What is Service Tax?
'Service' has been defined in clause (44) of the new section 65B and means - any activity for consideration carried out by a person for another and includes a declared service. The said definition further provides that 'Service' does not include -
any activity that constitutes only a transfer in title of goods or immovable property by way of sale, gift or in any other manner
a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29A) of article 366 of the Constitution
a transaction only in money or actionable claim
a service provided by an employee to an employer in the course of the employment.
fees payable to a court or a tribunal set up under a law for the time being in force
Service tax is, as the name suggests, a tax on Services. It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994. It is an indirect tax (akin to Excise Duty or Sales Tax) which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service.
Prior to 1.07.2012, Service tax was levied on specified services.
From 01.07.2012, there is a paradigm shift in the levy of service tax. The service tax has been imposed on all services other than those specified in the negative list.
Liability to pay service tax
Normally, the person. who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government. However, in the following situations, the receiver of the Services is responsible for the payment of Service tax :
Where taxable services are provided by foreign service providers with no establishment in India , the recipient of such services in India is liable to pay Service Tax.
For the services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be paid by the Insurance Company
For the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight is liable to pay Service Tax , if the consignor or consignee falls under any of the seven categories viz.
- a factory
- a company
- a corporation
- a society
- a co-operative society
- a registered dealer of excisable goods
- a body corporate or a partnership firm
For the taxable services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.
Rate of Service Tax
From 01.04.2012 onwards, Rate of service tax is 12% + 2% (of service tax) education Cess + 1% (of service tax) Secondary & Higher Education Cess (aggregating to 12.36%).
Every person who has provided a taxable service of value exceeding Rs. 9 lakhs, in the preceding financial year, is required to register with the Central Excise or Service Tax office having jurisdiction over the premises or office of such service provider. In case a recipient is liable to pay service tax he also has to obtain registration.
For registration, Form ST-1 (in duplicate) is required to be submitted before the jurisdictional Central Excise/Service Tax officer. To verify the correctness of declaration in the said form, certain documents such as copy of PAN card, proof of address of business premise(s), constitution of the business [proprietorship, firm, company, trust, institute etc.] etc. may be required by the registering authority. The copies may be self-certified by the applicant. In case of doubts in select cases, original documents may have to be presented for verification.
The Registration certificate is issued within a period of seven days from the date of submission of application ST-1 along with all relevant details/documents.
Penal provision for non-registration
Failure of registration may attract a penalty upto Rs.10000/- or Rs. 200/- for every day during which such failure continues, whichever is higher. However, such penalty may be waived in case the assessee proves that there was reasonable cause for such failure.
Payment of Service Tax
Form G.A.R.7 should be used to make service tax payments. Payment of service tax may be made at the specified branches of the designated banks. Service Tax can also be paid electronically, using e-payment facility.
E-payment is mandatory for assesses who have paid service tax of Rs.10 lakhs or more including the amount paid by utilization of CENVAT credit, in the preceding financial year. However, there is no bar for other assessees to pay their tax electronically.