SERVICE TAX
Service Tax is a destination based consumption tax in the form of Value Added Tax. Service Tax is
a indirect tax imposed on specified services (taxable services) provided by a service provider
(Company, Individual, Firm etc.).
Service Tax was first brought into force with effect from 1 July 1994. All service providers in India,
except those in the state of Jammu and Kashmir, are required to pay a Service Tax in India.
Initially only three services were brought under the net of service tax and the tax rate was 5%.
Gradually more services came under the ambit of Service Tax. The rate of tax was increased. On
February 24, 2009 in order to give relief to the industry under the impact of economic recession,
the rate of Service Tax was reduced from 12 per cent to 10 per cent.
Scope & Applicability
Scope
Service Tax is charged only on the receipt of the consideration for the services provided / to be
provided (advance receipts). The liability of tax is on the service provider (in some cases service
receiver), i.e. person who is providing the service is liable to pay tax to the government.
Example: Royal Agency provided advertising services of Rs. 1,00,000 to SysImage. On the
service amount of Rs.1,00,000, Royal Agency is liable to pay the tax of Rs. 10,300 @ 10.30%
(10% os Service Tax, 2% of Education Cess, 1% of Secondary Education Cess)
Though the tax liability is on service provider, the tax can be collected by the
service provider from the service receiver.
The service provider does not have to pay service tax on the total bill amount but
only on the payment received.
Applicability
Service tax is applicable on taxable services
1.Provided and taxable in the hands of service provider
2.Received and taxable in the hands of service receiver: Generally it is the service provider who is liable to collect service tax from his customer/client and pay the same to the government. But section 68(2) empowers the government to notify the services with regard to which the service receiver would be held liable to pay service tax to the government. For the below mentioned services the service receiver is liable to pay service tax (ss per Notification 36/2004 ST dated 31.12.2004 as amended from time to time)
Goods Transport Agency service
Business auxiliary service of distribution of mutual fund by a mutual fund distributor or agent
Sponsorship service provided to any body corporate/firm
Taxable services received by any person in India from abroad
Insurance auxiliary service by an insurance agent
The definition of taxable service is different for each class of services, e.g. in case of Stock Broker
agency, any service provided to a investor by buy or sell securities listed on a recognised stock
exchange will be a taxable service.
Registration
As per section 69 of the Finance Act 1994, every person liable for paying service tax has to
register as set out in the rules.
According to Rule 4 of the Service Tax Rules, 1994 following is the manner and time for registration
Application for registration to the concerned superintendent in form ST -1 with in 30 days from the date on which service tax is levied or 30 days from the commencement of business providing a taxable service, which ever is later.
Assessee providing Service from more than one Premises or Office, has to make separate applications for each of such premises or Offices.
If the assess has centralised billing System or Centralised accounting system, then assessee can obtain Centralised Registration covering all the premises or offices.
In case of transfer of business from Registered Assessee to new person, Transferee has to obtain the fresh registration certificate.
For every Registered Assessee there is a provision under Service Tax Rules to Surrender Registration Certificate to Superintendent of Central Excise when he ceases to provide taxable services for which he is registered.
Registration requirement for Small Service Provider (SSP)
A person who is eligible for availing exemption under notification no. 6/2005 is required to apply for service tax registration within 30 days from the date when his turnover of services exceeds rupees 3 lakhs.
Input Service Distributor (ISD) Registration
Service Provider having multiple offices other than from where the services are provided and
wants to distribute the input services and cenvat credit thereon to the other location which is liable
for payment of service tax, a separate registration (in the manner as that of service provider) will
be required for each such office.
Service Tax Assessee Code (Service Tax Registration Number)
Service Tax Assessee Code is a PAN based 15 digit alpha numeric numbers e.g.
AEFCE1567ST001.
The first part denotes (10 characters – alpha numeric) Permanent Account Number issued by
Income tax authorities to the concerned person to whom the Service Tax Registration Number is
to be allotted. Second part comprises of a fixed 2 character alpha code – ST (Service Tax). This
is followed by 3-Character numeric code representing the registered Premises or Office of the
service provider
The Service Tax Registration Number has to be quoted on GAR–7 Challans covering deposit of
Service Tax, Cess and other dues to the Government.
Valuation of Taxable Service
Valuation of the services provides the methodology of arriving at the service amount on which the
applicable service tax to be charged.
Value of the taxable service is determined as under
Consideration fully in Money: The gross amount charged by the service provider for such services provided/to be provided
Consideration not in Money: The Equivalent Value of the Non monetary consideration.
Consideration partly in money and partly in other form: Amount charged monetarily and the Equivalent value of the Non monetary consideration
Consideration not Ascertained: Valuation based on the Valuation Rules (as per section 67, Service Tax (Determination of value) rules, 2006
Consideration Inclusive of Tax: Value of taxable service will be such amount, in addition of service tax payable is equal to Gross amount charged.
Example: Royal Agency provides taxable service for Rs. 1,32,360 inclusive of service tax @
10.30%. The taxable service value shall be computed as shown
Taxable Service Value (1,20,000) = 1,32,360 X (100/110.30)
Charge of Service Tax
As per Section 66 of Finance Act, 1994 tax (Service Tax) @ 10% of the value of taxable service, in
addition, 2% Education Cess and 1% Higher Education Cess is payable on taxable services.
Thus, total service tax is 10.30% and it will be collected in such manner as prescribed.
Time and Mode of Payment
1.By individuals, proprietary firms and partnership firms
Payable on the Amount received during the Quarter Payable By
1st April to 30th June 5th July
1st July to 30th September 5th October
1st October to 31st December 5th January
1st January to 31st March 31st March
2.By Others
Payable on the Amount received during the Month Payable By
On amount received during each month except March 5th of following month
on amount received during March 31st March
Service Tax shall be paid to the government account through any designated branches of the
authorised banks, along with G.A.R.-7 Challans.
Returns & Time lines
The Service Tax returns are to be filed half yearly in the prescribed Form ST-3 or Form ST - 3A
1. Form ST-3 - For all the registered assessee, including Input Service Distributors,
The returns have to be submitted, along with copies of all GAR 7 challans within 25 days of the
expiry of the fiscal half-year
For half year 1st April to 30th September – by 25th October
For half year 1st October to 31st March – by 25th April.
2. Form ST-3A -The assessee who is making provisional assessment for any month/quarter submit the memorandum in from ST-3A by providing the details of difference between the provisional amount of service tax deposited and actual amount of service tax payable for each month along with the half yearly return in Form ST - 3.
Service Tax is a destination based consumption tax in the form of Value Added Tax. Service Tax is
a indirect tax imposed on specified services (taxable services) provided by a service provider
(Company, Individual, Firm etc.).
Service Tax was first brought into force with effect from 1 July 1994. All service providers in India,
except those in the state of Jammu and Kashmir, are required to pay a Service Tax in India.
Initially only three services were brought under the net of service tax and the tax rate was 5%.
Gradually more services came under the ambit of Service Tax. The rate of tax was increased. On
February 24, 2009 in order to give relief to the industry under the impact of economic recession,
the rate of Service Tax was reduced from 12 per cent to 10 per cent.
Scope & Applicability
Scope
Service Tax is charged only on the receipt of the consideration for the services provided / to be
provided (advance receipts). The liability of tax is on the service provider (in some cases service
receiver), i.e. person who is providing the service is liable to pay tax to the government.
Example: Royal Agency provided advertising services of Rs. 1,00,000 to SysImage. On the
service amount of Rs.1,00,000, Royal Agency is liable to pay the tax of Rs. 10,300 @ 10.30%
(10% os Service Tax, 2% of Education Cess, 1% of Secondary Education Cess)
Though the tax liability is on service provider, the tax can be collected by the
service provider from the service receiver.
The service provider does not have to pay service tax on the total bill amount but
only on the payment received.
Applicability
Service tax is applicable on taxable services
1.Provided and taxable in the hands of service provider
2.Received and taxable in the hands of service receiver: Generally it is the service provider who is liable to collect service tax from his customer/client and pay the same to the government. But section 68(2) empowers the government to notify the services with regard to which the service receiver would be held liable to pay service tax to the government. For the below mentioned services the service receiver is liable to pay service tax (ss per Notification 36/2004 ST dated 31.12.2004 as amended from time to time)
Goods Transport Agency service
Business auxiliary service of distribution of mutual fund by a mutual fund distributor or agent
Sponsorship service provided to any body corporate/firm
Taxable services received by any person in India from abroad
Insurance auxiliary service by an insurance agent
The definition of taxable service is different for each class of services, e.g. in case of Stock Broker
agency, any service provided to a investor by buy or sell securities listed on a recognised stock
exchange will be a taxable service.
Registration
As per section 69 of the Finance Act 1994, every person liable for paying service tax has to
register as set out in the rules.
According to Rule 4 of the Service Tax Rules, 1994 following is the manner and time for registration
Application for registration to the concerned superintendent in form ST -1 with in 30 days from the date on which service tax is levied or 30 days from the commencement of business providing a taxable service, which ever is later.
Assessee providing Service from more than one Premises or Office, has to make separate applications for each of such premises or Offices.
If the assess has centralised billing System or Centralised accounting system, then assessee can obtain Centralised Registration covering all the premises or offices.
In case of transfer of business from Registered Assessee to new person, Transferee has to obtain the fresh registration certificate.
For every Registered Assessee there is a provision under Service Tax Rules to Surrender Registration Certificate to Superintendent of Central Excise when he ceases to provide taxable services for which he is registered.
Registration requirement for Small Service Provider (SSP)
A person who is eligible for availing exemption under notification no. 6/2005 is required to apply for service tax registration within 30 days from the date when his turnover of services exceeds rupees 3 lakhs.
Input Service Distributor (ISD) Registration
Service Provider having multiple offices other than from where the services are provided and
wants to distribute the input services and cenvat credit thereon to the other location which is liable
for payment of service tax, a separate registration (in the manner as that of service provider) will
be required for each such office.
Service Tax Assessee Code (Service Tax Registration Number)
Service Tax Assessee Code is a PAN based 15 digit alpha numeric numbers e.g.
AEFCE1567ST001.
The first part denotes (10 characters – alpha numeric) Permanent Account Number issued by
Income tax authorities to the concerned person to whom the Service Tax Registration Number is
to be allotted. Second part comprises of a fixed 2 character alpha code – ST (Service Tax). This
is followed by 3-Character numeric code representing the registered Premises or Office of the
service provider
The Service Tax Registration Number has to be quoted on GAR–7 Challans covering deposit of
Service Tax, Cess and other dues to the Government.
Valuation of Taxable Service
Valuation of the services provides the methodology of arriving at the service amount on which the
applicable service tax to be charged.
Value of the taxable service is determined as under
Consideration fully in Money: The gross amount charged by the service provider for such services provided/to be provided
Consideration not in Money: The Equivalent Value of the Non monetary consideration.
Consideration partly in money and partly in other form: Amount charged monetarily and the Equivalent value of the Non monetary consideration
Consideration not Ascertained: Valuation based on the Valuation Rules (as per section 67, Service Tax (Determination of value) rules, 2006
Consideration Inclusive of Tax: Value of taxable service will be such amount, in addition of service tax payable is equal to Gross amount charged.
Example: Royal Agency provides taxable service for Rs. 1,32,360 inclusive of service tax @
10.30%. The taxable service value shall be computed as shown
Taxable Service Value (1,20,000) = 1,32,360 X (100/110.30)
Charge of Service Tax
As per Section 66 of Finance Act, 1994 tax (Service Tax) @ 10% of the value of taxable service, in
addition, 2% Education Cess and 1% Higher Education Cess is payable on taxable services.
Thus, total service tax is 10.30% and it will be collected in such manner as prescribed.
Time and Mode of Payment
1.By individuals, proprietary firms and partnership firms
Payable on the Amount received during the Quarter Payable By
1st April to 30th June 5th July
1st July to 30th September 5th October
1st October to 31st December 5th January
1st January to 31st March 31st March
2.By Others
Payable on the Amount received during the Month Payable By
On amount received during each month except March 5th of following month
on amount received during March 31st March
Service Tax shall be paid to the government account through any designated branches of the
authorised banks, along with G.A.R.-7 Challans.
Returns & Time lines
The Service Tax returns are to be filed half yearly in the prescribed Form ST-3 or Form ST - 3A
1. Form ST-3 - For all the registered assessee, including Input Service Distributors,
The returns have to be submitted, along with copies of all GAR 7 challans within 25 days of the
expiry of the fiscal half-year
For half year 1st April to 30th September – by 25th October
For half year 1st October to 31st March – by 25th April.
2. Form ST-3A -The assessee who is making provisional assessment for any month/quarter submit the memorandum in from ST-3A by providing the details of difference between the provisional amount of service tax deposited and actual amount of service tax payable for each month along with the half yearly return in Form ST - 3.
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