Service Tax Meaning- It was an indirect tax levied by the central government on the services offered by the service providers in the country. This tax was introduced under section 65 of the Finance Act, 1994. This tax was replaced by Goods and Services Tax (GST) on July 1, 2017 and was subsumed along with different types of indirect tax. Although this tax was paid by the customers against the availed taxable services, the tax was paid directly to the central government.
Origin of Service Tax in India
The Service Tax was introduced in India during the Union Budget 1994, and was brought into the effect from July 1, 1994. Services provided by restaurants, guest houses, lodging, and so on cam under the service tax. Services that were included in the service tax since its inception were gradually increased in the following years. The service tax payment was made through GAR 7, which was called TR 6 Challan in the past. However, some of the service providers made payments through the e-payment facility offered by the Government of India.
Service Tax Act
The Service Tax Act was introduced in the year 1994. Entry 97 of Schedule VII of the Constitution of India, the Central Government levies service tax through Chapter V of the Finance Act, 1994. The taxable services are defined in Section 65 of the Finance Act, 1994. Section 66 is the charging section of the said Act.
Exemptions Under Service Tax in India
As per the former rules and regulations, the service tax was paid on all the services except that were listed in the other set of services. Below given are some of the exemptions that were liable to pay Service Tax in India:
- Service providers were exempted from service tax only if the turnover on the taxable services did not exceed ₹10 lakhs within the same financial year
- Services provided to Special Economic Zone (SEZ) developers or to the unit of SEZ were exempted from service tax
- Services provided to international organizations as well as to the United Nations (UN) were non-taxable
- Services that are rendered to diplomatic missions as well as to officers on such mission plus their family members were exempted from service tax
Current Status of Service Tax
The Service Tax was abolished as soon as government of India announced the roll-out of GST on July 1, 2017. The GST subsumed service tax along with many other indirect taxes under its regime.
Service Tax- FAQs
Service Tax in India can be paid through the GAR 7 wherein service provider can visit the branch to pay the service tax. Also, service providers can pay tax through e-payment facility offered by the government.
As per the rule, the tax invoice should have the given below details on the invoice-
· Serial Number
· Name and Address of the Service Receiver
· Name, address and registration number of the service provider
· Payable tax amount to be mentioned on the tax invoice
· Classification and description along with taxable service value of the rendered service
The service provider pays the tax and recovers the amount from the recipient of the taxable service i.e. the final consumer.
Service Tax is required to be paid only when the aggregate value of services provided exceeds ₹10 Lakhs in a financial year.
Service tax is an indirect type of tax where tax is levied by the government on the service providers but it is actually paid by the customers.
