Service tax or ST is applicable to the whole of India except the state of Jammu and Kashmir or J&K. To get it applicable to the state of Jammu and Kashmir the consent of the state assembly is required which has not been obtained till date.
Followings are some of the incidence which needs to be examined in detail to know the impact of service tax on the state of J&K;
- Mr. X (Service provider) is from the state of J&k where as Mr. Y (receiver) is not.
- Mr. X and Mr. Y are from J&K.
- Mr. Y is from J&K where as Mr. X is from outside J&K.
To answer all these questions we have to remember that service tax will not be chargeable if it’s consumed in Jammu and Kashmir. This means. if its consumed in India but outside of Jammu and Kashmir then it will be charged to service tax.
In the first case, Mr. X is based out of J&K but Mr. Y is from outside J&K. In this case services are rendered outside Jammu and Kashmir (i.e. at the place of receiver) so tax will be chargeable on these types of transactions.
In the second case, both provider (Mr X) and receiver (Mr Y) are in Jammu and Kashmir so nothing will be chargeable to service tax.
In the third case its consumed in Jammu and Kashmir even though the provider (Mr X) is from outside the state of Jammu and Kashmir. In this case, service tax will not be charged as it is provided and consumed in J&K.
So to conclude, service tax will be charged if such services are consumed in Jammu and Kashmir. It does not matter where the offices of the provider or receivers are. These offices can be outside J&K but if it is consumed in the state of J&K then it will not be applicable.
This means Mr X can be from delhi, chennai, kolkata, mumbai or any other parts of India but to charge service tax we need to find out whether the receiver has consumed it in Jammu and Kashmir (J&K) or not. If its consumed in J&K then no Service Tax.