Basics of Service Tax
Service Tax forms the second best source of revenue for Government of India after Income Tax but on the contrary, a bane for many, just for the rate.
Let us understand the basics of Service Tax
Service Tax is an indirect tax on services provided by one person to another person. It is a destination based tax and charged on the basis where service is provided. It is applicable to every person (including government and regulatory authorities), who provides the service in India, except for provision of service in the state of Jammu and Kashmir. The rate at which service tax is levied revised to 14.5% recently (thanks to Swachch Bharat initiative by our Prime Minister). Unlike VAT, it is a central levy and hence charged by Central Government of India. It is governed and regulated by Finance Act, 1994.
Broadly, there are two types of Services viz. Declared Services and Services falling under Negative List. Declared services are services which are liable for service tax whereas services falling under Negative List are the services which are exempt from service tax. There are certain services wherein the Service Tax Laws provides abatement, in which case, the service tax is calculated on the abated value. There are services for which the service tax has to be paid by service receiver to the Government and not the service provider (for a change!!)
The service tax charged by the service provider has to be paid to the Government on a monthly basis, wherein the facility of e-payment is also available. After payment of service tax, the service tax returns need to be filed every half year.
Based on the returns filed, the department shall take certain cases for scrutiny and assessment. Further, there may be chances of Service Tax Audit from department’s end. The provisions of Service Tax also provides for interest, penalty and prosecution, as the case may be, in case of defaults in relation to provisions of Service Tax laws (much dearer than Income Tax though !).