Service Tax

Service tax levied by the government of India on making specific transactions carried out by the service provider. The final consumers are the ones who are paying tax as it is passed on to them by the service providers. The service tax was introduced under the Finance Act, of 1994. It falls under the category of indirect tax.

Service Tax Rules :

The Government of India, in keeping with the Finance Act of, 1994 has established the service tax rules for the collection and assessment of service tax in India. Read here in detail:

  • Rule 1:
    • defines the service tax rules
  • Rule 2:
    • consists of descriptions of every term that is related to service tax including terms like 'act', 'assessment', 'large taxpayer', etc.
  • Rule 3:
    • deals with the appointment of officers.
  • Rule 4:
    • states the registration of service tax.
  • Rule 5:
    • associated with records.
  • Rule 6:
    • deals with the payment of service tax
  • Rule 7:
    • deals with tax returns
  • Rule 8:
    • deals with the form of Appeals to the Commissioner of Central Excise Form of appeals to Appellate Tribunal

The process to make service tax payments :

  • Log on to the website- https://cbec-easiest.gov.in/EST/) and select 'E-Payment (Excise & Service Tax).
  • Enter the 15-digit Assessee Code provided by the jurisdictional Commissionerate to pay your service tax online.
  • An online check will be carried out to validate the code you have entered. If the code is valid, the screen will display details such as the name, address, Commissionerate code, etc.
  • Then select 'Select Accounting Codes for Service Tax'.
  • Following the validation of the data in the NSDL central system, the screen will display a drop-down menu with the names of different banks that provide the net banking facility to pay your service tax online.
  • Once you enter the Assessee code, the system will automatically select the kind of payment you wish to make, viz. Service Tax or Excise Duty.
  • After submitting the necessary data, a confirmation screen will appear, and if you confirm the details you have entered, you will be redirected to the net banking site of the bank you have selected.
  • Once you have made the payment, a challan counterfoil will appear on the screen and it will contain the payment details, the Challan Identification Number, and the name of the bank through which the payment was made.
  • You can download the counterfoil from the bank website as it contains all the information about the payment and works as an acknowledgment/proof.

Service Tax Exemptions :

If the turnover of the business is less than Rs 10 Lakh :

If the aggregate value of taxable services is less than Rsc10 lakh, you can claim service tax exemption. In case the aggregate value of taxable services provided over the previous financial year is more than Rs.10 lakh, service tax exemption cannot be availed.

CENVAT credit :

CENVAT credit cannot be availed on capital goods received if you have a claim of service tax exemption. Furthermore, service tax providers who avail of the small-scale service tax exemption will be required to make a payment equal to the CENVAT credit availed by them, if any.

Service Tax Billing :

As per the Rule 4A of the Service Tax Rules, 1994, it is mandate for a service tax Assessee to issue invoice with in 14 days from the date of completion of the taxable service. The invoice must have the details mentioned below:

  • Serial number
  • Recipient name and address details
  • Name of the service provider along with his or her registration number and address’
  • The classification as well as description of the service rendered along with its taxable service value
  • The amount of service tax payable

Service Tax Penalties :

According to the provision made under Section 76, 77, and 78 of Finance Act, 1994, the Central government may impose penalty, in case of failure to meet the following conditions.

  • If you will fail to file ST-3 return as per the stipulated due dates mainly 25th October and 25th April of each year. You will be liable for penalty payment which may extend up to Rs.2,000 based on the period of delay.
  • If you fail to furnish information before Central Excise officer on being called, he may charge you penalty up to Rs.5,000 or Rs.200 per day after the due date, whichever is higher.
  • If you are service provider, and your office is not registered, you will be liable for penalty as per the Section 77 of the Finance Act, 1994. The penalty in that case may go up to Rs.5,000.
  • Being an Assessee, if you are not maintaining records of the account and other documents required by service tax law, he/she shall be liable to pay penalty fee which may go up to Rs.5,000.
  • Penalty shall be charged if a person suppresses the value of taxable services or provides wilful miss-statements about the service provided.
  • If person is not paying tax electronically, he is liable for penalty which may extend up to Rs.5,000.
  • Penalty fee is also charged on non or delayed payment of service tax.
  • If a service provider is issuing incorrect invoice or fails to support the issued invoice with valid details, penalty of Rs 5000 shall be charged.

Frequently Asked Questions

  • Who is authorized to pay service tax in India?
    Any company or firm who is offering services which are not negative is liable for paying service tax in India.
  • What is service tax?
    Service tax is a form of indirect tax which the recipient of various services pays indirectly to the government via service providers.
  • Can I pay service tax online?
    Yes, one can pay service tax online by logging into the website of Central Board of Excise and Custom. For that, you need to have an internet banking account.
  • What is G.A.R -7?
    This is a challan which is used for the payment o