A. It is a tax on services provided in India levied by the Central Government under the Finance Act, 1994.
B. Business entities such as food service, consulting, car repair, banks, software development etc. provides service to the customer and henceforth attracts additional service amount is called service tax.
C. Business entity collects the tax from the consumer and pays to the central Govt. on behalf of them.
D. It is indirect tax as a service provider is not directly paying it but collecting from the recipients or customers and paying on their behalf to the central government.
Technically speaking it is
“A tax levied by Central Government of India on services provided or 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 this tax is governed by Service Tax Rules, 1994 he may be a service provider or service receiver or any other person made so liable”.
Existence and criteria for payment of service Tax in India
A. The concept of this tax comes into existence in 1994. However, in 2012 the scope of items under service tax increase covering wide varieties of service from air conditioned facility to lodging and boarding facilities etc..
B. Service Tax is applicable to business when the total value of service exceeds Rs. 10 lacs in a financial year.
When Receiver of service liable for payment of service tax directly?
There are instances when the receiver of service instead of paying tax to the service provider directly pays to the Central Government. This is referred to as reverse charge. These instances are as follow:
A. Service provided by the foreign company with no office or establishment tin India.
B. The services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be paid by the Insurance Company
C. Services provided for transportation of goods by Goods Transport Agency, the person who pays or is liable to pay freight is liable to pay Service Tax too. , if the consignor or consignee falls under any of the seven categories viz. (a) a body corporate or a partnership firm (b) a factory (c) a corporation (d) a company (e) a society (f) a co- operative society (g) a registered dealer of excise-able goods.
D. Services by the government or local authority to any business entity.
E. Sponsorship service provided by any person to Body Corporate or partnership firm
F. Services provided by Director to a body corporate.
G. Legal service provided by an individual or firm to any business entity.
List of services taxable
Almost all services are taxable ranging from architects, advertising, chartered accountants, beauty parlors, clubs, security agencies cosmetic surgeries consulting engineers, packaging services, interior decorators, real estate agents, and restaurants and. Although, a complete list of taxable services have been specified under Section 65(105) of the Finance Act, 1994. However, this section is not relevant after the introduction of negative list of services. Therefore from 1st July 2012 onwards all services (except those specified in the negative list of services by government) are not liable for tax
Negative list of Services under Service Tax
These are services exempt from paying service tax and included in the negative list of service tax. For the following service, it is not applicable.
A. Services provided to the United Nations or any specific international organizations.
B. An authorized Clinical establishment or medical practitioner.
C. Ambulance service
D. Services provided by Blood Bank or any other preservation centers.
E. Service in veterinary hospital or vet.
F. Services offered by temples or for conducting a religious ceremony.
G. Services provided by teachers of arts to I students, faculty and staff.
H. Transporting students.
I. Providing services in the educational institution, security and cleanliness services in educational institutions, sports events, sponsorships were given to students during events etc..
Besides these, there are other services too that are included in the negative list of services. Hence, before paying for the services check out the negative list of service tax. “Want to know more about Service Tax Registration Form ?”
Service tax on composite services
A. Service Tax on composite service refers to the service tax applicable on a portion of the bill rather than on full amount.
B. This is applicable to those business entities that provide goods as well as service.
C. For e.g. In Restaurant, food is offered considered as good (VAT applicable on goods) and service to sit, air-conditioning and serving are offered on which it is applicable.
D. It is due to the fact that it becomes difficult to divide the divide the bill amount for food as well as service provided.
Current service tax rate
A. Currently, the rate is 14%
B. It is applicable w.e.f. 1st June 2015.
C. It is to be paid quarterly or monthly.
We have more information about Service Tax Due Date or Service Tax Return Filing