Service Tax Law India

Service Tax

Service Tax

Service tax is levied on the notified services by the Central Government. The rate of Service Tax is currently 10 per cent. However, the Service Tax rate is scheduled to increase to 12 per cent with the enactment of the Finance Bill, 200G. Education cess at 2 per cent is levied on the Service Tax. The effective rate of Service Tax works out to 10.2%, which would increase to 12.24%.

Service Tax is charged on the gross value of services and is generally payable on a receipt basis. It is an indirect tax - payable by the service provider but ordinarily recovered from the recipient of services. The law requires separate mention of Service Tax amount in the invoices.

Ordinarily, every person liable to pay Service Tax is required to register it with the Service Tax authorities and comply with procedural requirements like paying taxes, filing returns, etc. However, in the case of non-resident service providers who do not have offices in India, this burden is shifted to the recipient of the service with effect from 16 August 2002. Further, with effect from 16 June 2005, where any taxable service is provided by a non-resident even from outside India and received by a resident having a place of business in India, such service is also deemed to be a taxable service and liable to be taxed in the hands of the recipient. In this regard, the GoI now proposes to create specific rules that will govern the taxability of a specific service rendered from outside India and received in India. Draft rules in this regard have already been issued for comments from the industry.

There is a basic exemption limit of'1,00,000 rupees (US $ 8,900), which means that Service Tax shall be exempted for service providers providing taxable services up to the aforementioned amount. A mechanism for credit of input Service Tax and Cenvat on specified inputs and capital goods is also in place.

Any service for which payment was received in convertible foreign exchange in India and which was not repatriated or sent outside India was exempt from levy of Service Tax up to 14 March 2005 (except for the period 1 March -19 November 2003 when this exemption was withdrawn). The GoI has now notified the new 'Export of Service Rules 2005', which defines what constitutes 'export of services'. These rules have been effective from 15 March 2005. Consequently, the exemption from Service Tax on payments received in convertible foreign exchange has now been removed with effect from the aforementioned date. When two or more services are bundled together, it would be classifiable under the category that gives essential character to the service. Classification rules are in place from 14 May 2003. If, in case of composite activities, one or more of the activities are liable to Service Tax and others are not. Service Tax would ordinarily be payable only on the charges received for the services to which the tax is applicable. This is provided charges for each activity can be separately identified/ determined and it is not incidental to the main service.

Service Tax/Cenvat incurred on input services/goods is available as credit which can be used as a set-off against output Service Tax liability. However, with respect to common service/inputs allocation Principles have not been well articulated in law. The language of the law is broad and generic and uses terms such as 'directly or indirectly and in any manner, which raise a number of issues regarding the scope of the specific category of service. Revenue authorities have been issuing explanatory circulars from time to time in relation to specific issues. Yet there remains considerable ambiguity in the applicability of the Service Tax law to various services.

Service Tax is currently levied on 81 notified categories of services. A total of 15 more taxable services will be covered by enactment of the Finance Bill, 2006.

by: KDK Software

POST COMMENT

Use Rvskin License To Customize Your Hosting Services More Exclusively Catering Service In Devon Seo India Firms Offering High-value Quality Services Rather Than Cost Tips For Selecting The Best Car Rental Services Serviced Appartment Mservice: Como Encontrar Computadores A Preos Baixos? Med Spa Services For Plastic Surgery Recovery Foundation Repair San Antonio: Getting The Best Foundation Repair Services A Brief Overview Of The Services Offered By Chiropractors Services Of Expert Movers In Bangalore Recognizing The Diverse Facets Of Upholstery Repair Services Public-private Partnerships Driving The Hospital Services Market In India Scope Of Services Provided By An Ottawa Lawyer