Consider the following statements related to Service tax 1 Service tax is categorized under direct T...........

Economic Affairs Tax System

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Consider the following statements related to Service tax:

1. Service tax is categorized under direct Tax and came into existence under the Finance Act, 1994.

2. Service tax is charged to the individual service providers on cash basis, and to companies on accrual basis.

3. Service tax is not applicable in the state of Jammu & Kashmir and few North-Eastern States.

Which of the above given statements is/are correct?

1and 2 Only

2 Only

2 and 3 only

All of the above

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Explanation:

Let’s look at each statement:

- Statement 1: Service tax is a direct tax – Incorrect. Service tax is an indirect tax, though it did come into existence under the Finance Act, 1994.

- Statement 2: Service tax is charged to individuals on cash basis, companies on accrual basis – This is correct as per provisions.

- Statement 3: Service tax is not applicable in Jammu & Kashmir – This is correct. Service tax was not applicable in Jammu & Kashmir, but was applicable in North-Eastern states (so "few North-Eastern States" is partly misleading).

Option:1 (1 and 2 Only): Statement 1 is incorrect.

Option:2 (2 Only): Only statement 2 is fully correct.

Option:3 (2 and 3 only): Partially correct (statement 3 slightly misleading).

Option:4 (All of the above): Statements 1 and 3 are not fully correct.

Correct Answer: Option 2, 2 Only