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Author: Associate Debasmita Patra

Service Tax is a tax imposed by the central government of India on service providers on various service transactions; however, ultimately it is borne by the customers. The concept of service tax was brought into existence in 1994 by the then Prime Minister Manmohan Singh, terming such tax as an indirect tax levied under Ministry of Finance.

In this system of taxation, the service provides the tax and then recovers it from the customers. Such tax is charged to companies on accrual basis while to individual service providers on a cash basis. The scope of the Service Tax applies to the value of services provided is more than Rs. 10 lacs in a financial year and is geographically applicable to the whole of India except Jammu and Kashmir.

Service Tax aims at lowering the burden of taxation on businesses and individuals on the part of the government. Every service provider in India (except J&K) has to register itself if the value of such services is more than Rs. 9 lacs during a year, but the tax is payable only when the accumulative amount in a year is more than Rs. 10 Lacs.

The Finance Act 1994 has set guidelines or rules for the assessment and collection of service tax in India:-

Rule 1:- Short Title and Commencement

The Central Government’s rules to assess payment of service tax, the returns, and collection, known as service tax rules have been in effect since July 1994.

Rule 2:- Definitions

All the frequently and commonly terms are defined by the service tax rules including terms such as:

 ‘Act’- referring to the Finance Act 1994.

‘Assessment’- the self-assessment of service tax by the assessee and re-assessment

‘Person liable for paying tax’- referring to the recipient of services who will pay the tax ultimately.

‘Quarter’- Service Tax divides the financial year into four quarters of 3 months each

‘Rent’- this refers to the services provided by renting of immovable property.

Aggregator’- refers to a person who owns and manages a web-based software application enabling potential customers to connect with service providers.

‘Brand name/trade name’- this refers to a name, be it registered or not, that is used to indicate a connection, in the trade course, between a service and a person using that identity to avail the service.

‘security service’- relating to security and property.

Rule 3:- Appointment of Officers

The Central Board of Excise and Customs (CBEC) is empowered to appoint central excise officers. Unlike VAT which is subject to State instructions, Service Tax has always been under the control of the Center.

Rule 4:- Registration

Every service provider that has taxable services to offer are required to issue an invoice, a bill or challan, for that matter, duly signed by the person under whose name the registration is done or by another person authorized by the former. Such invoice/ bill/challan should contain all the basic information like name, address and registration number of the service provider, name and address of the service receiver, the details of the taxable services rendered and the amount of service tax to be paid.

The application for registration is required to be made in Form ST-1 within 30 days from the date on which service tax is levied under Section 66B of the Finance Act 1994 or the date of commencement of business, whichever is later. The registration is granted by the Commissioner of Central Excise, under whose jurisdiction the centralized accounting offices are located.

All the processes of the registration are subject to conditions, safeguards, and procedures as specified by the CBEC. Rule 4(b) deals with a consignment note that has to be issued by any service provider involved in the services related to transportation of goods.

Rule 5:- Records

Both manually drawn and computerized records can be submitted and must be accepted by CBEC. All the records maintained for the accounting of transactions relating to:-

- Providing any service.

- Procurement or receipt of input services and their payments as well.

- Purchase, manufactures, receipts, sale or storage concerning inputs and capital goods.

- Other miscellaneous activities like manufacturing of sale of goods, etc., if any.

According to Rule 5(a), all service tax officers are authorized by the commissioner to have access to any registered premises, on his behalf for security and verification purposes.

Rule 6:- Tax Payments

Payments, in lieu of service tax, have to be done monthly as per Service Tax Rules. The amount has to be credited to the Central Government by the 6th of every month if paid through electronic modes. In case of payment through other means, it has to be made by the 5th of every month.

Rule 6(a) states that any services provided or agreed upon by parties to provide shall be treated as an export of services if the provider of the services concerned is located in the taxable territory, but the recipient is located outside India. However, exports do not come under the purview of Service Tax.

Rule 7:- Returns

Every Provider of any service has to submit half-yearly returns in Form ST-3 or ST-3A along with a copy of the Form TR-6 duly filled in triplicate by 25th of the month following the half-year in question.

Rule 7(a) deals with the requirement of providers of service related to transport operators to furnish returns within six months from 13th May 2003, failing which will attract penalty.

Rule 7(b) discusses the submission of revised returns by an assessee in Form ST-3 to modify or correct any errors within 90 days from the date of submission of return.

Under Rule 7(c), delay in furnishing of returns, in case of fewer than 15 days, an amount of Rs. 500 needs to be paid to the Central Government. In case of a delay greater than 15 days, the amount to be paid to the Central Government increases to Rs. 1000. For every additional month the delay continues, an additional amount of Rs. 100 is to be paid.

Rule 8:- Appeal to Commission of Central Government

An appeal to the Commission of Central Excise (Appeals) [CCE(A)] is to be filed in Form ST-4 in duplicate plus a copy of the order against which appeal is made within two months from the date of receipt of the impugned order of the adjudicating authority by the appellant.

Rule 9:- Appeals to Appellate Tribunal

Section 86 of the Finance Act 1994 states how an appeal can be made to the Appellate Tribunal with the help of Form ST-5.

Rule 10:- Facilities for large Taxpayers

This rule deals with the provisions enjoyed by large taxpayers. Such a taxpayer is required to submit returns for each of his registered premises. All his financial records may also be required to be submitted for verification purpose as and when needed.

As an amendment brought in the statute by Mr. Pranab Mukherjee in March 2012, ‘Service Tax would be applicable on all services except the negative list of services,' thereby excluding 17 services out of the ambit of Service Tax due to the nature of such services in the interest of general public.

The amount of Service Tax rate, w.e.f 1st June 2015, is 14% (including the education cesses that were previously included). An additional Swachh Bharat Cess is taxed along with Service Tax at the rate of 2 percent on the value of taxable services, details of which would be notified in due course.