Service tax

Service Tax
for B Com students
Assessment year 2016-17
Based on B. Com Syllabus of Goa University
Presented by
Dr. Sanjay P Sawant Dessai
Associate Professor
VVMs Shree Damodar College Margao Goa
08-10-2016 sanjaydessai@gmail.com 1

Contents
A) NEW SERVICE TAX REGIME BASED ON ‘NEGATIVE LIST’ APPROACH
B) Administration of the act and basic proposition
C) Mega exemption
D) Registration
E) Furnishing of return
F) Rate of service tax
G) Payment of service tax
UNIT IV: SERVICE TAX

• The Administration of the Act.
• Basic Propositions
• The Act does not extend to Jammu & Kashmir
• Composite Services- Abatement
Administration of the Act and Basic
proposition

1. Service provided to United Nations or an International
Organisation
2. Services provided to Developer/Unit in Special Economic Zone:
i) Developer
ii) SEZ
3. Value of Goods and Materials sold by service provider
4. Threshold Exemption (Exemption to small service providers )
Exemption is linked with Previous Year’s Turnover
New service providers (New Services commenced during the financial
year )
Persons excluded from exemption Benefit
Person using Brand Name/Trade Name of another Person.
Where service tax is payable by person other than service
providers
Mega exemption

• Persons who must Mandatorily obtain
registration
• Turnover Limit
• Application for registration
• Online submission of Application for Registration
• Centralised Registration
• Registration Certificate
• Penalty for late Registration,
D. Registration

• Form of Return
• Periodicity for Filing of Return
• Due Date for Filing of Return,
• Delay in Filing of Return(fees for late filing of
return)
• Filing of Revised Return,
• e- filing of Return,
FURNISHING OF RETURN

• 14 percent tax on service value
• Swachh bharat cess 0.5 %
• Krishi Kalyan Cess @ 0.5%
• Total 15 percent
RATE OF SERVICE TAX.

• Monthly/Quarterly Payment of Service Tax
• Due Dates for Payment of Service Tax,
• e-payment of Service Tax
• Penalty for Failure to pay Service Tax
• Interest for Late payment of Service Tax.
PAYMENT OF SERVICE TAX:

Current Tax collection of central Govt.
Tax Head 2014-15
Actual
(crore)
2015-16
Revised Estimate
(crore)
2016-2017
Budget
(crore)
Corporate tax 4,28,925 4,52,970 4,93,923
Income tax 2,65,733 2,99,051 3,53,174
Customs 1,88,016 2,09,500 2,30,000
Union excise 1,89,952 2,84,142 3,18,670
Service tax 1,67,969 2,10,000 2,31,000
Total 12,40,595 14,55,663 16,26,767
08-10-2016 9sanjaydessai@gmail.com

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
• The provisions relating to Service Tax were
brought into force with effect from 1st July 1994.
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

Background
• It extends to the whole of India except the
state of Jammu & Kashmir.
• In 1994 three services were brought under
service tax – Telephone, stock broker and
General insurance – tax rate was 5 percent

Background
• From 2003 rates were increased to 8 percent
• From 2004 service tax rates 10 percent plus 2
percent education cess
• From 2009 – 10 plus 3 percent
• From 2012 , rates become 12 plus 3 percent
cess

• Budget 2015, service tax rate increased from 12.36% to 14%.
• This new rate of Service Tax @ 14% was applicable from 1st June
2015.
• From m 15th Nov 2015, Swachh Bharat Cess @ 0.5% also got
applicable.
• From 1st June 2016 – service tax rate is 15 percent
• Service tax – 14%
•
• Krishi Kalyan Cess, @ 0.5%

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;

• 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

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.

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 70% 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
• The abatement is available for restaurant service @
60%

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.
( insurance agents , goods transport agency,
mutual fund agent, recovery agent of Bank)

Registration
• No registration if turnover is less than Rs. 9 lakhs
• Section 69(1) - every person liable to pay service
tax must mandatorily make an application for
registration to the Superintendent of Central
Excise.
• In 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 ( service tax paid on
input service and need to take output tax credit)
iii) Every provider of taxable service whose
aggregate value of taxable service in a financial
year exceeds Rs. 9 lakhs.

When to apply for registration
• Within 30 days of commencement of business
of providing taxable service
• once reaches turnover of Rs 900000
• Online registration at
https://www.aces.gov.in/STASE/ui/jsp/commo
n/registerWithACES.do
• Automation of Central Excise and Service Tax

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.
• furnish returns to the Superintendent of
Central Excise in the prescribed form at the
prescribed intervals.

Periodicity for Filing Return:
• Under Rule 7(1) This return is required to be
filed on a half yearly basis.

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 June 2016
• 14 percent tax on service value
• Krishi Kalyan Cess @ 0.5%
• Total 15 percent

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.
Cash basis for small business with 50 lakh or less
turnover in PY
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 (e payment) 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.

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 (from 1/10/2014)
• Up to six months- 18 percent.
• More than six months and up to one year - 18
percent for the first six months of delay; 24
percent for delay beyond six months.
• More than one year- 18 percent for the first six
months of delay; 24 percent for period beyond six
months up to one year; 30 percent for any delay
beyond one year.

• Reduction of interest rate in case of small
service provider 1/10/2014)
• As per sec.75, 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% 21 % and 27% for small service provider.

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.

Amount of Penalty
Under the old provision, service tax late payment
penalties used to be Rs.100 per day or 1% per
month, whichever is higher.
As per the new provisions, late payment of service
tax attracts a non-discriminatory minimum penalty
of 10% of service tax liability.
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.

Service tax

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