Indirect Taxes and Direct Taxes are the sources of revenue generation for the Government of India, which is finally utilized for the betterment of society. Apart from direct taxes i.e. Income tax and wealth tax, there are indirect taxes which are also paid by public in varying forms, for instance, VAT, excise, customs, service tax etc.
Service tax is considered as an important source of revenue in relation to other indirect taxes. The Government collects service taxes to provide convenience and cleanliness in the country. The Finance Ministry has recently increased the service tax rates by 0.5% by including Swachh Bharat Cess. Let’s understand the tax structure in detail for better comprehension.
What is the definition of Service Tax?:-
Service Tax is a kind of indirect tax that is levied on the services that are to be rendered by the person/service provider. It is the Central Government that governs the rules, applicability and rates of service tax. The service provider has to collect the service tax from service receivers and submit the collected tax periodically to the government. The current rate of service tax is 15%.
Service providers, who are providing services to the customers/service receiver, charge service tax on the final payment amount of their services. Person who attains these services pay the tax in addition to the payment amount of their availed service(s). It is applicable on different service sectors like healthcare, food and beverage, restaurant, telecom, wellness & beauty etc. Service providers then submit the collected service tax to the government in the prescribed format.
Registration and compliances:-
As per Service Tax Act of India, the service provider or distributor, who is eligible to submit and pay the tax, has to mandatorily get registered. It is compulsory to get the registration within 30 days from the date on which service tax is credited in their account.
Additionally, service-providers having annual income exceeding Rs.9 Lakhs are also liable to pay a specified amount of tax to the government and those having less than Rs.9 Lakhs p.a. income do not need to obtain registration. If the annual income of any registered service distributor exceed Rs.10 lakh in any year, then he/she is liable to pay the value for the taxable services.
The payment of taxes should be done in the name of Central Government which is governed by CBEC (Central Board of Excise & Customs). The last day of submitting their payment is on or before the 5 th day of every month, if the payment is made by cash/cheque/DD. If the payment is made electronically, then it is 6 th day of every month.
Filing of Periodic returns:-
The service provider/service distributor has to file a half-yearly return to the IT department in the prescribed format. Form No. ST-3 or ST-3A (as the case may be) is the prescribed forms that are needed to be submitted on or before 25 th of desired month that is the half-year month of the particular half year.
Any breach or violation to the above compliances will attract penalty provisions. Revised Return can also be filed, in case there is any reason of omission or failure on the part of service distributor. It has to be filed within 90 days from the date of submission of original/first return.