Service tax is an indirect tax which is levied upon the taxable services defined u/s 66B of finance act 1994. Generally the service provider is liable to collect the service tax from service receiver and deposit the same to the central govt. account this account is administered by the Central Excise Department. Generally service provider is liable to deposit service tax to central govt. but in some circumstances service receiver is liable to deposit such tax to central govt. which is popularly known as reverse charge mechanism.
What does service means?
'Service' has been defined and means -any activity for consideration carried out by a person for another excluding services under negative list but 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 or
- 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 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.
- A transaction only in money or actionable claim.
To determine whether you are a “service” provider or not ask following question to yourself
- Am I doing any activity for another person?
- Am I doing such activity for any consideration?
- Whether such activity consists of transfer of goods or immovable property?
- Is such an activity in the nature of a service provided by an employee of such person in the course of employment?
- Does this activity consist only of a transaction in money or actionable claim?
Once a person indulges in providing taxable services and his turnover exceeds Rs. One million during any financial year he must have to register himself under service tax department.
Rate of service tax:
At present, the effective rate of Service tax is 12.36 %. The above rate comprises of Service tax @ 12 % on “Gross Value of taxable service”. Education cess [EC] @ 2 % on service tax amount Secondary and Higher Education cess [SHE] @ 1 % on service tax amount.
Interest and penalties for non compliance of service tax rules and regulations: