The Ins and Outs of Service Tax

Service tax is a type of indirect tax, which is pertinent to the services that are taxable. This levy came into effect as the Central Government looked for a simple option that is clear in nature and can create revenue for the country in a simple manner. It was launched in India in 1994 according to Chapter V of the Finance Act, 1994.

Service Tax in India

Over the last few years, service tax has been imposed on different services. Its features are not similar to VAT, which is imposed on commodities and merchandises.
It is levied on different categories of services that are offered by financial institutions like stock exchange, banks, transaction providers, colleges, and telecom providers.

Banks were the first to impose service tax on their customers. From the time of their commencement, they frequently expressed service costs in the form of processing charges. The duty of collecting the levy is entrusted with the Central Board of Excise and Customs (CBEC), which is an authority under the Ministry of Finance. This authority devises the tax system in India.

For the rationale of imposing it, the cost of any taxable service has to be the gross amount fixed by the service provider for the service provided by him.

Rate of Service Tax

In India, service tax first came into existence with effect from July 1, 1994. Every service provider in India, apart from those in the state of Jammu and Kashmir, has to pay this levy. At the outset, just three services were grouped under its net. The rate was 5% at that point. Slowly, more services were brought under the realm of this duty. The rate was raised from 5% to 8% with effect from May 14, 2003. The rate was again hiked to 10% from 8% on September 10, 2004. In addition to this, 2% education cess on the service tax amount was also initiated. In the Union Budget of Government of India for fiscal 2006-2007, the service tax rate was upped from 10% to 12%. On February 24, 2009, with the purpose of offering reprieve to the business and commerce sector staggering under the brunt of economic slump, the rate was lowered from 12 per cent to 10 per cent.

Currently, the duty is payable @10% of the “gross amount” charged by the service provider for offering this kind of taxable service. The education cess is payable @2%, and higher and secondary education cess is payable @1% of the amount due.

Due date for paying Service Tax

For proprietary firms, individuals, and partnership firms, it has to be paid on a quarterly basis (four times a year). The due date for payment is the 5th of the month instantly subsequent to the particular quarter. April to June, July to September, October to December, and January to March are the four quarters. Nonetheless, payment for the final quarter that is January to March has to be carried out by March 31st itself. For any other types of service providers than mentioned above, it has to be paid each month, by the 5th of the next month. Nonetheless, payment for March has to be done by March 31st itself. Service tax has to be paid on the sum collected/obtained by the assessee throughout the applicable period (a quarter or a month as appropriate).

The exclusive aspect of Service Tax is dependence on gathering of tax, mostly via unpaid observance. The scheme of self-assessment of ST Returns by service tax assessees was launched with effect from April 01, 2001. The jurisdictional Superintendent of Central Excise has the power to cross check the accuracy of self-assessed returns. These returns are anticipated to be submitted after every six months. Central Excise officials are empowered to carry out inspections to get the probable assessees under the tax net.

What are the forms for submitting service tax?

The following forms can be used for submission:

ST – 1: Application form for registration under Section 69 of the Finance Act, 1994
ST – 2: Certificate of registration under Section 69 of The Finance Act, 1994 (32 of 1994)
ST – 3: Return under Section 70 of the Finance Act, 1994
ST - 3A: Memorandum for provisional deposit under rule 6 of the Service Tax Rules, 1994
ST - 4: Form of Appeal to the Commissioner of Central Excise (Appeals)
ST – 5: Form of Appeal to Appellate Tribunal under section 86 of the Finance Act, 1994
ST – 6: Form of memorandum of cross objections to the Appellate Tribunal under section 86 of Finance Act, 1994
ST – 7: Form of application to Appellate Tribunal under Section 86(2) [or Sec.86(2A) of the Finance Act,1994

G.A.R. 7: G.A.R. Proforma for Service Tax payments (For payments from April 2007 onwards)
AAR (ST-I): Application for Advance Ruling
ASTR – 1: Application for filing a claim of discount of cess and service tax paid on taxable services exported
ASTR – 2: Application for filing a claim of discount of levy paid on raw materials, cess and service tax paid on input services

Application
Proforma for Application for approval to submit ST-3 Return online

Form - A
Application for reimbursement of CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004

Constitutional and official stipulations behind imposition of Service Tax in India

Constitutional legitimacy

Article 265 of the Constitution indicates that no tax shall be imposed or received apart from by the power of law. Schedule VII splits this theme into three classes-

a) Union list (only Central or Union Government has authority of enacting laws)

b) State list (only State Government has authority of enacting laws)

c) Coexisting list (both Central and State Government have authority to enact laws).

Registration for submitting Service Tax

An individual person legally responsible to pay service tax has to submit an application for registration within 30 days (one month) from the date on which the service tax on specific taxable service becomes effectual or within 30 days from the beginning of his business.

All suppliers of a taxable service have to obtain registration by completing the Form ST-1 in photocopy with the authoritative Central Excise Office.

A “registered” service provider is denoted as an “assessee”.

One registration is adequate even when an assessee is offering in excess of one taxable service. Nevertheless, he needs to list all the services offered by him in the registration application and the field office will make appropriate notes/approvals in the registration certificate.

A new registration is necessary to be acquired if business is transferred to another individual.
If any registered assessee stops to offer the taxable service, he will need to give up the registration certificate right away.
If a registered assessee begins offering any new service from the same location, he does not have to submit an application for a new registration. He can just complete the Form S.T.1 for required changes he wants to make in his present details. The new form can be put forward to the jurisdictional administrator for essential approval of the new service type in his registration certificate.