Service Tax Liability
Service Tax scheme is based on wide definition of "Service". Essentially service means any activity (or omission) carried out by one person for another for consideration. The definition of service is extremely wide and it covers all business activities. It specifically excludes transactions with respect to transfer of title (sale of moveable or immovable property), transaction in money, employer employee relationship and fee payment to court. Thus every activity, apart from those excluded specifically is potentially liable to service Tax.
Services covered under negative list has no service tax. There is a list of exempted services. If a particular service is not covered under the negative list or exempted list, service tax is payable against that service. Apart from this there is a list of declared services. Declared services are those which may not be service, but has been declared as service by the legislature. Further there is a concept of composite service and bundled service for proper classification of services.
In view of this, every organisation needs to examine its revenue statement for determine as to what are the revenues which pertains to activities which are not service and which pertains to services falling under negative list or exempted list. All other revenue is potentially liable to service tax provided the activity must be performed in the taxable territory.