Service Tax
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. It is an indirect tax wherein the service provider collects the tax on services from service receiver and pays the same to government of India. Few services are presently exempt in public interest via Mega Exemption Notification 25/2012-ST as amended up to date & few services are charged service tax at abated rate as per Notification No. 26/2012-ST as amended up to date. Presently from 1 June 2015, service tax rate has been increased to consolidated rate @ 14% of value of services provided or to be provided. The service tax rate now is consolidated rate as education cess & secondary higher education cess are subsumed with 2% of "Swachh Bharat Cess(0.50%)" has been notified by the Government.
From 15 November 2015, the effective rate of service tax plus Swachh Bharat Cess, post introduction of Swachh Bharat Cess, will be 14.5%.
History of Service Tax
Dr. Raja Chelliah Committee on tax reforms recommended the introduction of service tax. Service tax had been first levied at a rate of five per cent flat from 1 July 1994 till 13 May 2003, at the rate of eight percent flat w.e.f 1 plus an education cess of 2% thereon w.e.f 10 September 2004 on the services provided by service providers. The rate of service tax was enhanced to 12% by Finance Act, 2006 w.e.f 18.4.2006. Finance Act, 2007 has imposed a new secondary and higher education cess of one percent on the service tax w.e.f 11.5.2007, increasing the total education cess to three percent and a total levy of 12.36 percent. The revenue from the service tax to the Government of India have shown a steady rise since its inception in 1994. The tax collections have grown substantially since 1994-95 i.e. from ₹410 crore (US$61 million) in 1994-95 to ₹132518 crore (US$20 billion) in 2012-13. The total number of Taxable services also increased from 3 in 1994 to 119 in 2012. However, from 1 July 2012 the concept of taxation on services was changed from a 'Selected service approach' to a 'Negative List regime'. This changed the taxation system of services from tax on some Selected services to tax being levied on the every service other than services mentioned in Negative list.[1]
under the Service tax from the year of original levying year of 1994 are constantly growing. The collections are shown as in the following table:
| Financial Year | Revenue Rupees(in crores) | Number of services | Number of Assessees |
|---|---|---|---|
| 1994-1995 | 407 | 3 | 3943 |
| 1995-1996 | 862 | 6 | 4866 |
| 1996-1997 | 1059 | 6 | 13982 |
| 1997-1998 | 1586 | 18 | 45991 |
| 1998-1999 | 1957 | 26 | 107479 |
| 1999-2000 | 2128 | 26 | 115495 |
| 2000-2001 | 2613 | 26 | 122326 |
| 2001-2002 | 3302 | 41 | 187577 |
| 2002-2003 | 4122 | 52 | 232048 |
| 2003-2004 | 7891 | 62 | 403856 |
| 2004-2005 | 14200 | 75 | 774988 |
| 2005-2006 | 23055 | 84 | 846155 |
| 2006-2007 | 37598 | 99 | 940641 |
| 2007-2008 | 51301 | 100 | 1073075 |
| 2008-2009 | 60941 | 106 | 1204570 |
| 2009-2010 | 58422 | 109 | 1307286 |
| 2010-2011 | 71016 | 117 | 1372274 |
| 2011-2012 | 97509 | 119 | 1535570 |
| 2012-2013 | 132518 | Negative List Regime | 1712617 |
Rates
Service Tax @ 14.% is applicable from 1 June 2015. Moreover, from 15th Nov 2015, Swachh Bharat Cess @ 0.5% also got applicable. Therefore, the effective rate is currently at 14.5% with effect from 15th Nov 2015. From 1 June 2016 is will be 15%.[2] 2016 Union budget of India has proposed to impose a Cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services effective from 1 June 2016. The new effective service tax could henceforth be 15%.[3]
Small Scale Exemption
Service tax is only liable to be paid in case the total value of the service provided during the financial year is more than ₹10 lakh (US$15,000). If the value of services provided during a financial year is less than ₹10 lakh (US$15,000), it is optional for he wants to avail this exemption or not.[4]
Negative List
Budget 2012 revamped the taxation provisions for services by introducing a new system of taxation of services in India. In the new system all services, except those specified in the negative list, are subject to taxation. Earlier the levy of service tax was based on positive list – specified 119 taxable services.
As per clause (34) of section 65B of the Finance Act, 1994, the term "Negative List" means the services which are listed in section 66D. [5]
Service Tax Return, Records & Invoices
Records
According to Rule 5 of Service Tax Rules, 1994, records include computerized data and means the record as maintained by an assessee in accordance with the various laws in force from time to time. Records maintained as such shall be acceptable to Central Excise Officer. Every assessee is required to furnish to the Central Excise Officer at the time of filing his return for the first time a list of all accounts maintained by the assessee in relation to Service Tax including memoranda received from his branch offices. This intimation may be sent along with a covering letter while filing the service tax return for the first time
Invoice
Rule 4A prescribes that taxable services shall be provided and input credit shall be distributed only on the basis of a bill, invoice or challan. Such bill, invoice or challan will also include documents used by service providers of banking services (such as pay-in-slip, debit credit advice etc.) and consignment note issued by goods transport agencies. Rule 4B provides for issuance of a consignment note to a customer by the service provider in respect of goods transport booking services.[6]
References
- ↑ (PDF) http://web.archive.org/web/20140202122301/http://www.servicetax.gov.in/ovw/ovw4_analysis-st-rev-ason120913.pdf. Archived from the original (PDF) on 2 February 2014. Retrieved 26 January 2014. Missing or empty
|title=(help) - ↑ http://www.cbec.gov.in/resources//htdocs-cbec/press-release/faq-sbc.pdf
- ↑ "Budget 2016: Service tax proposed to be increased from 14.5% to 15%", The Economic Times, 29 February 2016
- ↑ Karan Batra. "All about Service Tax & new Service Tax Rate @ 14.5%". Chartered Club.
- ↑ http://web.archive.org/web/20130703114544/http://www.aubsp.com:80/2013/06/services-tax-negative-list-66d.html. Archived from the original on 3 July 2013. Retrieved 24 June 2013. Missing or empty
|title=(help) - ↑ "INVOICE FOR SERVICE TAX". TopCAfirms. Retrieved 4 December 2013.
Service Tax on Export of the Services