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What is Service Tax?

Service tax is charged by the government of India on specific service transactions carried out by the provider. However, the final consumers are the ones who pay the tax as it is passed on to them by the service providers. It was introduced under the Finance Act, of 1994, and is a type of Indirect tax. The Government of India established the tax Rules for the assessment and collection of service tax in India. These rules govern all the tax particulars in the country. It is an indirect tax wherein the service provider collects the tax on services from the service receiver and pays the same to the government of India.

Exemption of Service Tax

  • Turnover is more minor than Rs.10 lakh in the previous fiscal: If the aggregate value of taxable services provided by a service provider is more minor than Rs.10 lakh over the last financial year, you can claim exemption from that. If the aggregate value of taxable services provided over the last financial year is more than Rs.10 lakh, the exemption cannot be availed.
  • CENVAT credit: CENVAT credit cannot be availed by the service provider on the tax paid on input or any input services used to provide the service for which they have helped exemption. Also, CENVAT credit cannot be availed on capital goods received throughout the period when the exemption was availed. Furthermore, providers who avail of the small-scale It exemption will be required to make a payment equal to the CENVAT credit availed by them if any.

Registration

As per Law, the following categories of persons must obtain registration:-

  • Every person liable to pay tax under Reverse Charge
  • An input service distributor
  • Every provider of taxable service whose aggregate value of taxable service exceeds 9 lakhs in a financial year.

Every person mentioned above will have to get themselves registered under the tax law within 30 days from the date of commencement.