Presentation on Service Tax

Presentation
on
Service Tax
For B Com (Taxation) students
of Goa University
By
Dr. Sanjay P Sawant Dessai
Associate Professor
Damodar College of Commerce and Economics
Margao Goa
06-10-2014 sanjaydessai@gmail.com 1

Contents
• Administration of the Act
• Basic proposition
• Composite Services
• exemptions
• Registration
• Furnishing of returns
• Rate of service tax
• Payment of service tax

What is Service
‘Service’ has been defined in clause (44) of the
new section 65B and means –
• any activity
• for consideration
• carried out by a person for another
• and includes a declared service.

Background
• Service tax introduced from 1st July 1994.
• In 1994 only three services were under service
tax
• Telephone
• Stock broker
• General insurance

Year wise service tax collection
• The first year collections was Rs 407 crore.
• Rs 3,302 crore in 2001-02.
• Rs 60,941 crore in 2008-09.
• Rs 70,896 crore in 2010-11.
• Rs 97, 444 crore in 2011-12
• Rs. 132,601 crore in 2012-13

Rates of service tax
• Initially rate of tax was 5 percent
• From 2003 rates increased to 8 percent
• From 2004 service tax rates were 10 percent plus 2
percent education cess
• In 2006 service tax rates revised to 12 percent plus 2
percent education cess
• From 2007 higher education cess of 1 percent was
introduced
• From 2009 rated were reduced by 2 percent (10 plus
3 percent)
• From 2012 , rates become 12 plus 3 percent cess

The Administration of the Act:
• The Act is administered by the Central Excise
Department.

The Act does not extend to Jammu &
Kashmir
The service tax was not levied in J&K till now to help the
State’s economy recover from the aftermath of terrorism.
1. The services provided by a person, having his business
premises in the State of Jammu & Kashmir and
providing taxable service to the clients in other parts
of the country would be liable for payment of service
tax.
2. A person, having his business premises in any of the
Indian States other than the State of Jammu &
Kashmir who provides the services to the persons in
the State of J & K, would not be liable to pay service
tax.

Negative list
• From 01.07.2012, there is a paradigm shift in
the levy of service tax.
• Service tax has been imposed on all services
other than those specified in the negative list.
• There are 17 such services specified in the
negative list.

Negative list
1. Services provided by Government or local authority
2. Services provided by Reserve Bank of India
3. Services by a foreign diplomatic mission located in
India
4. Services relating to agriculture or agricultural produce
5. Trading of goods
6. Processes amounting to manufacture or production of
goods
7. Selling of space or time slots for advertisements other
than advertisements broadcast by radio or television

8. Service by way of access to a road or a bridge
on payment of toll charges.
9. Betting, gambling or lottery.
10. Admission to entertainment events or access
to amusement facilities.
11. Transmission or distribution of electricity by
an electricity transmission or distribution
utility.

12. Services by way of –
(i) pre-school education and education up to higher secondary school or
equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognized
by law;
(iii) education as a part of an approved vocational education course.
13. Services by way of renting of residential dwelling for use as residence;
14. Services by way of –
(i) extending deposits, loans or advances in so far as the consideration is
represented by way of interest or discount;
(ii) inter-se sale or purchase of foreign currency amongst banks or authorized
dealers of foreign exchange or amongst banks and such dealers;
15. Service of transportation of passengers, with or without accompanied
belongings, by –

• (i) a stage carriage;
• (ii) railways in a class other than –
• (A) first class; or
• (B) an air conditioned coach;
• (iii) metro, monorail or tramway;
• (iv) inland waterways;
• (v) public transport, other than predominantly for tourism purpose, in a vessel between
• places located in India; and
• (vi) metered cabs, radio taxis or auto rickshaws;
16. Services by way of transportation of goods –
• (i) by road except the services of –
• (A) a goods transportation agency; or
• (B) a courier agency;
• (ii) by an aircraft or a vessel from a place outside India up to the customs station of
• clearance in India; or
• (iii) by inland waterways;
17. Funeral, burial, crematorium or mortuary services including transportation of the deceased

Composite Services
ABATEMENT
(Partial exemption available to certain services )
Exemption from the gross amount charged in
respect of different categories of taxable services
such as-
• Transport of passengers by air with or without
accompanied belongings where abatement of
60% of gross amount charged has been granted
to the service provider
• Abatement of 75% of gross amount charged has
been granted in case of service of transport of
goods by road.

• Abatement of 70% of gross amount charged
has been granted in case of service of
transport of passengers by first class and air
conditioned coach of rail;
• In case of renting of hotel, inn, guest-house
etc. abatement of 40% of gross amount
charged to the customer has been granted to
the service provider

GENERAL EXEMPTIONS
In addition to services covered by negative list, there is a huge
list of services which have been exempt from payment of
service tax.
1. Services provided to the United Nations or specified
International Organisations ,
2. Health Care services by a clinical establishment or an
authorized medical practitioner
3. Services by a veterinary clinic
4. Services provided to or by an Educational institution in
respect of education
5. Services provided to a Recognised Sports Body
6. Services provided to SEZ etc.

Some of the organizations notified as International Organisations
are as follows
1. International Civil Aviation Organisation.
2. World Bank
3. World Health Organisation (WHO).
4. International Labour Organisation (ILO).
5. U.N. International Children's Emergency Fund (UNICEF).
6. The Joint Enterprise Aid in Mass Vaccination against T.B. in India.
7. Food and Agriculture Organisation of the United Nations.
8. U.N. Educational, Scientific and Cultural Organisation (UNESCO).
9. International Monetary Fund (IMF).
10. International Bank for Reconstruction and Development ((IBRD).
11. Universal Postal Union.
12. International Telecommunications Union.
13. World Meteorological Organisation.
14. U.N.T.A. Board. (United Nations Transitional Administration Board)
15. International Atomic Energy Agency.
16. World Tourism Organisation.
17. Asian Development Bank.
18. South Asian Association for Regional Co-operation (SAARC).

THRESHOLD EXEMPTION
• Exemption to Small Service Providers
• Threshold exemption up to Rs. 10 lakhs
• Option available to the service provider to avail exemption
from tax leviable on taxable services of aggregate value not
exceeding the prescribed limit (original limit prescribed was 4
lakhs) in any financial year subject to the fulfilment of the
conditions specified in the said notification.
• Threshold exemption is raised to Rs. 10 lakhs w.e.f. 1-4-2008.

Persons excluded from exemption benefit
Two categories of persons have been excluded
from the benefits of this exemption:
i) Persons using brand name/trade name of
another person
ii)Where service tax is payable by certain
specified persons other than service providers.

Exemption is linked with preceding year's turnover
• The condition for availing the exemption
benefit is that the aggregate value of taxable
services rendered by a provider of taxable
service from one or more premises should not
have exceeded Rs. 10 lakhs in the preceding
financial year.

Registration
• No registration if turnover is less than Rs. 9 lakhs
• As per the provisions of section 69(1) of the Act, every
person providing a taxable service and liable to pay
service tax must mandatorily make an application for
registration to the designated Superintendent of
Central Excise within such time and in such manner
and in such form as may be specified .
• In a few cases liability to pay service tax has been
shifted to the service receiver or other specified
person, in terms of section 68(2) of the Act, who shall
make application for registration.

Persons Who Must Mandatorily
Obtain Registration
i) Every person liable to pay service tax.
ii) An input service distributor.
iii) Every provider of taxable service whose
aggregate value of taxable service in a
financial year reaches Rs. 9 lakhs.

Furnishing of returns,
• U/s 70(1) of the Act, every person liable to
pay service tax shall himself assess the tax
due on the services provided by him.
• Such person shall furnish to the
Superintendent of Central Excise a return in
the prescribed form prepared in the
prescribed manner at the prescribed intervals.

Periodicity for Filing Return:
• Under Rule 7(1) This return is required to be
filed on a half yearly basis. The half years for
this purpose will cover the periods from 1st
April to 30th September and 1st October to 31st
March of the relevant year.

Due Date for Filing Return :
• The half yearly return should be filed in
triplicate, on or before the 25th of the month
following the particular half year as under:
• by 25th October for covering the half year from
1st April to 30th Sept.
• by 25th April for covering the half year from 1st
Oct. to 31st March.
• If 25th Oct. Or 25th April happens to be a public
holiday, the return can be filed on the
immediately succeeding working day.

Rate of Service Tax,
• From 1.4.2012 the Service Tax Rate shall be
12% plus 2 percent Education Cess and 1
percent Secondary and Higher Education Cess
of service tax
• Total service tax of 12.36%

Payment of Service Tax,
Service tax payable on accrual basis: w.e.f.
1.4.2011 service tax will be payable on the basis
of date of billing or receipt of advance,
whichever is earlier, and not on receipt basis.
The service tax is required to be paid on monthly
basis by all service taxpayers, other than
individuals or proprietary /partnership concerns
who are required to pay service tax on quarterly
basis.

• Service tax liability for a particular month or
quarter shall be paid to the credit of
Government by the 5th or 6th day of the
month or quarter immediately following the
month or quarter.
• However, for the month/quarter ending
March, the payment is required to be made by
the 31st March itself by all taxpayers.

Penalty for Failure to pay Service Tax.
• Sec. 76 of the Finance Act provides for levy of
penalty in addition to the tax/ interest.
• The person is required to pay such penalty in
addition to the tax and interest due.

Imposition of penalty u/s 76 is mandatory, subject to the
condition that it can be waived or reduced if reasonable cause
was shown for such waiver u/s 80.
If service tax and interest is paid before Show cause Notice,
penalty cannot be imposed.
From 8.4.2011 the penalty leviable is prescribed as
1. not less than Rs. 100 per day during which the failure
continues, or
2. Amount calculated @ 1% per month on the tax due,
whichever is higher.
However, such penalty would not exceed 50% the service tax
payable.
The period of default will start with the first day after the due
date and will end with the date of actual payment of the
outstanding amount of service tax.

Interest for late payment of service tax
• In case of delayed payment /deposit of service
tax, there is mandatory payment of simple
interest u/s 75
• With effect from 1-04-2011 the rate of interest
is 18% p.a.

• Reduction of interest rate in case of small
service provider:
• As per proviso to sec.75, w.e.f. 8.4.2011 the
rate of interest shall be reduced by 3% in case
of small service provider whose turnover does
not exceed Rs. 60 lakhs. Thus, the rate of
interest shall be 15% in case of small service
provider.

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