Service tax

On specified service transactions, the government charges a tax on service providers, while the expense is borne by the customers. It was created by the Finance Act of 1994 and is categorised as an indirect tax. Service tax was once a sort of tax imposed by the Indian government on certain goods and services. The service tax may be paid by either the receiver or the supplier. The GST has just supplanted it.

Service tax in India

Service tax was a tax imposed by India on services provided or agreed to be provided, excluding services covered by the negative list, and collected from the person liable to pay service tax according to the Point of Taxation Rules, 2011 and the Place of Provision of Service Rules, 2012.

 The Service Tax Rules, 1994 determine who is required to pay service tax. This might be a service supplier, a service recipient, or anybody else. It is an indirect tax in which the service provider collects and pays the tax on services from the service receiver to the Indian government.

The tax on services provided by the service provider is known as service tax. Service Tax is paid on services rendered in the same way that Excise Duty is paid on produced items.

The service provider must pay service tax to the Indian government. The Service Provider, on the other hand, can collect Service Tax from the Consumer of Service (also known as the Recipient of Service) and deposit it with the government.

Service Tax Calculation

Section 66 of the Service Tax Act, which took effect on June 1, 2016, imposes a 15% service tax on the value of taxable services. 0.5 per cent Krishi Kalyan Cess and 0.5 per cent Swach Bharat Cess are included in the 15%.

The amount that can be assessed is calculated as a percentage of the fees paid or received for receiving or providing services. The tax, on the other hand, does not have to be assessed on the entire amount charged to the client. For example, any air transportation is exempt from 60%, chit funds are exempt from 30%, and some tour operator services are exempt from 70%. As a result, service tax will be applied to the portion of the bill that does not qualify for an exemption.

The rate of service tax

Analysis of the rise in the service tax rate from 12.36 per cent to 14 per cent

The Service Tax rate was raised by the Ministry of Finance in May 2015, and it became effective in June 2015. The service tax rate was raised from 12.36 per cent to 14 per cent, and a handful of cesses were absorbed in the process.

On May 14th, 2015, the Ministry of Finance raised the Service Tax rate, which took effect on June 1st. The Service Tax rate was raised from 12.36 per cent to a flat 14 per cent rate that includes Subsuming Education Cess and Secondary and Higher Secondary Education Cess.

The Effects of the Service Tax Rate Increase:

After June 1, 2015, the service tax amount paid by the service provider increased due to the rate adjustment.

If the contractual price includes all taxes, the extra service tax of 14 per cent would have to be borne by the service provider, depending on the conditions of the contract between the two parties.

If the contract’s provisions mention service tax as an optional charge, the service provider can collect and pay the tax.

From June 1, 2015, the Education Cess and Secondary and Higher Education Cess on Service Tax will be removed. 

The rate of service tax is subject to change at any time. During the fiscal budget session, the government revises the rates. During the budget session of the parliament, the finance minister usually announces modifications to the service tax rates. 

Service Tax Invoices

As soon as the taxpayer begins paying service tax regularly, he or she must file a return online every half-year. You can do so by going to www.aces.gov.in. On or before the 25th of the month after the half-year, this must be completed.

Conclusion:

Service tax was a tax assessed by the Indian government on services given or agreed to be delivered, except those covered by the negative list, and collected from the person responsible to pay service tax according to the Point of Taxation Rules, 2011. The Service Tax Rules, 1994 determine who is obliged to pay service tax. This might be a service supplier, a service recipient, or anybody else. It is an indirect tax in which a service provider collects and pays the tax on services to the Indian government.