Service Tax : Definition and Meaning

Table of Content

1. What is Service Tax?

2. What is the Rate of Service Tax?

3. What is Applicability of Service Tax?

4. How is Service Tax Registered?

5. What is the Payment Procedure of Service Tax?

6. Maintenance of Records

7. Returns for Service Tax

• 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 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.

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