What Is Service Tax In India

A service tax is a tax imposed by the Indian government on services provided in India. The service provider collects the tax and pays the same to the government. Let us consider a simple service tax example. Suppose you go on a vacation and stay in a hotel. The hotel management will charge you service tax for the accommodation and additional services that they offer. We usually see the GST amount on bills, which is inclusive of the service tax.

The service tax collected from you is then submitted to the government when the hotel pays its taxes every financial year.

[Note: Service tax is applicable in all of India except Jammu and Kashmir and some of the designated areas in the continental shelf and exclusive economic zones of India.]

Service tax rates in India are subject to change as per the government policies. Typically, the government revises the service tax percentage during every budget session.

Currently, the service tax percentage is 15%. The 15% rate includes 0.5% of Swachh Bharat Cess, which came into effect on November 15 2015, and 0.5% of Krishi Kalyan Cess, which was included in the rate on June 6 2016.

The inclusion of Swachh Bharat and Krishi Kalyan Cess resulted in an increase in the service tax rate in India from 14% to 15%.

All the services, including declared services under Sec 66B of the Finance Act, 1994, are subject to service tax in India.

However, certain services and territories are not included in this section. It includes services included in the ‘Negative List’ or special exempted services.

Moreover, services provided in the state of Jammu and Kashmir and some exclusive economic zones of India are also excluded from service tax payables.

Service providers need to complete their service tax registration within 30 days from the commencement of providing taxable services. To make service tax payments to the government, the service provider needs to register themselves with the government. Here are the steps for registering:

Step 1: Go to the official CBIC website.

Step 2: On the home page, click on the “Service Tax” tab. Under the tab, you will find a login link for the ACES website; click on it.

Step 3: You will be directed to the login page of the ACES website. Here, you need to click on “New Registration” to create an account.

Step 4: Here, you need to provide the information requested, such as the unit name, contact number, designation, address, etc., to register yourself.

Step 5: Once done with filling in your details, submit the registration form.

Step 6: You will receive your username and password on the registered email address within 24 hours of submitting your registration details.

Payment of service tax is mandatory for every taxpayer. You can pay your tax online by logging on to the CBIC Central Board of Indirect Taxes and Customs website through your taxpayer ID. Although, in some instances, a manual payment is also allowed, it is done on specific requests.

• Payment of government service tax is exempted under certain conditions, these include:

• Small-scale service providers whose turnover does not exceed ₹10 lakhs in a financial year can avail of service tax exemption benefits.

• Services offered to international organisations or the United Nations are exempted from service tax.

• Transfer of title of goods from one person to another in exchange for monetary benefits. It includes sales of goods or monetary transactions only without providing any actual services.

• Services provided free of cost are exempted from service tax.

• Services provided to diplomats or their family members for official and personal purposes are exempted from service tax.

• Services offered to units of Special Economic Zones or Special Economic Zone Developers are exempted from service tax.

Maintenance of Records: The taxpayer must maintain records accepted by the government. These records can include digitally signed invoices and other electronic records. Remember, these records need to be preserved for at least 5 years as proof.

Invoice: As per rule 4A, taxable services shall be provided only on the basis of invoice or bill. These bills, invoices or challan can include documents used by service providers for banking services, such as debit credit invoices, pay-in-slips or consignment notes by goods transport service bookings. .

Every taxpayer would want to reduce their tax liability. Well, there are some tax-saving instruments that you can have for tax benefits. One such way is buying health insurance for senior citizens.

Under Section 80D, a tax deduction of up to ₹25,000 per financial year is allowed on medical insurance premiums. Moreover, if your parents are senior citizens, you can buy a policy in their name and claim deductions for up to ₹50,000 under Section 80D of the Income Tax Act. Additionally, if you buy critical illness insurance, you can avail ₹25,000 of deductions under the same section of Income Tax.

At Tata AIG, we provide some of the best benefits on medical insurance in India, such as COVID-19 coverage, cashless treatment at your preferred hospital, coverage for pre-existing diseases, etc.

If you are providing taxable services, then you must pay this tax on time. To be able to pay the correct taxes, you must have awareness of their types of service tax, meaning, rates, inclusions and exclusions. With the points mentioned in the article, you will be able to gather the knowledge you require.