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Service Tax : Definition and Meaning

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Service Tax : Definition and Meaning
February 20, 2024

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HDFC Life explains definition and meaning for Service Tax which is a type of indirect tax collected by the Indian Government.

  • What is Service Tax?

    Service tax is payable to services provided by the provider. It's similar to excise duty where an amount is payable on goods that are manufactured. It's a type of indirect tax that is collected by the Government after consuming the taxable services provided by travel agents, restaurants, cable providers, cab services etc. Service tax was announced in the year of 1994 as a part of the Finance Act per section 65.

  • What is the Rate of Service Tax?

    The rate of service tax varies from time to time as the Government revises the rates during every financial budget. Usually it is the finance ministry that announces the change in the service tax rate during the budget session of the parliament. The rate increased in 2015, from 12.36% to 14% and it was revised again in 2016 from 14% to 15% that included 0.5% ‘Krishi Kalyan’ cess and 0.5% ‘Swacch Bharat’ cess.

  • What is Applicability of Service Tax?

    Service tax is described in detail under Section 65B (44) of the Finance Act of 1984. This Act clearly mentions the complete list of services that fall under the purview of service tax. It also includes the 'Negative List' which are non-taxable list of services and is mentioned under Section 66D of the Finance Act. Also, there are certain ‘Special services’ too that are exempted from service tax.

  • How is Service Tax Registered?

    Usually, service tax is collected by the service provider from the recipient directly, but in certain cases, the Government may collect the tax from the recipient, this is called ‘Reverse Charge Mechanism’. The advent of Digital India has made the entire process of registering for service tax online. One can register by logging on to www.aces.gov.in. You need to complete your service tax registration within the span of 30 days of providing a taxable service. Once the form is submitted, the government reviews it and grants the registration within 2 days. Documents are not required for the registration process, they can be submitted for verification after the registration process is completed.

  • What is the Payment Procedure of Service Tax?

    The new rules state that online payment of service tax is mandatory to all eligible income tax slab rates players. Certain exceptions can be made for specific requests to allow manual payment. Online service tax payment can be done by visiting www.cbec-easiest.gov.in. Individuals or partnership or proprietary farms need to make the payment on a quarterly basis.

  • Maintenance of Records

    People who pay direct service tax are required to maintain their own records. They can issue digitally signed invoices and may also electronically maintain service tax records. They should preserve these records for a minimum of 5 years.

  • Returns for Service Tax

    The tax payer needs to file for return online on a half yearly basis as soon as he/she has started paying service tax regularly. This can be done by visiting www.aces.gov.in. This must be done on or before the 25th of the month following the half year.

FAQs on Service Tax

Who is liable for service tax?

Service tax was a type of indirect tax levied on services rendered by service providers in Indi Section 66B of the Finance Act, 1994 used to determine whether services rendered by an individual or a company are taxable for service tax or not. All services rendered or to be rendered within the country’s taxable area were subject to service tax except specifically exempt.

How much is the service tax?

Before being replaced by GST (goods and service tax) in the year 2017, the service tax rate was 15% in Indi Service tax is only to be paid if the total value of the service provided is more than Rs. 10 lakhs in an FY or financial year. If the value of services is less than Rs 10 lakhs, it is optional for the service provider to either choose to pay service tax or not.

How is service tax calculated?

Just before the introduction of GST Regime, Service Tax was levied at the rate of 15% on the value of taxable services. Service tax is bifurcated as 14% to service tax, 0.5% to Swach Bharat Cess and 0.5% to Krishi Kalyan Cess with sums up to 15%.

How do I pay service tax?

Online service tax payments were done by logging into the official website of Central Board of Indirect Taxes and Customs, and using your taxpayer login and then proceeding to pay the service tax.

Does service tax still exist in India?

No, the service tax was replaced by GST (goods and services tax) in India from 1st July 2017. This was done towards the aim of one nation, one tax. GST replaced multiple indirect taxes, such as value-added tax (VAT), excise duty, service tax, etc.

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source links

https://gstcouncil.gov.in/brief-history-gst

https://www.cbic.gov.in/entities/serviceTax

https://dor.gov.in/sites/default/files/service_tax1.pdf

https://economictimes.indiatimes.com/definition/service-tax

https://nacin.gov.in/page/knowledge-service-tax

https://unacademy.com/content/upsc/study-material/commerce/service-tax/

 

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Disclaimer

#Tax benefits & exemptions are subject to conditions of the Service Tax Law and its provisions.

#Tax Laws are subject to change from time to time.

#Customer is requested to seek tax advice from his Chartered Accountant or tax advisor with respect to his tax liabilities under the Service Tax Law.

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