Sunday, August 21, 2016

What is Service Tax?

Service tax refers to tax collected by the government of India from certain service providers for providing certain services. The person who pays service tax can be either a service provider or a service receiver or any other person who is responsible for providing certain services. Service tax is a kind of indirect tax because the service providers pay the tax and recovers it from the service receivers who receive or purchase the taxable services. It is a kind of tax that you pay to the government for enjoying different services received from various service providers.

Service Tax in India:

Service tax in India came into effect in 1994 following the Finance Act, 1994. It is imposed on certain services which are taxable under the section 65 of Finance Act, 1994. The budget 2012 increased the range of services included under service tax. It incorporated services such as service provided by AC restaurants, short and long term lodging offered by hotels and private guest houses etc. under taxable services. As per this new regulation, service tax is charged from individual providers as well as companies in India. Individual service providers can pay this tax via cash while companies can pay it on accrual basis. However, they need to pay this tax only if the value of services provided by them exceeds Rs. 10lakh in a single financial years. However, this new additions to service tax rules are not applicable to the state of Jammu & Kashmir. From the year 2012 onwards, all services, except the ones specified in the “negative list” of services, become liable for service tax. The negative list refers to the services listed in section 66D of the Finance Act, 1994.

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