Service Tax

Service Tax is an indirect levy imposed under Chapter V of the Finance Act, 1994 as amended. The tax is applicable to services specified in the chapter called "taxable services". The person who provides the taxable service on receipt of charges is responsible for paying the Service Tax to the Government. The article provides explanation about the procedure to register for service tax and also the appeal mechanism in lieu of it.

Service Tax is an indirect levy imposed under Chapter V of the Finance Act, 1994 as amended. The tax is applicable to services specified in the chapter called "taxable services". At present, the rate of Service Tax is eight percent to be levied on the "value of taxable service". Generally speaking, "value of taxable service" means the gross amount received by the service provider for the taxable service rendered by him. The person who provides the taxable service on receipt of charges is responsible for paying the Service Tax to the Government. Where the service is provided by a person other than Indian resident or who does not have any establishment in India, then the services receiver in India is liable to pay service tax.

Service Tax is administered by the Central Excise Commissionerate working under the Central Board of Excise & Customs, Department of Revenue, Ministry of Finance, Government of India.

Services Subject to Tax

The provisions relating to Service Tax were brought into force with effect from 1st July 1994. It extends to whole of India except the state of Jammu & Kashmir. The services, brought under the tax net are:

Since 1994-95

1. Telephone
2. Stockbroker
3. General Insurance

Since 1996

4. Advertising agencies,
5. Courier agencies
6. Radio pager services.
7. Consulting engineers (7th July 1997)
8. Custom house agents (15th June 1997)
9. Steamer agents (15th June 1997)
10. Clearing & forwarding agents (16th July 1997)
11. Air travel agents (1st July 1997)
12. Tour operators (exempted upto 31.3.2000 Notification No.52/98, 8th July 1998, reintroduced w.e.f. 1.4.2000)
13. Rent-a-Cab Operators (exempted upto 31.3.2000 Vide Notification No.3/99 Dt.28.2.99, reintroduced w.e.f. 1.4.2000)
14. Manpower recruitment Agency (1st July 1997)
15. Mandap Keepers (1st July 1997)

Since1998.

16. Architects
17. Interior Decorators
18. Management Consultants
19. Practicing Chartered Accountants
20. Practicing Company Secretaries
21. Practicing Cost Accountants
22. Real Estates Agents/Consultants
23. Credit Rating Agencies
24. Private Security Agencies
25. Market Research Agencies
26. Underwriters Agencies

Since 2001.

27. Scientific and technical consultancy services
28. Photography
29. Convention
30. Telegraph
31. Telex
32. Facsimile (fax)
33. Online information and database access or retrieval
34. Video-tape production
35. Sound recording
36. Broadcasting
37. Insurance auxiliary activity
38. Banking and other financial services
39. Port
40. Authorised Service Stations
41. Leased circuits Services

Since 2002.

42. Auxiliary services to life insurance
43. Cargo handling
44. Storage and warehousing services
45. Event Management
46. Cable operators
47. Beauty parlours
48. Health and fitness centres
49. Fashion designer
50. Rail travel agents.
51. Dry cleaning services.

Since 2003.

52. Commercial vocational institute, coaching centres and private tutorials
53. Technical testing and analysis (excluding health & diagnostic testing) technical inspection and certification service.
54. Maintenance & repair services
55. Commission and Installation Services
56. Business auxiliary services, namely business promotion and Support services (excluding on information technology services)
57. Internet cafe
58. Franchise Services
59. Foreign Exchange broking services
60. Maxicab repair services
61. Minor ports (other than major ports)

The Service Tax is leviable on the 'gross amount' charged by the service provider from the client, from the dates as notified and indicated above.

The rate of Service Tax has also been increased from 5% to 8% on all the taxable services w.e.f. 14.5.2003.

Payment of Service Tax

1. The Service Tax amount is required to be paid in Form TR-6 challan (yellow in colour) in the specified branches of designated banks. The list of such Banks and Branches is available in every Commissionerate of Central Excise. Different heads of accounts have been specified for different taxable service by the Govt. under which payment has to be made. While making the payment of service tax to the credit of Central Govt., head of account should be correctly and properly indicated under major and minor heads and sub-heads to avoid misclassification.
2. If the assessee is an individual or a proprietary or partnership firm, the service tax is to be paid on quarterly basis. The payment is to be made by the 25th day of the month following the quarter. For example, Service Tax for the quarter ending 30th June is to be paid by 25th July.

In respect of other categories, the tax is payable on monthly basis and is to be paid by 25th day of the succeeding month.

IMPORTANT CLARIFICATIONS

1. The Service Tax for a particular period is payable on the value of taxable service received in that period and not on the gross amount billed to the client.
2. For payment of service tax, specific Bank has been nominated for every Central Excise Commissionerate. If service tax amount is deposited in a branch of Bank other than nominated Bank, it amounts to non-payment of Service Tax.
3. The deposit date of the cheque is the date of payment of Service Tax. The Service Tax Rules as amended provide that it would suffice if the cheque is presented to the bank by the 25th of the month. However, if the cheque bounces, it would mean as if the tax has not been paid and the necessary penal consequences would follow.
4. Service tax is payable on all taxable services rendered in India, whether to an Indian or foreign client.
5. Services rendered abroad shall not attract service tax as the levy only covers the services provided within India.
6. The Service Tax is to be paid on the value of taxable services which is charged by an assessee. Any income tax deducted at source is included in the charged amount. Therefore, Service Tax is to be paid on the amount of income tax deducted at source also.
7. In case of delay in making payment of Service Tax to the Government within the prescribed or stipulated period, the interest is payable at the rate of 1.25% per month or part thereof. The interest is to be computed on the amount of Service Tax due or unpaid.
8. For failure to pay the Service Tax, the assessee would be required to pay a minimum penalty of Rs.100/- to Rs.200/- for every day during which the failure continues. However, the penalty shall not exceed the amount of Service Tax that the assessee failed to pay. Interest is also payable at the rate of 15 percent per annum.

Registration

Service Tax is administered by the Central Excise Commissionerate working under the Central Board of Excise & Customs, Department of Revenue, Ministry of Finance, Government of India. The unique feature of Service Tax is reliance on collection of tax, primarily through voluntary compliance.

PROCESS FOR REGISTRATION

All persons providing taxable services are required to register with the Central Excise department. They would have to take only one registration even if they operate from more than one premise but have centralised billing at one place. However, if such persons do not have Centralised billing at one place, then they will have to register at each place separately. Besides, only one registration is required to be taken even if an individual provides more than one service, but from the same premises.

Generally, all Commissionerate of Central Excise, have a Service Tax Cell, headed by Assistant Commissioner/Deputy Commissioner. However, in certain Commissionerate, separate Service Tax Divisions have been constituted. The work is also delegated to Central Excise Divisions in many Commissionerate. A prospective assessee of Service Tax can approach the Assistant Commissioner/Deputy Commissioner in charge of Service Tax cell of the Commissionerate or Central Excise Division for registration depending upon the arrangements made in the Commissionerate.

A prospective taxable service provider seeking registration should file an application in Form ST-1 (in duplicate) before the jurisdictional Central Excise officer/Service Tax officer within thirty days from the notification date  of the taxable service. Department is required to issue the registration certificate within 7 days of the receipt of application. In case of failure to issue registration certificate within 7 days, the registration applied for is deemed to have been granted and the assessee can carry on with his activities.

IMPORTANT CLARIFICATIONS PAYMENT OF TAX IN CASE OF DIFFERENT PREMISES AND SERVICES

Where the assessee is providing the service from more than one premises and has centralised billing system

When an assessee is providing a taxable service from more than one premises or office and has a centralised billing system in respect of services rendered to clients from all such premises or offices at anyone premises or office, the person may opt for registering only the premises or office from where such centralised billing is done. Similarly, if the assessee does the billing from his regional office in respect of branch office, falling within that region, he may register his regional office(s) on his option.

Where the assessee is providing service from more than one premises, but does not have centralised billing system

Where an assessee is providing a taxable service from more than one premises or office, but does not have any centralised billing system, he is required to obtain registration in respect of each of such premises or offices to the concerned Central Excise Officer.

Where the assessee is providing more than one service from the same premises

Where an assessee is providing more than one taxable service from the same premises, the person may make a single application for registration mentioning therein all the taxable services provided by the person, to the concerned Central Excise Officer.

Adjudication and Appeal

1. If an assessee aggrieved by the order of Assistant Commissioner in respect of Service Tax, may file an appeal to the Commissioner of Central Excise (Appeals) in Form ST-4, in duplicate along with a copy of order appealed against. The appeal should be presented within three months from the date of receipt of the decision or order of the Central Excise officer.
2. It shall be presented within three months from the date of receipt of order which is being appealed against.
3. It should be filed in duplicate.
4. It should be accompanied by a copy of the order appealed against.
5. An appeal be filed against the order of Commissioner of Central Excise or Commissioner of Central Excise (Appeals). Such appeals can be filed with the CEGAT within three months of the order receipt date sought to be appealed against.
6. It should be filed in the prescribed form ST-5.
7. It shall be filed in quadruplicate.
8. It should be accompanied by a copy of the order appealed against, one of which should be a certified copy.
9. The appeal should be accompanied by a fee of Rs. Two Hundred only.

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