Service tax is an easy and effective tool in the hands of finance minister to generate revenue. This article discusses service tax right from the Finance Act 1994 by which it was first introduced to the amendments made by the budget 2007-08, in a eloquent and tabular manner indicating the position before and after the budget.

The "Service Tax" (ST), an indirect tax, was in India by the Finance Act, 1994, whereby it covered only three services namely telephone, general insurance and stock broking. Gradually the various finance acts have widened the scope of service tax to cover more and more services. Now, it is applicable to the whole of India, except the state of Jammu & Kashmir. Further, any service provided to the United Nations or an International Organization like World Health Organization (WHO) is exempted from the service tax.

The service tax is levied by the virtue of Entry No. 92C of the List I i.e., Union list of the Seventh Schedule to the Constitution of India. Service tax is administered by Commissionerates of Central Excise working under Central Board of Excise and Customs. The tax collections under the service tax are very promising. As evident from Table 1 below, it has increased from Rs. 862 cr in 1995-96 to Rs. 14,200 cr in 2004-05 and to around Rs. 23,055 cr in 2005-06. The share of service tax in total tax revenue has increased from 0.8 to 4.7% and to 6.3% and in Gross Domestic Product (GDP) from 0.1 to 0.5% and to 0.6% over the same period.

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