. from 12 % to 10 %, vide Notification No. 8/2009 ST Dated 24.02.2009, which is effective from 24.02.2009. It may be observed that service tax is payable upon realization of value of taxable service, or on receipt of advances for the services to be provided. Though the taxable event for the levy of service tax is the rendering of service, the liability arises on receipt of value of such taxable service. To further elaborate, if a service tax not taxable when rendered, there will be no service tax liability, even if the value for such service is realized after introduction of levy of service tax on such services. But, if the service is already taxable, even when the service was rendered in the past, the rate of service tax applicable would be the rate prevalent on the date of realizing the value of taxable service.
In line with the above, the implication of reduction in service tax rate from 12 % to 10 %, in different situations are tabulated below:
Courtesy:S. Jaikumar & G. Natarajan, Advocates