Service Tax in India

Service tax was, in the past, a form of tax that was collected by the Indian Government for certain goods and services. The individual paying the service tax can be either a receiver or a provider. It has recently been replaced by the GST.

Service tax is charged by the government of India on specific service transactions carried out by the service provider. However, the final consumers are the ones who pay the tax as it is passed on to them by the service providers. Service Tax was introduced under the Finance Act, 1994, and is an indirect tax.

Service Tax Rules

The Government of India, in keeping with the Finance Act, 1994, has established the Service Tax Rules for the assessment and collection of service tax in India. These rules govern all the service tax particulars in the country. Here are the Service Tax Rules in detail.

Service Tax Payment

The Central Board of Excise and Customs, or CBEC as it is known in its abbreviated form, launched a web-based payment gateway called Electronic Accounting System in Excise and Service Tax (EASIEST) in an effort to help assessees pay their service tax online with relative ease.

Here is a step-by-step procedure to pay your service tax through EASIEST:

  1. Visit NSDL-EASIEST website ( and select ‘E-Payment (Excise & Service Tax).
  2. Enter the 15-digit Assessee Code provided by the jurisdictional Commissionerate to pay your service tax online.
  3. An online check will be carried out to validate the code you have entered, and if the code is valid, the screen will display details such as the name, address, Commissionerate code, etc.
  4. Once you enter the Assessee code, the system will automatically select the kind of payment you wish to make, viz. Service Tax or Excise Duty.
  5. You will then have to select ‘Select Accounting Codes for Service Tax’.
  6. Following the validation of the data in the NSDL central system, the screen will display a drop-down menu with the names of different banks that provide the netbanking facility to pay your service tax online. Here, you will have to pick the bank through which you wish to make your service tax payment online.
  7. Once you have submitted the necessary data, a confirmation screen will appear and if you confirm the details you have entered, you will be redirected to the netbanking site of the bank you have selected.
  8. You will then have to log in to your netbanking account and enter the payment details and make the payment.
  9. Once you have made the payment, a challan counterfoil will appear on the screen and it will contain the payment details, the Challan Identification Number and the name of the bank through which the payment was made.
  10. You can download the counterfoil from the bank website as it contains all the information about the payment and works as an acknowledgment/proof.

After you have made the online payment of service tax, you can visit to view the challan status enquiry. In case the challan data is not available in the EASIEST website, you can lodge a complaint by sending an email to

Service Tax Exemption

The following are the conditions under which you can avail service tax exemption:

  • Turnover is less than Rs.10 lakh in the previous fiscal

In case the aggregate value of taxable services provided by a service provider is less than Rs.10 lakh over the course of the previous financial year, you can claim exemption from service tax. In case the aggregate value of taxable services provided over the course of the previous financial year is more than Rs.10 lakh, service tax exemption cannot be availed.

  • CENVAT credit

CENVAT credit cannot be availed by the service provider on the tax paid on an input or any input services that are used to provide the service for which he/she has availed exemption. Also, CENVAT credit cannot be availed on capital goods received over the course of the period when the exemption was availed. Furthermore, service tax providers who avail the small scale service tax exemption will be required to make a payment equal to the CENVAT credit availed by them, if any.

Service Tax Billing

Under Rule 4A of the Service Tax Rules, 1994, it is compulsory for a service tax assessee to issue a bill or invoice within 14 days from the date on which the taxable service was completed or the date on which the payment was received for the service, whichever comes first. The invoice must contain the following details:

  • Serial number
  • The name of the recipient of the service along with his/her address
  • The name of the service provider along with his/her registration number and address
  • The classification as well as description of the service rendered along with its taxable service value
  • The amount of service tax payable

Service Tax Penalties

As per the provisions made under Sections 76, 77 and 78 of Finance Act, 1994, the central government may charge penalty, if you fail to meet the following conditions:

  • If you fail to furnish the ST-3 Return within the due dates which are 25th October and 25th April of every year. In that case, you will be liable to pay penalty fee which may extend up to Rs.2,000 based on the period of delay.
  • If a person fails to furnish information or appear before the Central Excise Officer when called for, he/she shall have to pay penalty up to Rs.5,000 or Rs.200 per day after the due date, whichever is higher.
  • If you are a service provider and fail to register your service, it will draw penalty as per the regulations mentioned in section 77 of the Finance Act, 1994 and the penalty fee may go up to Rs.5,000. Because, registration serves as an identity of an assessee and it is mandatory to register your services.
  • If an assessee fails to keep or maintain records of account and other documents required by service tax law, he/she shall be liable to pay penalty fee which may go up to Rs.5,000.
  • If a person fails to pay tax electronically, they will have shall to pay penalty which may extend up to Rs.5,000.
  • Penalty fee is also charged on non-payment or delayed payment of service tax.
  • Penalty shall be charged up to Rs.5000, if a person issues an incorrect invoice or fails to support their invoice with valid details.
  • Penalty shall be charged if a person suppresses the value of taxable services or provides willful miss-statements about the service provided.

Not only there are provisions for imposing penalty if you fail to meet the above mentioned criteria, there are also provisions for not imposing penalty in the service tax rules. As per section 80 of the Finance Act, 1994, if a person can provide sufficient cause to support their failure to pay service tax, they can be exempted from paying penalty fees. However, insufficient funds or lack time are not considered as adequate causes to waive penalty.

FAQs On Service Tax

  1. Who is liable to pay service tax in India?
  2. Any firm, company or individual who provides services which are not included in the list negative things is liable to pay service tax.

  3. What kind of tax is service tax?
  4. Service is a kind of indirect tax which the recipient of various services pays indirectly to the government via service providers.

  5. Can I pay my service tax online?
  6. Yes, you can pay your service tax online by visiting the website of Central Board of Excise and Custom. For that, you need to have an internet banking account.

  7. Do I need to pay penalty fees, if I don’t pay my service tax on time?
  8. Yes, penalty will be imposed on you, if your fail to pay tax on time.

  9. What is G.A.R -7?
  10. This is a challan which is used for the payment of service tax manually. The challan is available in specific authorized banks.

News About Service Tax

  • Service Tax Growth Deaccelerates with Demonetization

    Service tax collections showed an even greater fall with a registered growth of 13% in November compared to 60% the previous month. The excise duty number captures data of manufacturers with an annual turnover of more than Rs 1.5 crores, while service tax accounts for small businesses with a revenue threshold of Rs10 lakh annually.

    A statement issued by the Finance Ministry said that there was a 13.9% decline from October in the total indirect tax collection for the month of November.

    The data shows that the demonetization drive has hit India’s economic growth with many financial institutions and economists lowering India’s GDP growth prediction for 2016-2017.

    Unavailability of notes have also hit Value-Added tax (VAT) collections of the States as overall consumption has declined. The West Bengal Finance Minister, Amit Misra has recently said that small-scale manufacturers, tourism and the hotel industry have seen a steep decline in their revenues due to cash crunch, destabilizing West Bengal state finances.

    10 December 2016

  • No Service Tax on Online Railway Bookings until December 31

    The price of train tickets in India will decrease for some time as the government has said that no service tax will be charged on online railway bookings until December 31, 2016. This step has been taken to encourage people to indulge in cashless transactions. At present, Rs.20 is charged on Sleeper class tickets and Rs.40 is charged on AC class tickets as service tax.

    22 November 2016

  • GST Council Hits Rough Patch on Service Tax Issues

    Service tax has run into rough waters again after a consensus that was reached between the centre and the states about administering 1.1 Million service tax assesses broke down during the first GST council meeting on Friday. The problems arose due to different interpretations of service tax and the division of authority between centre and the states. While in an earlier meeting, dual control between centre and the states for service tax assessment method was agreed upon, a few states have, since then, raised concerns on the methods.

    The prime contention was that the centre continues imposing tax for services till the time states have been trained but the states say that they have been imposing tax on services such as entertainment and restaurants and would want to continue doing so.

    1 October 2016

  • Service Tax Collection in Mumbai Goes Up By 23% in First Quarter

    The Mumbai zone department has reported a 23% rise in the service tax collection in the first quarter, crossing the target of this period by 4%.

    According to the Service Tax Department, service tax collection went up by 22.9% to Rs.17,583 crore in the quarter ending June. Last year’s collection reached Rs.14,307 crore during the same period. The zone’s collection target was Rs.16,969 crore, which was surpassed by 3.6%.

    The revenue collection target for the Mumbai zone for this financial year is Rs.76,300 crore. The previous year saw a revenue collection of Rs.68,714 crore by the zone.

    5 August 2016

  • Finance Minister Jaitley Bats for the GST Bill

    Touted to be the biggest tax reform since the Indian independence, the GST (Goods and Services Tax) Bill is being given that much needed push in the parliament for an early passage. The Finance Minister is leaving no stones unturned in ensuring it gets the nod from both houses during the monsoon session.

    He has asked the Rajya Sabha to pass the GST Bill so that states can get their share of service tax. Stressing on this fact, he is of the opinion that the sooner it it enacted, states stand a quicker chance to get their share. The bill contains provisions for states to get a share of 42% from the service tax collections until 2020.

    29 July 2016

  • Service Tax Collection Up by 23% in Mumbai Zone During Quarter 1

    In a recent news release by the Service Tax Department, the consolidated service tax collection during the first quarter stood strong at a whopping Rs.17,583 crore, a rise of 22.9% from Rs.14,307 crore during the same quarter last year.

    During the current fiscal, the Mumbai zone has been assigned a target of Rs.76,300 crore on the basis of collections during the last fiscal which clocked 68,714 crore. It must be noted that the target set by the Union Budget for service tax collection for the current fiscal is Rs.2.16 lakh crore. So far, the government has managed to collect Rs.53,757 crores, a staggering growth of 20.8% over last fiscal’s collection of Rs.44,503 crore during the same period.

    20 July 2016

  • SEBI Seeks Service Tax Exemption From July 2012 Onwards

    The Securities and Exchange Board of India (SEBI) recently got an exemption from service tax from this fiscal year onwards. However, not content with that, SEBI has asked the government to exempt its service tax liabilities with retrospective effect from July 2012.

    While the government had contended that SEBI’s services fall within the ambit of service tax, SEBI had been arguing otherwise. Finally, after rounds of discussion, SEBI was exempt from service tax from this financial year.

    SEBI is the regulator for capital markets including entities such as companies, stock brokers and mutual funds.

    15 July 2016

  • Telangana plans to replace the term "Licence Fee"

    In an attempt to save up on tax deducted by the central government, the Telangana government has taken help of finance professionals and come up with the idea of replacing the term “Licence Fee” with some other term. Currently, as per new rule of the central government, any licence fee levied by the state government is liable to attract a 15% service tax that goes to the union government.

    Considering this as detrimental to the growth of Telangana, the state aims to change the term Licence Fee to any other suitable term to save up on service tax which will be around 500 crore rupees if service tax is to be paid on all licences. Various licences are issued by state governments in India. These include hotel licences, bar licences, licences for clubs etc.

    7 July 2016

  • Air-Conditioned Buses in Bengaluru Feel The Heat

    With service tax levied on air-conditioned carriage buses, commuters in Bengaluru who frequently use them as a mode of transport are now feeling the heat, with the already expensive bus fares rising by 6 per cent. The The Bangalore Metropolitan Transport Corporation (BMTC) and the Karnataka State Road Transport Corporation (KSRTC) have both launched an all out attack the service tax levied on bus fares. Due to the Union Budget buying over all state-owned transport corporations that come under this service tax bracket, the new regime has implemented a service tax of 15 per cent on 40 per cent of all revenues that are collected from air-conditioned bus services. While non-air conditioned buses are exempt, the tax burden on air-conditioned buses has been shifted to the commuters. Commuters that have been hardest hit by the rise in service tax are usually travellers who commute to and from the Bengaluru International Airport as well as the IT sector of the city. KSRTC MD Rajendar Kataria has however written to the ministry of finance asking them to reconsider their proposal.

    27 June 2016

  • Sebi seeks Exemption from Service Tax Liability With effect from 2012

    Sebi (The Securities and Exchange Board of India) has written to the government seeking an exemption from the tax liability with retrospective effect from 2012. Sebi is the regulatory authority that controls the entire range of capital markets including thousands of companies, mutual funds, brokers and other entities.

    In the budget of 2016-17, the government announced that Sebi will be exempted from service tax effective from April 1, 2016. However, U K Sinha, the Chairman of Sebi was dissatisfied with the announcement as the regulatory authority has always maintained that the services provided by it did not attract any service tax. The Chairman has written to the Revenue Secretary, Finance Minister and Economic Affairs Secretary, asking for an exemption from 1st July, 2012.

    15 June 2016

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