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Introduction to Service Tax in India

Service Tax in India History

Service Tax in India has been introduced in the year 1994 through the insertion of Chapter V of Finance Act, 1994 as an tax on Services, Since 1994 service tax was charged on the categories of services whose description was given in the section 65(105) of the Finance Act 1994, However the Finance Act, 2012(w.e.f 01-07-2012) made radical changes in the service tax law through introducing the concept of negative list, Thus from 2012 service Tax is chargeable on all services except the services specified under the section 66D (negative list)

What is negative list of Services?

Negative list of services includes two things firstly the list of services which are not subject to tax will be described and secondly other than the services which are described in the negative list will be taxable which fall within the definition of service,The negative list is given under section 66D of the finance act 1994.

Scheme of Service tax from 01-07-2012

  1. Service has been defined in the section 65B(44) of Finance Act 1994
  2. As per section 66B service tax is charged onAll services provided in a taxable territory other than those services specified in negative list.
  3. Taxable territory has been defined in section 65B(52) as “taxable territorymeans territory to which the provisions of this chapter apply(Chapter V of Finance act, 1994)” , Section 64 specifies that this chapter applies to whole of India expect the state Jammu and Kashmir. India has been defined in section 65B(27).
  4. Since provision of services in a taxable territory are subject to service tax, Place of provision of services rules 2012 has been introduced to find the place where services are provided.
  5. To remove ambiguities certain activities are defined in section 66E by description as services and these are called as declared services.
  6. In addition to the services specified in the negative list, certain exemptions have been given for specified services from the service tax, for ease reference most of the exemptions have been consolidated in to a single mega exemption notification.

“Extracts from Clause 143- Section 66D (34) Negative list of services. “Negative list” means the services which are listed in section 66D;”
Contents of the post :

  • Applicability of Service Tax
  • Registration of Service Tax
  • Payment of Service Tax
  • Service Tax Return
  • Records
  • Issue of Invoice

Applicability of Service Tax

As per section 66B of finance act 1994 service tax is levied on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another.

Following are features of the above definition :

• Services must beprovided are agreed to be provided
• Services must be provided byperson to another
• Such services must be other than falling undernegative list and services includes declared services
• Services must be provided or agreed to be provided for aconsideration (value)
• Service must be provided in ataxable territory
• The services should not be exempted by anyexemption notification.

Registration of Service Tax

As per Service Tax Law it is mandatory for the following categories of persons obtain registration :-
• Every person liable to pay service tax under Reverse Charge
• An input service distributor
• Ever provider of taxable service whoseaggregate value of taxable service exceeds 9 lakhs in a financial year.

Every person mentioned above will have to get themselves registered under the service tax law within 30 days from the date of commencement of such service or business.

Whereas in case of service provider whose aggregate value of taxable service not exceeded 9 lakhs in a financial year not need to obtain registration, where in case he has obtained registration he is liable to payment of service tax only if the value of taxable services exceeds 10 lakhs rupees.

Payment of Service Tax

As per Rule 6(1) of Service Tax Rules 1994 Service tax is paid to the credit of the central government by 5th or 6th as the case maybe immediately following the calendar month (5th or 6th as the case maybe immediately following the quarter in case of partnership,individual and proprietary firm) in which the service deemed to provided as per rules framed in this regard.

The time limit for the payment of Service Tax as follows

1. By the 6th day of immediately following calendar month if the duty is deposited by electronically through internet banking and
2. By the 5th day of immediately following calendar month in any other case.
In case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or agreed to be provided by him up to a total of rupees fifty lakhs in the current financial year, in which payment is received.

Service Tax Return

Every person liable to pay service tax shall himself assess the tax and shall submit a half yearly return in From ST-3 or ST-3A in case of provisional assessment as the case may for the months covered in the half-yearly return. Every assessee shall submit the half yearly return by the 25th of the month following the particular half-year.

The half years for this purpose will cover

1st half year 1st April to 30th September due date for the return is 25th October
2nd half year 1st October to 31st march due date for the return is 25th April.

Late filing of Return

Where the return is furnished after the date prescribed for submission of such return, the person liable to furnish the said return shall penalty for the period of delay of as
1. fifteen days from the date prescribed for submission of such return, an amount of five hundred rupees;
2. beyond fifteen days but not later than thirty days from the date prescribed for submission of such return, an amount of one thousand rupees; and
3. beyond thirty days from the date prescribed for submission of such return an amount of one thousand rupees plus one hundred rupees for every day from the thirty first day till the date of furnishing the said return:
The total amount of penalty for delayed submission of return, shall not exceed Rs.20,000/-
i.e, maximum penalty is penalty as calculated above or Rs.20,000/- which ever is lower.

Records

The records including computerised data, as maintained by an assessee in accordance with the various laws in force from time to time shall be acceptable.

Every assessee shall furnish to the Superintendent of Central Excise at the time of filing of first return after 28-12-2007 a list in duplicate, of all the records prepared or maintained by the assessee for accounting of transactions in regard to
(a) providing of any service,
(b) receipt or procurement of input services and payment for such input services;
(c) receipt, purchase, manufacture, storage, sale, or delivery, as the case may be, in regard of inputs and capital goods;
(d) other activities, such as manufacture and sale of goods, if any.
and all other financial records maintained by him in the normal course of business

All such records shall be preserved at least for a period of five years immediately after the financial year to which such records pertain.

Issue of Invoice

Every person providing taxable service shall issue an invoice/bill/challan within 30 days (45 days in case of banking and other financial service providers) from the date of completion of such service or receipt of any amount for such taxable service.

The invoice/bill/challan signed by such person or a person authorized by him in respect of taxable service provided or agreed to be provided and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely :-

(i) the name, address and the registration number of such person;
(ii) the name and address of the person receiving taxable service;
(iii) description and value of taxable service provided or agreed to be provided; and
(iv) the service tax payable thereon:

In case the provider of taxable service is a banking company or a financial institution including a non-banking financial company, or any other body corporate or any other person, providing service to any person an invoice, bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered, and whether or not containing address of the person receiving taxable service but containing other information as prescribed above.