As per the Finance Act of 1994, all service providers in India, except those in the state of Jammu and Kashmir, are required to pay a Service Tax in India. The provisions related to Service Tax came into effect on 1st July, 1994.
Administration and Intent
Service Tax in India is regulated and administered by the Central Excise Commissionerates who work directly under the Department of Revenue, Ministry of Finance, Central Board of Excise and Customs, and the Government of India. The interesting thing about
Service Tax in India, is that the government depends heavily on the voluntary compliance of the service providers for collecting
Service Tax in India. This is expected to foster and sustain faith in Indian citizens regarding the government's tax initiatives.
Taxed Services
When the concept of Service Tax was introduced in India in 1994-95, only three services came under the purview of the tax. Since then, in several phases and installments, the government has brought nearly 100 categories under the ambit of Service Tax, including:
- Telephone
- Stockbroking
- General Insurance
- Advertising agencies
- Courier agencies
- Consulting engineers
- Air travel agents
- Tour operators
- Architects
- Market research agencies
- Management consultants
- Sound recording
- Broadcasting
- Event management
- Beauty parlors
- Fashion Designers
- Internet cafés
- Outdoor caterers
- Intellectual property services
- Packaging services
Tax Amount
The government charges Service Tax in India on the gross amount which the service providers charge from their clients. By bringing more and more services within the scope of Service Tax, the government intends to enhance its revenue earnings manifold.
The Service Tax amount used to be 5% when the government first launched Service Tax in India. In 2003, this was hiked to 8%. Currently, the rate of Service Tax in India is 10.2%, including a 2% Education Cess.
Salient Features
- Service Tax is essentially an indirect tax.
- Individuals are required to pay the Service Tax only once in a quarter.
- Companies can pay Service Tax for one month by the 25th of the following month.
- The Finance Act of 2001 launched self-assessment for Service Tax returns so that assessees can are spared the inconvenience of regular scrutiny.
- Although legal penalties exist for failing to pay Service Tax, these penalties cannot be imposed if the assessee can prove that there was due cause for failure.
