Service Tax falls in the category of indirect tax that an individual is liable to pay to the government for certain services that are specified by the Central Government under the Finance Act, 1994.
The services that require you to pay tax for are cab services, restaurants, cable providers, travel agents, hotels, and so on. A consumer pays the tax to the service provider at the time of bill payment. This tax is then collected by the government from the service providers. Hence, service tax is not something that is paid directly to the government.
Service tax was first levied on General Insurance Services, telephone, pager, and stock broking services. Currently, there are around 140 different types of services that come under the umbrella of service tax.
According to the recently revised regulations, this tax is now applicable to both individual service providers as well as companies or organizations in India. There are various outsourcing companies that do tax services to which companies can consult.
The tax can be paid through cash, which is generally the mode for service providers, and on an accrual basis which is easy for companies. However, service tax is applicable for the services whose value exceeds Rs. 10 Lakh in a single financial year.
What Is The Rate Of Service Tax In India?
Service tax rates are modified or changed from time to time by the government depending on the revisions done during the financial budget sessions. The finance ministry normally announces any changes in the service tax rates in the parliament sessions held on budget.
In 2015, the finance minister declared an increase in the service tax rate from 12.36% to 14% and 15% in the year 2016. The 2016 declaration includes 0.5% for Swachh Bharat cess and 0.5% Krishi Kalyan cess.
What Is The Applicability Of Service Tax?
The service tax is clearly described under section 65B (44) of the Finance Act, 1994. The act defines all the services that should come under the category of service tax. The services that are listed as non-taxable are also clearly mentioned in the Act, under section 66D.
Along with the negative list, there are some special services that have been exempted from service tax. The service tax is only imposed after considering whether or not the service was provided within the taxable territory on not. The nature of territory is determined by referring to The Places of Provision of Service Rules, 2012.
How To Register For Service Tax?
The service tax, in most cares, is directly collected from the service provider. However, in some cases, the government collects the service tax from the recipient or service provider. This process is generally known as Reverse Change Mechanism. With the rapid growth of digitalization, one can now register themselves or their company for service tax online.
They can apply on the official website provided by the government (www.aces.gov.in) and complete their registration process. The registration has to be completed within 30 days of providing a service that is taxable.
Once the registration is done, the government then reviews and grans it in a couple of working days. The taxation services can also do this process for you if you are not able to. The applicant can complete the process without verification of documents and can be done after the registration is granted. After the entire process, that is, registration is allowed, one can take soft or printed copies of the respective documents as proof of registration.