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Service Tax

Service Tax came in to effect under the jurisdiction of Finance act, 1994 and levied on certain services that are taxable under the section 65. The range of services in service tax has been increased in budget 2012.It is integrated in services which are provided by AC restaurants, and long term and short term lodging facilities provided by hotels and guest houses.Service tax and Income Tax is charged by companies and individual providers as per the new regulation.It can be paid in cash by individual service providers while the companies need to pay on accrual basis only when the value of the services provided by them exceeds Rs 10,00,000 in a financial year, but these new additions are not applicable in the state of Jammu & Kashmir. All the services come under the ambit of service tax,except the one which are mentioned in “negative list” listed in section 66D of Finance Act,1994.

Rules of Service Tax:

As per the Finance Act, the government of India created a set of rules in order to evaluate and collect service tax in India. Here are the rules listed below, which are applicable to service tax in India:

  1. Rule 1: Short Title and Commencement:

    The rules created to evaluate service tax are called as Service Tax Rules,which came into effect from 1st July.

  2. Rule 2: Definitions:

    This category of rules is inclusive of the meaning of several terms such as “Act”, “assessment” “personal liable for paying service tax” etc. Act refers to the Finance Act, 2014, “assessment” refers to the self-assessment of service tax by the assessee, provisional assessment and reassessment, and "personal liable for paying service tax" refers to the recipient of service.

    It also defines "quarter", "security services", "renting of immovable property" etc where Quarter is referred to the period between 1st January to 31st March or 1st April to 30th June; or 1st July to 30th September; or 1st October to 31st December of a single financial year. “Renting of immovable property” is referred to services provided through renting of an immovable property and “security services” refers to services which are related to the security and property.

  3. Rule: 3 Officers Appointment:

    As per this rule, the CBEC can appoint the central excise officers.

  4. Rule 4: Registration:

    The service provider who comes under the ambit of service tax should register by using the application form ST - 1 within thirty days from the date, on which service tax has been charged.

    1. Rule 4 (A): Information about services which are taxable and to be provided on Bill, Invoice Or Challan

      Any service provider who is offering taxable services, will issue an invoice or a challan signed by him or by another person who is authorized containing the basic details like name, address and the registration number of the person providing the service; name and address of the person receiving the service; description and cost of taxable service provided and the amount of service tax to be paid.

    2. Rule 4 (B): Note of Consignment:

      Any service provider who provide services, which are related to the transportation of goods should be issued a consignment note.

  5. Rule 5: The Records:

    Any records which consists computerized data, maintained and produced by an assessee according to different laws shall be accepted by CBEC.

    1. Rule 5 (A): Access to the Registered Premises:

      As per this rule, any officer who is authorized by the commissioner shall have access to any premises for completion of verification required to protect revenues.

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  6. Rule (6): Service Tax Payment:

    As per this rule, if a person is paying electronically then the service tax shall be credited to the central government by the 6th of every month, and 5th of every month, if paid via other means.

    1. Rule 6(A) Export of Services:

      The circumstances under which any service shall be considered as export of service, if the provider is located within the taxable territory and the recipient is located outside India.

  7. Rule 7: Returns:

    Every service provider should conform a half yearly return in Form ST-3 or ST-3A together with a copy of the Form TR-6 filled in triplicate by 25th of the month following the half year.

    1. Rule 7 (A) Returns for taxable services provided by transport operators:

      The services/goods which are provided by transport operators should be furnished for return within a period of six months from the 13th May of 2003, failing which may lead to penalty.

    2. Rule 7 (B) Revision of Return:

      As per this rule, an assessee can submit a Form ST-3 to modify or correct any mistakes within ninety days from the date of submission of return.

    3. Rule 7 (C): Amount to be paid for delay in furnishing returns:

      An amount of Rs.500 needs to be paid to the central government, if returns are not furnished within 15 days from the date of submission of service tax. If it gets delayed by more than 15 days, the service provider will be required to pay Rs. 1000 and if it extend by more than 30 days,the service provider will be required to pay Rs. 1000 plus Rs.100 per month till the date, returns will not be furnished finally.

  8. Rule 8: Appeal to Commissioner of Central Excise:

    The appeal can be made to the Commissioner of Central Excise in Form ST - 4 under section 85 of the Finance Act, 1994.

  9. Rule 9: Form of Appeals to Appellate Tribunal:

    The appeal to the Appellate Tribunal can be made under section 86 of the Finance Act, 1994 by using Form ST-5.

  10. Rule 10: Facilities and Procedure for Large Taxpayers:

    This section of rules have the provisions which can be enjoyed by the large taxpayers. The taxpayer shall submit returns for each registered premises. They may be required to produce all financial records for verification and security as and when required.

Service Tax rate in India:

In budget 2015, the finance minister announced the increase in service tax from 12.36% to 14% which will include education and secondary education cess in it and it is expected to increase the cost of the restaurant and mobile bills.Another provision which was included in the Finance bill,2014 of imposing Swachh Bharat Cess at 2% on all or selected taxable services of India.

How To File Service Tax Return in India

Service tax return can be filed via two methods, online and offline.

Online Filing of Service Tax Return

  • The assessee is required to get registered to ACES (Automation of Central Excise and Service Tax).
  • In the next step, he/she has to fill the "ACES Declaration Form" and submit it with the concerned Range Superintendent. He/She must ensure that details are accurate
  • The TPIN and password are communicated to the email ID that you have provided.
  • When TPIN and password are received you'll be required to visit the official ACES Government Website and then click on service Tax on the page for logging in.
  • Login to the website by giving the TPIN and password. When you log in for the first time, you'll be required to set a new password.
  • For subsequent login, enter the User ID and password that you had set earlier. Click on "Fill ST3" under "RET"
  • Premises code and the address of the registered premises of assesses appears on the page. The code will redirect you to a hyperlink that can prepare the ST3 return.
  • File the return and click on the "Save". The confirmation page of the return will be shown on the screen. If you wish to make any changes to the information, then click on "Modify" and save the changes.
  • Return to the main page of the form and click on "Submit" to submit your return.
  • Successful submission of the service tax return will be confirmed by showing the unique acknowledgment number for the return. After submission, the return can be reviewed once in three months by clicking "Revise ST3".

Offline Mode of Filing Service Tax Return

  • Visit the official website of ACES and then click on "Downloads" on the top-panel. You can download the excel utility by clicking on "ACES Return Utility-Central Excise and Service Tax".
  • Use this excel utility to prepare the return and then click on "Validate & Submit" to generate the XML file.
  • Save the file on your system.
  • Login to ACES website by giving the TPIN and password
  • Now go to "RET" menu and then in under " E-filing" select the "Upload File" option.
  • Save the return by clicking on "save" and then click on "Submit" to submit the return filed. After successful uploading of the file, a Return Confirmation will appear on the screen.
  • To check the status of the service tax Return filed, click on "RET" and then go to the "E-Filing" option and then click on "View Status".
  • The status of your service tax return will show "Filed" if you have filed your service tax on or before the due date.

Payment procedure of Service Tax:

Either G.A.R-7 challan can be used for the payment of service tax which is available in specified branches of some particular banks or it can be paid online using e-payment facility of CBEC for which it is mandatory to have an internet banking account with authorized banks.

Steps to Pay Service Tax in India

Step 1

Click on the payment link and then enter your Service Tax Registration number

Step 2

Select the 'Service Tax' option. Now, a drop-down menu will appear. In this section, you'll be required to fill up details such as your name, name of the premises, address, Commissionerate Name and Code, Division Name and Code & Range Name.

Step 3

After filing in all the details, Select "Accounting Codes for Service Tax" and choose the code which is applicable to you from the menu. Select the "Education Cess," if applicable.

Step 4

Select your Bank and then click on "Proceed." This will redirect you to your net banking account where you'll be directed to enter details of the amount that must be paid as service tax. After the amount is paid, a challan is generated which acts as proof of payment. You'll need to show this challan when you file your Service Tax Returns.

Penalties Under Service Tax

Penalty for Non-Payment of Service Tax

A taxpayer is liable to 10% of the service tax as a penalty if he/she has not paid the tax

No penalty is charged if the service tax and interest is paid within 30 days of notice

If the service tax is paid with interest and the penalty should be paid within 30 days of service of the order, then 25% of penalty must be paid as specified in the order.

The penalty can be dismissed on submission of authentic documents which gives a proper reason for the delay/non-payment of the service tax.

Penalty for Not Obtaining Registration

Failure for not acquiring service tax registration can attract a penalty of Rs.10,000 or Rs. 200 each day in the default period.

Penalty for Non-Maintenance of Documents

If a person fails to keep the record and documents linked to service tax, a penalty of up to Rs.10,000 is levied.

Penalty for Not Furnishing Required Information

If a person fails to submit valid documents when summoned by an officer, an Rs.10,000 penalty or Rs. 200 per day during the default period is levied.

Penalty for Submitting Incorrect Invoices

For furnishing incorrect or incomplete invoice details, a penalty of up to Rs. 10,000 could be levied by the Excise Department.

Penalty for Late Filing Service Tax Return

Penalty for late service tax return filing is capped at a maximum of Rs.20,000 and this penalty is subject to the number of days delayed.

  • Penalty for delay up to 15 days in filing service tax return – Rs.500
  • Delay of 16 – 30 days in filing service tax return – Rs.1,000
  • Delay of more than 31 days in filing service tax return – Rs.100 per day for the default period.

Penalty for Offences by Director of Company

Penalty up to Rs.1 lakh is imposed on any director, manager, secretary or any other officer of a company if the company has committed any of the below violations:

  • Evasion of service tax
  • Issuance of invoice, bill or challan without having a provision of taxable service
  • Utilizing the credits of duty without actual receipt of taxable service
  • Failure to pay service tax to the Central Government for a period higher than 6 months from the due date of the payment.

Penalty for Other Default

For violating any provisions of the laws pertaining to service tax under Finance Act (1994), a penalty of Rs.10,000 is levied.

Billing of Service Tax

Issuing Bill or Invoice by the service tax assessee is mandatory according to Rule 4A of Service Tax Returns, 1994. The bill /invoice should be issued within 14 days from the payment receipt for the service.

The bill should have the following things on it:

  • Serial Number
  • Address and name of the receiver of service
  • Registration number, address and service provider's name should be mentioned on the bill
  • Taxable service value, description of service rendered
  • Service tax amount which is payable should also be there on the invoice

FAQs on Service Tax

Who should pay service tax in this country?

Any firm, company or individual who renders services that aren't included in the list negative things is liable to pay the service tax.

What kind of tax is the service tax?

Service tax is a type of indirect tax which is paid by the recipient of various services indirectly to the government through service providers.

Can I pay my service tax online?

Yes, you can easily pay your service tax online by visiting the official website of Central Board of Excise and Custom. You'll need to own a net banking account to do that.

Do I need to pay the penalty fees, if I don't pay my service tax on or before the due date?

Yes, penalty will imposed on you, if you fail to pay your service tax on time.

What is G.A.R -7?

This is a challan which can be used to pay service tax manually. This challan is available in specific authorized banks.

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