Introduction:
In India, every person is paying service tax but unfortunately, few of them are only know about this deduction. Definition of ‘Service Tax’ Definition: Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. This tax is payable only when the value of services provided in a financial year is more than Rs 10 lakh.
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Service tax was a tax levied by Central Government of India on services provided or agreed to be provided excluding services covered under negative list and considering the Place of Provision of Services Rules, 2012 and collected as per Point of Taxation Rules, 2011 from the person liable to pay service tax. The person liable to pay service tax is governed by Service Tax Rules, 1994 he may be a service provider or service receiver or any other person made so liable. It is an indirect tax wherein the service provider collects the tax on services from the service receiver and pays the same to the government of India. Few services are presently exempt in public interest via Mega Exemption Notification 25/2012-ST as amended up to date and few services are charged service tax at an abated rate as per Notification No. 26/2012-ST as amended up to date. Presently from 1 June, 2016, service tax rate has been increased to the consolidated rate at “14% +0.5%+0.5%= 15%” Of the value of services provided or to be provided. The service tax rate now is consolidated rate as education cess and secondary higher education cess is subsumed with 2% of “Swach Bharat Cess(0.50%)” has been notified by the Government.
From 15 November 2015, the effective rate of service tax plus Swachh Bharat Cess, post introduction of Swachh Bharat Cess, was 14.5%. Currently, Swachh Bharat Cess and Krishi Kalyan Cess would also be levied on all services on which Service Tax is being levied and therefore, the Service Tax (including Swachh Bharat Cess and Krishi Kalyan Cess) applicable from 1 June 2016 has become 15%.
During the 2015 budget, the Finance Minister had incremented the service tax rate from 12.36% to 14%, which had been applicable from June 1, 2015. Further, from November 15th, 2015, an additional Swachh Bharat Cess got added at the rate of 0.5%, which left the service tax at 14.5%. After the new proposal brought in during the 2016 Union Budget, the applicable service tax from June 1, 2016, will be “15%”
Dr Raja Chelliah Committee on tax reforms recommended the introduction of service tax. Service tax had been first levied at a rate of five per cent flat from 1 July 1994 till 13 May 2003, at the rate of eight per cent flat w.e.f 1 plus an education cess of 2% thereon w.e.f 10 September 2004 on the services provided by service providers. The rate of service tax was increased to 12% by Finance Act, 2006 w.e.f 18.4.2006. Finance Act, 2007 has imposed a new secondary and higher education cess of one per cent on the service tax w.e.f 11.5.2007, increasing the total education cess to three per cent and a total levy of 12.36 per cent. The revenue from the service tax to the Government of India has shown a steady rise since its inception in 1994. The tax collections have grown substantially since 1994–95 i.e. from ₹410 crore (US$57 million) in 1994–95 to ₹132,518 crore (US$18 billion) in 2012–13. The total number of Taxable services also increased from 3 in 1994 to 119 in 2012. However, from 1 July 2012, the concept of taxation on services was changed from a ‘Selected service approach’ to a ‘Negative List regime’. This changed the taxation system of services from tax on some Selected services to tax being levied on every service other than services mentioned in the Negative list.
Under the Service tax from the year of original levying year of 1994 are constantly growing. The collections are shown in the following table.
Service tax is only liable to be paid in case the total value of the service provided during the financial year is more than ₹10 lakh (US$14,000). If the value of services provided during a preceding financial year is less than ₹10 lakh (US$14,000), only then this exemption is applicable in the current financial year. It is optional for he wants to avail this exemption or not.
Registration of Service Tax
As per Service Tax Law, it is mandatory for the following categories of persons to obtain registration:-
- Every person liable to pay service tax under Reverse Charge
- An input service distributor
- Every provider of taxable service whose aggregate value of taxable service exceeds 9 lakhs in a financial year.
Every person mentioned above will have to get themselves registered under the service tax law within 30 days from the date of commencement of such service or business. Whereas in case of the service provider whose aggregate value of taxable service not exceeded 9 lakhs in a financial year not need to obtain registration, where in case he has obtained registration he is liable to the payment of service tax only if the value of taxable services exceeds 10 lakhs rupees. Rule 4A prescribes that taxable services shall be provided and input credit shall be distributed only on the basis of a bill, invoice or challan. Such bill, invoice or challan will also include documents used by service providers of banking services (such as pay-in-slip, debit credit advice etc.) and consignment note issued by goods transport agencies. Rule 4B provides for the issuance of a consignment note to a customer by the service provider in respect of goods transport booking services.
The amount of tax that can be levied is calculated as a percentage of the charges received/paid for the provision/receipt of services. Service tax is levied at the rate of 15% of the value of taxable services. However, service tax is not necessarily levied on the entire amount charged to the customer. Service tax was a tax levied by Central Government of India on services provided or agreed to be provided excluding services covered under negative list and considering the Place of Provision of Services Rules, 2012 and collected as per Point of Taxation Rules, 2011 from the person liable to pay service tax.
You have to collect the tax (at the rate 12.36% currently) from your customer and pay it to the government. Any person who has collected any sum on account of service tax is under obligation to pay the same to the Government.
An example where Amount does not include taxes
- The gross value of services provided is Rs. 14,060.00.
- Service Tax is 12%
- The rate of Education Cess is 2% of the total Service Tax.
- The rate of Secondary & Higher Education Cess is 1% of the total Service Tax.
- Calculations. Service Tax (ST) = 14060.00 * 12% = 14060.00 * 0.12 = 1687.20.
Therefore, the effective rate became 14.5% with effect from 15 Nov 2015. For transactions that occurred on or after 1 June 2016, this tax is at 15%. 2016 Union budget of India has proposed to impose a cess, called the Krishi Kalyan Cess, at0.5% on all taxable services effective from 1 June 2016.
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What is a service tax number?
Service Tax Number is a unique 15 digit number which is allotted to the assessed at the time of filing an application for registration for Service Tax. Just like PAN Card, No is required for payment and filing of Income Tax Returns, similarly, service tax number is required for payment and filing of Service Tax Returns
Service Tax was first introduced in 1994 when Dr Manmohan Singh was the Finance Minister. The initial rate was only 5% and was levied on only 3 services. With the introduction of Krishi Kalyan Cess, the Service Tax rate in India is now 15%.
How can I know my service tax payment details?
- Log on to NSDL-CBEC site website (cbec-easiest.gov.in)
- Click on the menu e-Payment.
- Enter 15-digit valid Assesse Code.
- Select the respective type of Duty / Tax (accounting code)
- Select the Bank name from the drop down provided.
- After entering all the above detail, click on PROCEED button.
What are the types of taxes in India?
- Income Tax. If money is earned then tax has to be paid – if it crosses a particular slab of income received
- Capital Gains Tax
- Securities Transaction Tax
- Fringe Benefits Tax or Perquisite Tax
- Corporate Tax
- Service Tax
- Value Added Tax (VAT)
- Custom Duty
Taxes generally fall into the following broad categories:
- Income tax.
- Payroll tax.
- Property tax.
- Consumption tax.
- Tariff (taxes on international trade)
- Capitation, a fixed tax charged per person.
- Fees and tolls.
The Point of Taxation: The Point of Taxation Rules, 2011 focuses on simplifying the determination of that point at which service tax in India becomes payable. According to these rules, it becomes payable on the date falling earliest of:
- Invoice Date of the service provided; or
- Date on which the service to be provided gets completed; or
iii. Date on which payment for the service is received.
Taxable Territory: Except for the state of Jammu & Kashmir, the whole of India is considered to be a taxable territory. It also includes territorial waters (airspace, water, and seabed), exclusive economic zones, maritime zones and the continental shelves.
Governing Authority: Service tax is considered to be a self-assessed tax. Still, the Central Board of Excise and Customs (CBEC) is regarded as the governing body of service tax laws. It lays down all the procedures for the assessment of service tax in India. The penalties for non-payment and interest to be charged for delayed payments are all looked after by CBEC.
Registration: If the total value of services provided exceeds Rs. 9 lakhs during the financial year, the service provider is required to apply for Service Tax Registration.
The rate of Service Tax: With the declaration of Union Budget 2016, the rate of service tax in India becomes 15%, bifurcated as:
- Basic Rate = 14%
- Swacch Bharat Cess = 0.5%
- Krishi Kalyan Cess = 0.5%
Due Dates for filing returns: The service tax returns are filed half-yearly, i.e., by 25th October and 25th April for half year period ending in September and March, respectively.
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