Taxation of Services in India A Study of Policy Law and Governance

Abstract

In this thesis, taxation of services, which began in India, for the first time during the year 1994 and finally subsumed into the Goods and Services Tax, in 2017, is taken up for study. In this inter-disciplinary study, using doctrinal method, historical approach and primary sources, the development of tax on services from 1994, till 2023, is examined, with emphasis on understanding the interplay between policy, law, and governance. The key focus is to explore and explain, how judicial wisdom supported and shaped the new levy, which faced the following challenges: (i) no entry was available in List-I of the Constitution of India, with a description namely, tax on services; (ii) when introduced and subsequently expanded every year, tax on services was overlapping with taxation related entries in List-II of the Constitution; (iii) though, services sector in the economy was growing rapidly, distinction between goods and services, was not clear and hence was difficult to identify the event of tax, namely, provision of services. By the exercise of the power of review and interpretation of the legal provisions, the judiciary explained the constitutionality of the service tax levy, scope and extent of residual power and clarified the overlap between taxation entries in List-I and List-II of the Constitution. In judicial wisdom, many conceptual distinctions were drawn, especially between goods and services, to create a distinct taxable event. The judicial wisdom in precedent case laws, drawing distinctions between goods and services also provide continuity for the currently followed Goods and Services Tax. newline