Service means a useful result of labour, which is intangible. Thus, service is an addition that can be only felt but cannot be seen. As per Section 65B(44) of the Finance Act, 1994, Service means an activity carried out by one person for another for consideration. The Service does not include the following cases.
- Mere transfer of title of goods / immovable property [Section 65B (44)(a)(i)] by way of gift, sale, or in any other manner.
- Service by an employee to the employer in the course of or of his employment do not constitute service [Section 65B(44)(b)].
- A mere transaction in money or actionable cliams [Section 65B(44)(a)(iii)].
- Fees are taken for Service of Court or Tribunal established under any law.
Finance Act, 1994
Finance Act, 1994 chapter-V contains provisions for levy of service tax, registration and other procedures like appeals, rectification, revision, interest and penalties, recovery, etc. Chapter V-A contains provisions on advance rulings. Chapter-V extends to the whole country except the state of Jammu & Kashmir.
It is a charging section which provides Service Tax shall be levied on all services provide or agreed to be provided in the taxable territory other than services specified in the Negative list.
What is Service Tax?
Service Tax is a tax in the provision of services. Service Tax is a tax on the ‘economic activity’ which results in value addition. The service tax has been enforced on all services other than those specified in the negative list. It is a tax imposed on the transaction of certain services specified by the Central Government under the Finance Act, 1994. Service Tax is a destination based consumption tax leviable in services provided within the country. Unlike profession tax, it is not leviable only when some ‘service‘ is rendered. Unlike Income tax, it is not a tax on revenue generated from services but is a tax on the rendition of services. It is not like sales tax/ Value Added Tax which is a tax on the sale of goods. Service tax was levied on specified services before 1.07.2012. From 1st July 2012, there is a paradigm shift in the levy of service tax.
Service Tax Liabilities
Service Tax is payable by the individual, who offers the service on receipt of service charges to the Government of India. Although, in the following states, the Service Receiver is responsible for the Online payment of Service tax Return.
- Where the taxable services are offered by the foreign service providers with no establishment in India, the recipient of that services in India is liable to pay Service Tax.
- The Service Tax is paid by the Insurance Company, for the services providing the Insurance Auxiliary Service by an Insurance Agent.
- For the taxable services offered by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight is likely to pay Service Tax, if the consignee or consignor comes under any of the seven categories listed below.
- A factory.
- A company.
- A corporation.
- A Co-operative Society.
- A Society.
- A registered dealer of excisable goods.
- A body corporate or a partnership firm.
- For the taxable services offered by Mutual Fund Distributors about the distribution of Mutual Fund. In such case the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.
Essentials for charge of Service Tax
- Service should have been provided (or) agreed to be provided for another.
- Service should be presented for consideration of the business purposes.
- When a transaction is completely going only on money or the actionable claim.
- It should be provided for supplying, delivery and transfer of Goods that are deemed to be the sale of goods within the clause (29 A) of article 366 of the constitution.
- One person should provide it to another.
- It should be offered in the taxable territory as per “Place of Provision of Service (POPs)” Rules, 2012.
- It also includes some Declared Services.
- Service must not be specified in the Negative list.
Service Tax Rate
In Union Budget 2016 Finance Minister introduced a new Cess called the Krishi Kalyan Cess. This Cess will be applicable from 1/06/2016. Krishi Kalyan Cess would be levied on all services(taxable) and will be charged @ 0.5% of the total value of service. KK Cess would be levied over and above the Service Tax & the Swachh Bharat Cess. From 1st June 2016 onwards the Service Tax rate in India could be 15% including Krishi Kalyan Cess. Get online Service Tax Calculator is here. Check out How to calculate Service Tax in India.
Read More: Service Tax calculation
Before 01/06/2016, Service Tax of 14% and Swachh Bharat Cess of 0.5%, hence a total of @14.5% would be applicable. But starting from 1st June 2016 including Krishi Kalyan Cess the effective rate of Service tax would become 15%. The current Service Tax Rate in India is 15%.
Service Tax Exemption
Some Services in India are exempted from Service Tax in India. Along with services specified in the negative list a Mega Exemption has been issued exempting many services from Service Tax payment. Learn more about Service tax Exemption list here. For more details regarding Service Tax Exemption check out Service Tax Exemption List here.
Service Tax Payment
Assessee can make a service tax payment manually using G.A.R.-7 Form. G.A.R.-7 is a challan available in all specified branches of banks. The Taxpayer needs to fill the challan with relevant information and submit the challan in nearest branch. However, Assessee can also have Service tax online payment provision offered by the Central Board of Excise & Custom. For E-payment of Service Tax, internet banking account in the authorized bank is mandatory. Check out steps for How to pay service tax online? Here you can get complete Information regarding Service Tax Payment in India. For more information regarding this topic refer Service Tax e Payment.
Online Service Tax Registration
Service Tax Registration is a Central Tax Registration, it is admissible on service based business. Every individual who has offered a taxable service of value above Rs. 9 lakhs, in the previous financial year, is required to register with the Central Excise. For Online Service Tax registration, Form ST-1 is needed to be submitted to the constitutional Central Excise. The Service Tax registration process is made easy by Digital India. For More details regarding this topic, you may check the Online Service Tax Registration.
Service Tax e-Filing – Service Tax Return Filing
Service Tax Return filing (Service Tax Return form-3) is made mandatory for all Assessees with effect from 01.10.2011 vide Notification No. 43/2011 of Service Tax, dated 25.08.2011. These are the complete steps for Online Service Tax Return filing. No manual returns could be entertained, filed or accepted. NIL return filing option is not available for ST assessees in Automation of Central Excise and Service Tax (ACES). They may enter the value and tax as zero and file the return. For more about Service Tax Number Verification and Service Tax return Online Filing, Refer Service Tax e-Filing.
Service Tax Due Dates- Service Tax Return Due date
As per the Service Tax Rules of Govt of India, Online Service Tax Payment should be made at regular intervals. The Tax received by the Service Provider shall be paid to the credit of the Central Government on a regular basis before the Due date. In a case of Late Payment of Service Tax, Late Payment Interest shall also be payable as prescribed by Service tax rules. List out the due dates for Online Service Tax payment in the following section.
As per Service Tax Rules 1994, Rule 6, the Service Tax Payment due dates are different for Individual, Partnership Firms, and others.
Due dates for Service Tax- Service Tax Due Date
Nature of Taxpayer
Offline or Mannual
|Individual or Partnership||Quarterly||5th of the Following Quarter||6th of the Following Quarter(with Grace period of 1 day)|
|Other than individual||Monthly||5th of the Following Month||6th of the Following Month. (with Grace period of 1 day)|
Late Payment of Service Tax
Interest on delayed payment of Service Tax Section 75 of Finance Act 1994.
|Gross Turnover||Interest on late payment|
|Less than Rs. 60 lakhs||16%|
|More than Rs.60 lakhs||18%|