Service Tax – Meaning
“Service Tax is a tax
levied by Central Government of India on services provided or to be provided
excluding services covered under negative list and considering the Place of
Provision of Services Rules, 2012 and collected as per 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 so liable”.
Key points:
It is a tax on services levied by the
Central Government under the Finance Act, 1994.
Business entities includes food
service, consulting, banks, software development etc provides service to the
customer and attracts additional service amount is called service tax.
Business entity collects the service
tax from the consumer and pays to the central govt. on behalf of them.
It is indirect tax as service
provider is not directly paying it but collecting from the recipients or
customers and paying on their behalf to the central government.
The government had increased the service tax rate to 14% (inclusive of all cess)
from 12.36% earlier, making services more expensive for the end user.
Criteria for payment of service Tax in India
ü
The concept of service tax comes
into existence in 1994. However, in 2012 the scope of items under service tax
increases covering wide varieties of service.
ü Service Tax is applicable to business when total value of service
exceeds Rs. 10 lacs in a financial year.
Receiver of service liable for payment
of service tax directly.
There are cases when receiver or consumer of service instead of paying tax to the service provider directly pays to the Central Government. This is referred to as reverse charge .These are as follow:
·
Service provided by foreign
company with no office or establishment tin India.
·
Services provided by Director to
a body corporate.
·
Services provided for
transportation of goods by Goods Transport Agency, the person who pays or is
liable to pay freight is liable to pay Service Tax too. , if the consignor or
consignee falls under any of the seven categories viz. (a) a body corporate or
a partnership firm (b) a factory (c) a corporation (d) a company (e) a society (f) a
co-operative society (g) a registered dealer of excisable goods .
·
The services in relation to
Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be
paid by the Insurance Company
·
Legal service provided by an
individual or firm to any business entity.
·
Services by government or local
authority to any business entity.
·
Sponsorship service provided by
any person to Body Corporate or partnership firm.
List of services taxable
Almost all services are taxable for e.g. from
architects , chartered accountants, beauty parlors, clubs, security agencies
cosmetic surgeries, consulting engineers, packaging services, interior
decorators, real estate agents, and restaurants. A complete list of taxable
services has been specified under Section 65(105) of the Finance Act, 1994.
From 1st July 2012 onwards all services (except those specified in
the negative list of services by government) are not liable for tax.
Negative
list of Services
These are services exempt from paying service
tax and included in the negative list of service tax. For the following
service, service Tax is not applicable.
ü
Services provided to the United
Nations or any specific international organizations.
ü
Ambulance service
ü
Transporting students.
ü
Providing services in the educational
institution, security and cleanliness services in educational institutions,
sports events, sponsorships given to students during events etc.
ü
An authorized Clinical establishment
or medical practioner.
ü Services
provided by Blood Bank or any other preservation centers.
ü Services offered by temples or for conducting
religious ceremony.
ü Services
provided by teachers of arts to i students, faculty and staff.
ü Service
in veterinary hospital or vet.
Author:
This blog is written by Ms. Chanchal Sharma, a passionate
blogger of Aapka Consultant.
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