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 It has recently been replaced by the GST.

What is Service Tax?

Service tax is a tax 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 type of 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 (https://cbec-easiest.gov.in/EST/) 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 https://onlineservices.cbec-easiest.gov.in/csi/indexl 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 easiest@nsdl.co.in.

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.

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