Service tax

2. Service Tax Concepts

3. Service Tax Concepts
Who Can Levy Tax
Central Govt. State Govt.
Service Tax, Central Excise,
Customs, Income Tax
VAT, State Excise, Property
Tax, Entry Tax, Octroi
Note: No state can levy Service Tax. Only Central Govt. has the
power to levy service tax
Tax

4. Service Tax Concepts
Taxes
Direct Indirect
•Paid directly by tax payer
to Govt.
•E.g. income tax, wealth
tax, gift tax
•Paid indirectly to Govt.
•E.g. service tax, excise,
customs etc.
Note: No state can levy Service Tax. Only Central Govt. has the power to levy service tax
Types of Taxes

5. SERVICE TAX

6. INTRODUCTION
Service Tax is an indirect tax levied on services. It was
imposed by Chapter V of Finance Act, 1994, which
was introduced by the then Finance Minister Dr.
Manmohan Singh.
There is no separate “Service Tax Act”. It is imposed
every year by making amendments to the Finance
Act, 1994.
Service tax is not a tax on profession, trade or
employment but is in respect of services rendered. If
there is no service, there is no tax.
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7. APPLICABILITY OF SERVICE TAX
Service Tax is applicable to the whole of India except Jammu and
Kashmir.
If a service provider provides taxable services in Jammu and
Kashmir, then it is not liable to Service tax. However, if a
service provider provides taxable services from Jammu and
Kashmir to the client any where else in the country, he shall be
liable to service tax.
• First Introduced w.e.f. 01.07.1994 taxing 3 category of
services:
• General Insurance
• Stock Broking
• Telephone Service
• At present almost 120 category of taxable service
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8. RATE OF TAX
 Rate of Service tax is 12% for all services, plus Education
Cess 2% and Secondary and Higher Secondary
Education Cess @ 1%, effectively the tax rate shall be
12.36%
 Three rate of service tax:
• Service Tax @ 12%
• Education Cess @ 2%
• Secondary & Higher Education Cess @1%
 Example: Calculation of total tax
 Value of service = Rs. 100
 Service tax (12% of Rs. 100) = Rs. 12.00 (A)
 Education cess (2% of Rs. 12) = Rs. 0.24 (B)
 SAH EC (1% of Rs. 12) = Rs. 0.12 (C)
 Total service tax = (A)+(B)+(C) = Rs. 12.36
 Total service tax payable is @ 12.36% (including EC and SAH EC) on the
value of taxable service.

9. Rate of Service Tax: Illustration
Mr A provides taxable service to Mr B for which consideration agreed between
them is Rs. 50,000 (assume Rs. 50,000 as taxable value). Compute the amount
of tax.
Taxable value = Rs. 50,000
Service Tax @ 12% = Rs. 6000
EC @ 2% = Rs. 120 (6000* 2%)
S&HEC @ 1% = Rs. 60 (6000 * 1%)
Total ST = Rs. 6,180
Service Tax Concepts

10. Problems
Q1. Mr. Yash, a Chartered Accountant provides taxable
services valuing Rs. 10,00,000 to Mr. Rohit. Compute the
amount of service tax payable by Mr. Yash.
Q2. Mr. Shankar enters in to an advertising contract with
Mr. Ganpati for a sum of Rs. 750000. Compute the amount
of service tax payable by Mr. Shankar.
Q3. A service provider provides services valuing Rs.
20,00,000. Compute the amount of service tax payable by
him.
Q4. A service provider provides taxable services the
gross amount charged in respect of which is Rs.
20,00,000. Compute the amount of service tax payable
by him. If the gross amount so charged is inclusive of
service tax.

11. SERVICE LIABLE TO SERVICE TAX
All services are liable to service tax except –
a) Activities specifically excluded in definition of service.
b) Services covered under the negative list (39)
c) Services covered under Mega Exemption notification.
d) Services provided outside the taxable territory.
e) Services received by a unit located in SEZ (subject to
conditions).
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12. IMPORTANT TAXABLE SERVICES
 Stock Broker
 Insurance Auxiliary Services In Relation To General
Insurance
 Practicing Chartered Accountant
 Banking And Other Financial Services
 Insurance Auxiliary Services In Relation To Life
Insurance
 Investment Management Services Under LIP

13. STOCK BROKER
 All services provided in connection with sale or purchase
of securities listed on a recognized stock exchange.
 Person liable
 Stock broker
 Sub-Broker
 Taxable services
 Own trading
 Arbitrage
 Trading in listed securities
 Non taxable services
 Off market deals
 Dealing in unlisted securities

14. INSURANCE AUXILIARY SERVICES IN
RELATION TO GENERAL INSURANCE
 Any service provided by Actuary, Intermediary or
insurance agent including risk assessment, claim
settlement, survey and loss assessment
 Person liable
 Actuary
 Intermediary
 Loss Assessors
 Survyors
 Insurance consultantts
 agents

15. CONTINUE
 Taxable services
 Information on policy
 Advice
 Processing of documentation
 Remitting of insurance premium
 Risk Assessment
 Claim settlement
 Survey
 Loss Assessment
 Calculation of insurance risk premia
 Insurance claims adjustments
 Administration of insurance

16. PRACTICING CHARTERED
ACCOUNTANT
 Person Liable
 Independent Practitioners
 Firm of practicing CAs
 Taxable Services
 Professional Capacity
 Non-Taxable Services
 Teaching
 Placement
 Representation before statutory authority (bcoz of
notice)

17. IDENTIFY WHETHER TAXABLE OR NOT
 Fees for certification service
 Fees for auditing service
 Fees for statutory audits
 Fees for statutory representation
 Providing coaching to students of CS courses.
 Fees for drafting appeal and representing the client.
 Fees for visit to tax-office for service tax related work.
 Filing of returns.
 Audit of accounts of a client.
 Fees for carrying out statutory audit and certification.
 Fees for drafting reply to show-cause notices and
representing the client before Statutory Authorities.

18. CALCULATE SERVICE TAX
 Professional fees for appearing in tribunal against
the notice received Rs. 2,00,000.
 Audit fees received from the client Rs. 1,00,000.
 Tax consultation fees Rs. 4,00,000 (amount
received is 50%).
 Certification fee outside India Rs. 2,00,000.
 Professional fees charged for appearing before
Income Tax Authorities (Statutory Authority) Rs.
5,000.
 He is management consultant and Annual Fees are
charged Rs. 2,00,000 (actual amount received Rs.
1,00,000).

19. BANKING AND OTHER FINANCIAL
SERVICES
 Service in relation to trf of money through different
modes
 Person liable
 Banking Company
 Financial Institution
 NBFC
 Taxable services
 Financing Activities
 General Banking Activities
 Merchant Banking
 Non taxable services
 Int on O/D, CC

20. INSURANCE AUXILIARY SERVICES IN
RELATION TO LIFE INSURANCE

21. INVESTMENT MANAGEMENT
SERVICES UNDER LIP