Table of contents

  1. Introduction

2. Service Tax in India

3. Service Tax Exemptions in India

4. Service Tax Billing

5. Service Tax Payment

6. Service Tax Today

7. Summary

  1. Introduction

Service Tax was a tax that was imposed by the Central Government of India on the services provided by the service providers. This indirect tax came into being under the Finance Act, 1994. It was primarily set at 15% for transactions that occurred on or after 01 June, 2016. The tax was to be paid to the Government in order to enjoy different services that were received from different service providers. In that case, the tax was paid by service providers, but recovered from service receivers who purchased or received the different taxable services.

2. Service Tax in India

The service tax in India was levied under Section 65 of the Finance Act, 1994. With the implementation of the budget of 1994, it came into effect from July 1,1994, the services that were included under the service tax were increased continuously from 1994. They were extended to Incorporate services provided by different air-conditioned restaurants, lodging (both long and short term), guest houses etc. Moreover, based on the regulations, the service tax was charged from the companies as well as individual providers. While companies could pay it on the basis of accrual, on the contrary individuals had to pay tax via cash. The tax, however, had to be paid only if the value of the services provided exceeded Rs.10 lakh rupees in the single Financial year. This addition to the service tax rules was exempted from Jammu and Kashmir.

3. Service Tax Exemptions in India

As per the previous regulations, the Service tax in India was paid on all the services excluding those that were included in the other set of services, mainly, the negative list. While all the service providers were liable to pay service tax, including those in the government and private sectors both, the main exemptions included the following:

  • A service provider of a small scale can avail an exemption if his turnover on the taxable services does not exceed Rs.10 lakhs within the same Financial year.
  • When some goods and services are received from any service provider, and there is proof indicating that no credit duty has been paid on those goods or services, while there is written proof of their value, and the fact that the services are rendered as per the CENVAT Credit rules, then the recipients are exempted from paying the Service tax on those goods and services.
  • The Service tax is also not applicable to the services that are rendered to diplomatic missions as well as to officers on such mission plus their whole family.
  • Some other services that are not taxable include services such as port services, containerized transport services and goods transport services which have been either received by exporters or used for exporting the goods. Here, the service tax which is paid by an exporter on these services is then refunded back to the exporter.
  • The services that are provided to International organizations as well as to the United Nations are not taxable.
  • The services that are provided to developers of SEZ or to a particular unit of SEZ are exempted from tax.

4. Service Tax Billing

As per the Rule 4A of STR, 1994, it is important to issue an invoice or bill by a service tax assessee. This invoice has to be issued under 14 days from the date of completion of the taxable service or the receipt of payment of the service, whichever is done earlier. The invoice must have the following points:

  • Serial number
  • Name and address of the particular Service receiver.
  • Name, address and Registration number of the Service provider.
  • Classification, description as well as taxable service value of the service that is rendered.
  • Payable Service tax amount to be displayed on the invoice.

5. Service Tax Payment

A service tax payment can be made via G.A.R.7. or the erstwhile TR6 Challan. Branches of designated Banks accept the payment of Service tax. The closest service tax office or even the central excise office can provide a list of designated Banks along with its branches in order to pay the service tax. Another option of making the service tax payment is through the E-payment facility

6. Service Tax Today

The tax was in place as per the guidelines of the Finance Act, 1994. The tax, however, has been abolished since the roll-out of the Goods and Service Tax(GST) on 01 July, 2017. The implementation of GST caused the fade-out of many other Indirect taxes too.

7. Summary

Service tax was a tax imposed by the Central Government of India on services provided or agreed to be provided excluding services covered under the negative list and considering the Place of Provision of Services Rules, 2012 and collected as per the Point of Taxation Rules, 2011 from the person liable to pay Service tax. Person liable to pay Service tax is governed by Service Tax Rules, 1994 he may be service provider or service receiver or any other person made liable. It is an Indirect tax wherein the service provider collects the tax on services from service receiver and pays the same to the government of India. Few services are presently exempted in public interest via Mega Exemption Notification 25/2012-ST as amended upto date and few services are charged service tax at abated rate as per the Notification No. 26/2012-ST as amended upto date. From 1 June 2016, Service tax rate has been increased to consolidated rate at 14% +0.5%+0.5%= 15% of value of services provided or to be provided. The service tax rate now is consolidated rate as education cess and Secondary higher education cess are subsumed with 2% of “Swach Bharat Cess(0.50%)” has been notified by the Government of India.

About the Author

BankReed Admin

Banking Professional with 16 Years of Experience. The idea to start this Blogging Site is to Create Awareness about the Banking and Financial Services.

View All Articles