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What is Service Tax?

Service Tax was a tax that was levied by the Central Government of India on the services provided by service providers. This indirect tax came into being under the Finance Act, 1994. It was set at 15% for transactions that occurred on or after 01 June, 2016. The tax was to be paid to the government in order to enjoy different services that were received from service providers. In that case, the tax was paid by service providers, but recovered from service receivers who purchased or received the taxable services.

Service Tax in India

The service tax in India was imposed under Section 65 of the Finance Act, 1994. With the roll-out of the budget of 1994, it came into effect from July 1, 1994, the services that were included under the service tax were increased gradually from 1994. They were extended to incorporate services provided by air-conditioned restaurants, lodging (both long and short term), guest houses etc. Furthermore, based on the regulations, the service tax was charged from companies as well as individual providers. While companies could pay it on the basis of accrual, individuals had to pay tax via cash. The tax, however, had to be paid only if the value of the services provided exceeded INR 10 lakh rupees in the single financial year. This addition to the service tax rules was not applicable to Jammu and Kashmir.

Service Tax Exemptions in India

As per the previous regulations, the service tax in India was paid on all the services excluding those that were included in the other set of services, namely, the negative list. While all the service providers were liable to pay service tax, including those in the government and private sectors, the main exemptions included the following:

A service provider of a small scale can avail an exemption if his turnover on the taxable services does not exceed INR 10 lakhs within the same financial year.
When some goods and services are received from a service provider, and there is proof indicating that no credit duty has been paid on those goods or materials, while there is written proof of their value, and the fact that the services are rendered as per the CENVAT Credit rules, then the recipients are exempt from paying the service tax on those goods and services.
The service tax is also not applicable to the services that are rendered to diplomatic missions as well as to officers on such mission plus their family members.
Some other services that are not taxable include services such as port services, containerised transport services and goods transport services which have been either received by exporters or used for exporting goods. Here, the service tax which is paid by an exporter on these services is then refunded to the exporter.
Any services that are provided to international organizations as well as to the United Nations are not taxable.
The services that are provided to developers of SEZ or to a unit of SEZ are exempt from tax.

Service Tax Billing

As per Rule 4A of STR, 1994, it is mandatory to issue an invoice or bill by a service tax assessee. This invoice has to be issued in 14 days from the date of completion of the taxable service or the receipt of payment of the service, whichever is earlier. The invoice must have the following:

The serial number
The name and address of the service receiver
The name, address and registration number of the service provider
The classification, description as well as taxable service value of the service that is rendered
The payable service tax amount to be mentioned on the invoice

Service Tax Payment

A service tax payment can be made via G.A.R.7. or the erstwhile TR6 Challan. Branches of designated banks accept the payment of service tax. The closest service tax office or even the central excise office can provide a list of designated banks along with its branches in order to pay the tax. Another option of making the service tax payment is through the e-payment facility.

Service Tax Today

The tax was in place as per the specifications of the Finance Act, 1994. The tax, however, has been abolished since the roll-out of the Goods and Services Tax or GST on 01 July, 2017. The implementation of GST caused the fade-out of many other indirect taxes.

FAQs

What is a service tax?

A service tax is a tax that is levied by the Government of India on services that are provided by a service provider. It is an indirect tax under the Finance Act, 1994.

What are the modes of paying the service tax?

Service tax can be paid via the G.A.R.7. wherein you can walk into the branch and pay your tax. Alternatively, the payment can also be done via the e-payment facility.

Is the service tax still valid in India today?

Talking of the relevance of service tax, the tax has been abolished in India with the roll-out of the Goods and Services Tax or GST on 01 July, 2017