Service Tax

Service Tax was a type of Indirect tax levied by the government on the services offered by the service providers. Service tax had been introduced under the section 65 of the Finance Act in Union Budget 1994 and it rolled out with effect from 1 July 1994.

Service tax was an Indirect tax that paid to the government in exchange for different services received from the service providers. The tax was paid by the service providers but it was recovered from the customers who availed or bought the taxable services. Services provided by guest houses, air-conditioned restaurants, short-term accommodations provided by hotels, lodging (both long and short term) and other amenities were included under the service tax.

Features of Service Tax

• Accurate Service tax calculation
• Meets all accounting and regulatory norms
• Compute and pay right amount on time
• Service tax and statutory reports

Objectives of Service Tax

• Broadening the Tax base
• Larger participation of citizens in the economic development of the nation
• To bring unorganized sectors under tax purview
• Increasing the revenue by imposing service tax, as the service sector is the major contributor to the GDP.

Rates of Service Tax

The Rates of Service Tax was varied from time to time because the government revised the rates of taxes during every financial budget. Finance Ministry usually announced the changes in service tax rate during the budget session of the parliament. The rate of Service tax was increased in 2015, from 12.36% to 14% and it was revised again in 2016 from 14% to 15% that included 0.5% ‘Krishi Kalyan’ cess and 0.5% ‘Swachh Bharat’ cess.

Service Tax Billing

It was mandatory to issue a bill or invoice by a service tax assessee, as per rule 4A of STR, 1994.The invoice had to be issued in 14 days from the completion date of the taxable service or the receipt of payment of the service. The service tax invoice must have the following:-

• The serial number
• Service receiver’s name and address
• Service provider’s name , address and registration number
• The classification, description as well as taxable service value of the service that was rendered
• The payable service tax amount to be mentioned on the invoice or bill

 The Service tax was replaced by Goods and Services Tax (GST) on July 2017, which included the various types of indirect taxes.