What is the service tax?

Tax on services?

The Central Government of India imposed a levy on service providers in the form of service tax. Under the Finance Act of 1994, this tax was enacted. For transactions that took place on or after June 1, 2016, the fee was reduced to 15%. As a condition of receiving certain services from service providers, taxpayers were required to pay a tax to the government. Service providers paid the tax, but it was recouped on those who bought or received the taxable services.

Section 65 of the Finance Act, 1994, was used to implement the service tax. Services subject to the service tax began to rise gradually in 1994 with the introduction of the budget for that year, which took effect on July 1 of that year. As a result, air-conditioned restaurants, hotels (both long and short term), and other guest homes were added to the list of available services. In addition, the service tax was levied on both businesses and individuals, according to the rules. Individuals had to pay tax in cash, while corporations may use accrual accounting to do so. Only if the value of services given surpassed INR 10 lakh rupees in a single financial year did the tax have to be paid. Jammu and Kashmir was exempt from the new service tax regulations.

Exemptions from Service Tax

The service tax was formerly levied on all services, barring those on the “negative list,” as defined by the prior legislation. All service providers, including those in the public and commercial sectors, were required to pay service tax. However, the following were exempt:

If his taxable service revenue for the financial year does not exceed INR 10 lakhs, a small-scale service provider might claim an exemption.

As long as the receiver provides confirmation that no credit duty has been paid on the items or materials in question, as well as written documentation proving their worth, the recipient will not be liable for paying service tax on such goods and services. This is in accordance with the CENVAT Credit guidelines.

In addition, the service tax does not apply to services provided to diplomatic missions or to officers serving on such missions or to the families of such officers.

Port services, containerized transport services, and goods transport services that exporters get or employ for exporting products are all examples of non-taxable services. The service tax paid by an exporter on these services is reimbursed to the exporter in this case.

International organisations, including the United Nations, are exempt from paying taxes on any services delivered to them.

Taxes are not imposed on services given to SEZ developers or SEZ units.

Billing for service taxes

A service tax assessee must issue an invoice or bill in accordance with STR, 1994 Rule 4A. If a service is completed or a payment is received, this invoice must be provided within 14 days of that event. The invoice should include the following:

The serial number.

The service recipient’s name and address are required.

The service provider’s name, address, and registration number

The service’s categorization, description, and taxable service value

The invoice must include the amount of service tax due.

Payment of Service Taxes

G.A.R.7 or the old TR6 Challan are two options for paying service tax. Service tax may be paid at branches of specified banks. Even the national excise office may furnish a list of recognised banks and their branches where taxes can be paid. You may also use the e-payment tool to pay your service tax.

Service Charges in the Modern Era

Finance Act, 1994 specified that the tax was in existence. In July 2017, the Goods and Services Tax or GST was implemented, and the tax was eliminated. Because to GST’s adoption, numerous other indirect taxes were phased out.

Phillip Armstrong

The author Phillip Armstrong