What is Service Tax?
Service
'Service' has been defined in clause (44) of the new section 65B and means - any activity for consideration carried out by a person for another and includes a declared service. The said definition further provides that 'Service' does not include -
any activity that constitutes only a transfer in title of goods or immovable property by way of sale, gift or in any other manner
a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29A) of article 366 of the Constitution
a transaction only in money or actionable claim
a service provided by an employee to an employer in the course of the employment.
fees payable to a court or a tribunal set up under a law for the time being in force
Service Tax
Service tax is, as the name suggests, a tax on Services. It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994. It is an indirect tax (akin to Excise Duty or Sales Tax) which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service.
Prior to 1.07.2012, Service tax was levied on specified services.
From 01.07.2012, there is a paradigm shift in the levy of service tax. The service tax has been imposed on all services other than those specified in the negative list.
Liability to pay service tax
Normally, the person. who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government. However, in the following situations, the receiver of the Services is responsible for the payment of Service tax :
Where taxable services are provided by foreign service providers with no establishment in India , the recipient of such services in India is liable to pay Service Tax.
For the services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be paid by the Insurance Company
For the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight is liable to pay Service Tax , if the consignor or consignee falls under any of the seven categories viz.
- a factory
- a company
- a corporation
- a society
- a co-operative society
- a registered dealer of excisable goods
- a body corporate or a partnership firm
For the taxable services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.
Rate of Service Tax
From 01.04.2012 onwards, Rate of service tax is 12% + 2% (of service tax) education Cess + 1% (of service tax) Secondary & Higher Education Cess (aggregating to 12.36%).