Service Tax - All you need to know

Application, Payment, Surrendering Service Tax and all Services related to Service Tax have been made Online Mode from Jan 2012. So, No Manual Submissions.

What is Service Tax?
Service Tax is a form of indirect tax (collect it from client and pay it on your behalf to Government – this is indirect tax) imposed on specified services called "taxable services". Service tax cannot be levied on any service which is not included in the list of taxable services. See Central Excise Website for latest list of Taxable Services.

Rate of Service Tax:
At present, the effective rate of Service tax is 10.30 %. The above rate comprises of Service tax @ 10 % on “Gross Value of taxable service”. Education cess [EC] @ 2 % on service tax amount. Secondary and Higher Education cess [SHE] @ 1 % on service tax amount.

Persons Liable To Service Tax:
Any provider of taxable service whose aggregate value of taxable service received in any financial year exceeds Rs.10,00,000/-

Should I apply for Service Tax or Not?
Service Tax must be applied ONLY when your business exceeds Rs.9,00,000/- and less than Rs.10,00,000/- till then it is not necessary to apply.
OK, I had already applied for Service Tax and got it Registered (with the hope that my total business turn over will cross Rs.10,00,000/-) but now the turn over is less than Rs.10,00,000/- what should I do?

Case 1:
If your turn over is less than Rs.10,00,000/- and if you are not collecting service tax from Client then file NIL Returns only.

Case 2:
If you are collecting service tax from Client, then no matter whether you business turn over crosses Rs.10,00,000/- or not, you have to pay whatever collected from client to company.

So, if your turn over is less than Rs.10,00,000/- then simply don’t collect any taxes from Client. Simple. Just file Nil Tax Returns.

If your turn over crosses Rs.10,00,000/- then collect from client, pay it to Government.

Registration procedure under Service Tax:

Step 1: Apply for registration in Form ST – 1 to the Superintendent of Central Excise. Online application can also be made.

Step 2: Submit along with Form ST – 1 the following documents • Permanent Account Number (PAN) • Affidavit declaring the commencement of the services • Copy of passport or ration card or any other document of residential proof. • Passport size photograph of the assessee in case of individual and of partners in case of firm and of directors in case of a company. • Partnership deed in case of firm. • Memorandum and Articles of Association in case of company

Step 3: The Superintendent of Central Excise will grant a certificate of Registration in Form ST- 2 within 7 days of the date of receipt of application.

Step 4: Certificate of Registration can be surrendered if the assessee ceases to provide the taxable service for which he had been registered.

Payment Of Service Tax:

1. Service tax is payable on accrual basis as per point of taxation rule. Where the service provider receives only a part of the total service charges, Service tax shall be paid on proportionately only on such part and not on the entire consideration. The balance service tax will have to be paid on receipt of consideration. Therefore the service tax is payable only on realized value and not on bill value.
2. Due dates for payment of service tax Individuals and Firms 5th of the month following the quarter ended June, Sep, Dec. 31st March Others 5th of the following month 31st March
3. In case of e- payment, due date shall be 6th of the respective month / quarter.
4. If last date for paying tax is a public holiday, tax may be paid on the next working day.
5. Tax is paid through GAR – 7 challan.
6. Big assesses with a service tax liability of Rs.10 lakhs and above should pay tax electronically.
7. Interest in case of delayed payment of service tax.
Delay in payment of tax attracts interest at the rate of 18 % p.a. (but relief of 3% to assessee having turnover less than of Rs.60 lakhs.
The interest shall be payable for the period by which payment of tax is delayed.

Filing Of Returns:
Returns are filed half yearly in Form ST – 3 [ Form ST – 3A for PA]. If the service provider is not able to estimate the tax amount properly, he may apply for Provisional Assessment.

Due dates are as follows:
(a) 25th October for the half year ending 30th September.
(b) 25th April for the half year ending 31ST March.

Records To Be Maintained:

The records as maintained by the assessee in accordance with the various laws in force shall be accepted. Every assessee is required to furnish to the Superintendent of Central Excise a list of accounts maintained by him in relation to service tax. This is to be submitted only once at the time of filing the first ST- 3 return. The following records have to be maintained...

Sales register
Purchase register
Cash book
General ledger

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