Get Service Tax Act Notes / ebook:
In previous post we have given Value Added Tax (VAT) Notes and 5 heads of income i.e.
1) Income From Salaries (Sec 15-17) Notes / ebook
2) Income From House Property (Sec 22-27) ebook / notes
3) PGBP (Profits and Gains from Business or Profession) ebook / Notes
4) Capital Gains (Sec 45-55) Notes
5) Income From Other Sources (Sec 56-59).
Today we are providing Service Tax Act Latest Notes for CA , CMA, CS & for other Taxation students.
Service Tax
Meaning of Service Tax:
Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers.
Definition:
Service tax is a tax levied by the government on serviceproviders on certain service transactions, but is actually borne by the customers.
Levy of Service Tax:
The levy of a service tax can be based on either of the following 2 approaches:
1. Comprehensive coverage/approach: In comprehensive approach all services are taxable and a negative list is given in case some services which are to be exempted. Such a comprehensive approach is operational in many developed nations.
2. Selective coverage/approach: In the case of selective approach, only selective services are subject to Service tax. In this case, the legislator attempts to specify and list the services that would be taxable and the scope of coverage of each service. There is no residuary category for taxing all services. India has adopted selective approach to taxation of Services where only those services which are specified are made taxable and others are not taxable at all.
Exemption Available to Service Tax Assessees:
1. General Exemption from Service Tax for certain assessee:
a) Service Provider:
Services provided by the following are exempt:
Reserve Bank of India (RBI)
Small service Provider (SSP) (upto a turnover of Rs.10 lakhs)
Entrepreneur in Technology Business Incubator (TBI)
Entrepreneur In Science and Technology Entrepreneurship park (STEP)
b) Service Receiver Service Provided to the following are exempt:
Reserve bank of India(RBI)
Developers of Special Economic Zone (SEZ)
Unit in SEZ
United nations, International organizations, Foreign Diplomatic missions
2. Small Service Provider Exemption (SSP):
a) Exemption granted through notification No.7/2007 – ST dt. 01.03.07.
b) Exemption is upto a turnover (money received) of Rs.10,00,000 in a financial year. i.e. To determine whether assessee is eligible to claim SSP exemption in current year, what is relevant is aggregate value of taxable services provided in preceding year shall be less than Rs.10 lakhs.
c) On crossing money received towards taxable service in excess of Rs.10,00,000/- tax is payable at the usual rate and CENVAT credit can also be availed.
d) The service Provider shall opt for the exemption.
e) Option is irreversible till the end of that financial year.
f) Registration is necessary if the turnover (receipt of money towards value of taxable service) exceeds Rs.9,00,000.
g) Exemption is available in the current year, if in the previous year, the aggregate value of taxable services provided does not exceed Rs.10,00,000/- Exemption can be claimed upto aggregate money received towards value of taxable services during the current year upto Rs.10,00,000/-.
Incidence for Levy and Collection of Service Tax and Effective Date of Taxation:
1. Effective date:
Date on which a service is made taxable for the first time (OR) date from which a service is included in the taxable service. On the date on which service is provided, Service must be taxable irrespective of date of receipt of consideration.
2. Service will not be taxable even if the bills are raised or payment received after the effective date however service is provided before the effective date.
3. Service will be taxable even if the advance was received before the effective date of levy.
Pure Agent:
Pure agent is a person who has an agreement with service receiver to act as his pure agent to incur expenditure for providing service. The salient features of a pure agent are:
1. He has no title over the goods/services provided to the client.
2. He cannot use them for his purpose.
3. He gets from the service receiver only the actual cost of such purchases.
Service Tax Act Rate:
The current Service Tax rate is 12%.
Education Cess @ 2% and Senior and Higher Education Cess @ 1% are also liable to be payable on the above Service Tax Rate.
Total effective Service Tax rate is @ 12.36%
Taxation of Free Services:
No service tax on free services:
No service tax is leviable if free services are provided by the service provider. However, if the authorized dealer of motor vehicle provides to customers free servicing of motor vehicles without charging any amount of service charge from the customers and vehicle manufacturer reimburses the amount to authorized service station on account of such free services, the authorized service station shall have to pay service tax on the amount received from the vehicle manufacturer for the purpose of servicing the vehicle.
Provisions Regarding Payment of Service Tax:
S.No
Nature of the Service
Service Provider
Service Receiver
Person liable to pay tax
1.
Insurance auxiliary services
Insurance agent
Insurance company
Insurance company
2.
Service provided to a person in India from outside India. (i.e Import of Service)
Person outside India
Person in India i.e Importer of Service
Person in India i.e Importer of Service
3.
Goods transport agency for transport of goods by road. Note: If the service receiver is individual, HUF etc., tax is payable by the service provider (GTA)
Goods transport agency
a. Any registered factoryb. Any companyc. Any corporation d. Any registered Society / corporative societye. Any registered dealer of excisable goods f. any registered firm or body corporate
Person making the payment of freight (i.e. consignor or consignee)
4.
Business Auxiliary Service of Distribution of mutual fund
Mutual fund distributor / Agent
Mutual fund company or Asset management company
Mutual fund company or Asset management company
5.
Sponsorship Service
Sports Body providing such Service
Any Body corporate / Firm in India
Any Body corporate / Firm in India
Due Dates for Payment of Service Tax:
Due dates for payment of Service tax. Service tax had to be paid on a monthly / quarterly basis depending upon the status of the service provider.
Procedure for Registration of Service Tax:
Registration:
Every Person who is liable to pay Service Tax is required to register with Central Excise Department within time limit as may be prescribed. It means every service provider who is providing taxable service is required to get himself registered with Central Excise Department.
Application for Registration to be made in Form No. ST-1:
Central government may specify such other person or class of persons, who shall make an application for registration within such time and manner as may be prescribed.
1. Persons notified by the Central Government – Special Category Persons:
a) Input Service Distributor:
(i) Office: Input Service distributor refers to an office of the –
Manufacturer or
Producer of final products or
Provider of output service
(ii) Invoice: Which receives tax paid invoices (under Rule 4A of Service Tax Rules, 1994) towards purchases of input services and issues invoice, bill or challan.
(iii)Purpose: For distributing the credit of service tax paid on the said services to such manufacturer or producer or provider
b) Small service provider whose aggregate value of Taxable Services exceeds Rs.9 Lakhs in a financial year
Documents to be enclosed for registration:
Documents to be attached
An application for registration has to be accompanied along with the following documents:
1. Application in Form ST-1 in triplicate duly signed
2. Attested Copy of the PAN Card
3. Proof of Address of the premises which is required to be registered
4. Copy of the Document governing the constitution of the organization (Partnership deed in case of a partnership firm, Memorandum of Association in case of a company, Trust Deed in case of a trusts or associations)
5. Authority Letters in favour of the person who is to collect the registration certificate on the Letter head of the organization applying for registration.
6. Power of Attorney in case the documents are signed by an authorized representative
Procedure for Assessment and Returns:
Assessment and Returns – Sec.70 and STR 7
1. The service provider shall himself assess and pay the tax. This process is known as Self Assessment.
2. If he is not able to estimate the tax amount correctly, he may apply to the department for Provisional Assessment (PA). Provisional Assessment is a process through which the department arrives at the provisional tax liability on the services provided by the service provider without waiting for the complete assessment at the initial stage itself. However, the service provider has to provide an undertaking for bearing the final liability once the final assessment is completed. In case of provisional payment of service tax, the assessee has to file a statement giving details of the difference between the service tax deposited and the service tax liable to be paid for each month in a memorandum in Form ‘ST-3A’ which should accompany the return in ‘Form ST-3’.
3. Return is to be filed half yearly in Form ST-3 (Form ST – 3A for PA). The half yearly due dates are:
For half year
Return to be filed on or before
1st April to 30th September
25th October
1st October to 31st March
25th April
4. E-filing of returns is also permissible through the internet using computer. The website for filing e-returns is www.servicetaxefiling.nic.in
5. If the due date is a public holiday then the return should be filed on the next working day.
6. Revised returns may be filed within 90 days from the date of filing of original return.
7. For delay in filing returns, “late fee” is payable as follows :
Period of Delay
Penalty to be paid
Upto 15 days
Rs.500
16 days to 30 days
Rs.1,000
More than 30 days)
Rs.1,000 plus Rs.100 per day (from the 31st day) till the date of filing returns (Maximum of Rs.2,000
8. Where the gross amount of service tax payable is nil, the Central Excise Officer may, on being satisfied that there is sufficient reason for not filling the return, reduce or waive the penalty (late fee).
9. Nil return should also be filed within the prescribed time limit.
10. Filing of single return is sufficient in case of multiple service provider. However necessary details in each of the columns of Form SR-3 have to be furnished separately for each of the taxable service rendered by him. Thus, instead of showing a lump sum figure for all the services together, service wise details should be provided in the return.
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