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Service Tax Registration

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Service Tax

Service tax is an indirect tax levied on services rendered by a person and the responsibility of payment of the tax to the government lies with the service provider. It is an indirect tax as it can be recovered from the service receiver by the service provider in the course of his business transactions.

Service tax was introduced in India in 1994 on an initial set of three services. The scope of service tax has since been expanded continuously by subsequent Finance Acts. The Finance Act extends the levy of service tax to the whole of India, except Jammu & Kashmir. Now, all services except that are covered under the negative list are taxable.

Since service tax is an indirect tax, taxable service providers need to add service tax (present rate of 15.00%) on the total invoice. For example, if the service invoice value is Rs.100, then service tax will be Rs.15.00 and total invoice amount Rs.115.00. The tax amount of Rs.15.00 after collection needs to be paid to the Government of India by the service provider.

Service Tax Registration

Service Tax Registration is required if the turnover of taxable services of the service provider exceeds Rs.9 lakh in the previous financial year.

Service Tax Registration is required in the following cases also.

  1. Certain categories of service recipients
  2. Distribution of service if the turnover of taxable services exceeds Rs.9 lakh in the previous financial year
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Service tax - Overview

Service tax is applicable to all service other than services listed in the Negative List of Services (services exempted from Service Tax) as may be notified by the Government of India. If the service provided by a person does not fall within the scope of the exempted services, the service tax is payable on the value of the taxable service received.

A Company/LLP/Partnership/Proprietorship providing the taxable service has to obtain Service Tax Registrations when the annual turnover is more than Rs.9 lakhs in any financial year.

Filing of Service Tax Returns

A Service provider who has obtained the Service tax registration is required to file the required returns periodically. In case there is no services provided and Service Tax is collected during a period, NIL return is required to be filed.

Service provider has to file the half-yearly returns to the Service Tax Department on or before 25th day of the following month after each half year (October 25th & April 25th).

Service Tax Credit

In terms of the service tax law, any service provider receiving a service with service tax (input services) for rendering the services, can avail service tax credit.

For example, in a particular month, if the telephone bill is Rs.1,000.00 and service tax Rs.150.00, the service provider can take a credit of Rs.150.00. If his service tax collection is Rs.500.00, his liability to pay service tax will be Rs.350.00 only.

Payment of Service Tax

The service provider shall collect service tax at such rate from the recipient of services and pay to the government as follows on a receipt basis:

Company - Service tax to be paid on or before 5th /6th day of the following month

LLP - Service tax to be paid on or before 5th /6th day of the following month after each quarter

1. What is service tax?

Service tax is a tax on services. It is a tax levied on any services other than the exempted services. It is an indirect tax, which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service.

2. What is service?

Service means any activity for consideration carried out by a person for another and includes a declared service. Activity could be active or passive and would also include forbearance to act. To be taxable, a service should be provided or agreed to be provided by a person to another in the taxable territory and should not be specified in the negative list.

3. Who is liable to pay service tax?

The person who provides the service on receipt of service charges is responsible for paying the Service Tax to the Government of India.

4. What is service tax rate?

At present, the effective rate of service tax is 15.00% on the value of the service provided. The effective rate comprises Service Tax @ 14%, Swachh Bharat Cess @ 0.5% abd Krishi Kalyan Cess @ 0.5%

5. When is service tax registration required and why?

Every person who has provided a taxable service of value exceeding Rs. 9 lakhs in the preceding financial year, is required to register with the Service Tax authorities. A person liable to pay service tax must apply for registration before he/she starts collecting service tax. Service tax Registration is an identification of an assessee. This is necessary to deposit service tax, file returns and undertake various processes madated by law relating to service tax.

6. Is PAN mandatory for obtaining Service Tax Registration?

PAN is essential for service tax registration because the Service Tax Registration number is generated based on the PAN. The PAN-based Service Tax Registration number is a must for payment of service tax.

7. When can service tax credit be taken?

Every service provider (output service) shall be eligible to avail credit of the service tax paid by him to other service providers, in respect of the services (input service) provided by them to him/her. Such availment should be in relation to the rendering of service by the service provider. The output service provider can take such credit only after he/she makes a payment against the bill to the input service provider. The unutilsed balance of service tax cannot be claimed as refund.

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