About Service Tax
Service Tax is a Central levy on provision of notified taxable services specified under Chapter V of the Finance Act, 1994. The Finance Act in the year 1994 has introduced service tax only on three services viz.
(1) Telephone (2) Stockbroker (3) General Insurance
But over the years, numerous services have been brought under the purview of this tax. Due to constant amendments in the Finance Act by introduction of new services, the maximum GDP of about 55.1% in the year 2006-07 was collected from the Service sector.
At the time when this tax was introduced, the rate of service tax was 5%. But over the years this rate had increased upto 12% along with Education Cess of 2% and Secondary Higher Education Cess of 1%. The Service Tax rate increased from 12.36% to 14%. This new rate of Service Tax @ 14% was applicable from 1st June 2015. Moreover from 15th Nov 2015, Swachh Bharat Cess @ 0.5% also got applicable. The rate was further increased by 0.5% towards Krishi Kalyan Cess w.e.f. 1st June, 2016. Currently the effective rate of Service Tax is 15%.
Service tax is a destination based consumption tax. When any taxable service classified under Section 65 (105) of the Finance Act is rendered, the service provider is liable to pay service tax. The service tax is actually borne by the service recipient in normal circumstances. The total consideration paid by the recipient of the taxable services is considered to be the amount on which Service Tax is chargeable.
The service provider whose gross receipts exceeds Rs. 9,00,000/- (Nine lakhs Rupees) needs to be registered with the Service Tax Department. The gross receipt upto the extent of Rs. 1,00,000/- are exempt from Service Tax. However, this exemption is available only once till the gross receipts have not crossed the Rs. 10 lacs limit. Once the gross receipt exceeds Rs. 10 lacs, the services provider needs to collect and pay service tax on each billing. The Service Provider is required to seek registration within 30 days from the date of commencement of business or from the date when the provision of any taxable service commences. Penalty is levied in case the service provider fails to seek registration within the prescribed time limits.
Single Premise Registration
In case service provider is providing services from multiple place of business, separate registration is required in respect of each premises from where the services are rendered. The application shall be filed in Form ST-1.
In case where the service provider is providing taxable services from more than one premises and has Centralised billing system, Centralised accounting system, he may at his option opt for the centralized registration for all such premises. The application shall be filed in Form ST-1 with additional documents.
Input Service Distributor
An office who is receiving only input services and not providing any output service can distribute the CENVAT Credit of the service tax paid on input services. An input service distributor must make an application for registration within 30 days from the commencement of business
Service Tax Payment
The service tax liability is required to be discharged on a monthly basis and quarterly basis. The company needs to discharge the service tax liability on a monthly basis; The society, partnership firm, proprietorship firm need to discharge service tax liability on quarterly basis. In case of a company, The liability should be deposited on or before 5th of the next month. For example, for the receipts during the month of December, the service tax liability should be discharged on or before 5th of January month.
Service Tax Return
The service tax return is required to be filed under section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules. This return shall be filed in Form ST- 3. The periodicity and filing due date of return is as under: April to September: 25th October October to March: 25th April.
Import of Services
Generally, the liability to deposit service tax lies with the service provider. In case the service provider is a non-resident, not having an office in India, the person liable to pay the service tax is the service recipient in India, in such case recipient of service has to get himself registered under service tax. This mechanism is properly known as reverse charge mechanism.
Export of Services
The Export of Services Rules, 2005 (“Export Rules”) have been enacted to regulate the export of services from India. As per the said Rules, the export of taxable services as defined under section 65 (105) of the Finance Act, 1994, are divided into three categories. The first category relates to the taxable services provided in relation to an immovable property which is situated outside India. The second category talks about the services which are partly or wholly performed outside India, and the third category where the services are provided in relation to any business or commerce located outside India
Rebate Refund of Service Tax
The service provider has two options; either to claim rebate or refund of the tax paid or not to pay the tax. Subsequent to the enactment of the Export Rules, two notifications were issued by the Government; for a rebate of service tax and education cess paid on export of taxable services, and;for a rebate of excise duty paid on inputs and service tax paid on input services which are used in providing exported taxable services.