2. Introduction
Service Tax was introduced in 1994 vide Finance
Act, 1994 with 3 SERVICES namely, Brokerage
charged by stockbroker, Telephone services &
premium on General Insurance Services.
Applicable to whole of India except Jammu &
Kashmir.
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3. Contd…
What is Service Tax?
• It is a tax levied on the transaction of certain
Specified Services, by the Central Government
under the Finance Act, 1994.
• It is an Indirect Tax, which means that normally
the service provider pays the tax and recovers
the amount from the recipient of taxable service.
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4. Who is liable to pay Service Tax?
Generally, the ‘Person’ who provides the taxable
service (on receipt of service charges) is
responsible for paying the Service Tax to the
Government (Sec.68 (1) of the Act), except the
following:
•The recipient of services in India is liable to pay
Service Tax, where taxable services are provided
by Foreign Service providers with no
establishment in India;
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5. Contd…
• The Service Tax is to be paid by the Insurance
Company for the services in relation to Insurance
Auxiliary Service by an Insurance Agent.
• The person who pays or is liable to pay freight for the
taxable services provided by a Goods Transport Agency
for transport of goods by road, is liable to pay Service
Tax, if the consignor or consignee falls under any of the
seven categories viz. (a) a factory (b) a company (c) a
corporation (d) a society (e) a co-
operative society (f) a registered
dealer of excisable goods (g) a body
corporate or a partnership firm.
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6. Contd…
i. The taxable services provided by Mutual Fund
Distributors in relation to distribution of Mutual
Fund. In this regard, Service Tax is to be paid by
the Mutual Fund or the Asset Management
Company receiving such service.
Refer: Sec. 68(2) of the Act read with Rule 2(d) of
the Service Tax Rules, 1994.
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7. Contd…
i. In case the service provided by a person falls within
the scope of the taxable services and if such service is
not fully exempted, the service tax is payable on the
value of the taxable service received subject to the
eligible abatements, if any.
Service tax is payable on Gross Amount charged for
taxable service provided or to be provided [Section
67]. If consideration is partly not in money, valuation is
required to be done as per
Valuation Rules. Tax is
payable even when advance is
received.
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8. Assessee
ho is an ‘Assessee’ in relation to Service
Tax?
Assessee’ means a person liable to pay
Service Tax and includes his agent.
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9. REGISTRATION REQUIREMENTS
• As per Section 69, every person liable to pay
service tax has to get themselves registered with
service tax department.
• An Input Service Distributor and any provider of
taxable services whose aggregate value of
taxable service in a financial year exceeds Rs. 9
lacs, has to get themselves registered.
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10. Contd…
• Application for registration in Form ST-1 to be
made to concerned Superintendent of Central
Excise.
• The application for registration shall be made
within 30 days, from the date on which the levy
of service tax is brought into force in respect of
the relevant services or of the commencement of
business where services has
already been levied .
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11. Contd…
• Registration Certificate is granted in Form ST-2 within
7 days from the date of receipt of intimation, if not, then
deemed to be granted. In case the registration
certificate is not issued within seven days, the
registration applied for is deemed to have been
granted. (Rule 4(5) of the STR, 1994)
• CBEC vide Circular no. 35/3/2003 has made it
compulsory for every assessee to obtain the Service
Tax Code number which is a 15 digit
alphanumeric no. based on the PAN
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12. Contd…
Assessee providing more than one taxable
service should mention in single application, all
the taxable services provided by him. Rule 4(4),
Service Tax Rule,1994.
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13. Provision for Centralized Registration
ervice providers having centralised accounting or
centralised billing system, at their option, can have
Centralised registration at one or more places.
Commissioner of Central Excise / Service Tax in
whose jurisdiction centralised account or billing
office of the assesses exists, is empowered to
grant centralised registration.
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14. Exemption Scheme for
Small Service Providers
• Central Government, provides the basic exemption to
the service providers whose aggregate value of
taxable services provided in last financial year is less
than Rs. 10 Lacs.
• Assessee should not charge the Service Tax if
he/she is claiming the benefit of exemption. If
charged by mistake the same should be refunded to
the service receiver.
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15. Contd…
Exception
• Taxable services provided by a person under
Brand Name or Trade Name, whether registered
or not, of any other person are not eligible for the
threshold limit exemption of Rs. 10 Lacs.
[Notification No. 6/2005]
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16. Other Exemptions
• Services provided to United Nations &
International Organizations.
• Services provided to developer of SEZs or
units of SEZs
• Services provided to Diplomatic Missions.
• Services exported in terms of Export of
Service Rules,2005.
• Services provided by RBI
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17. Contd…
• Services provided by Incubators (used to
maintain a constant temperature) are exempt
from service tax.
• Services provided by digital cinema service
provider to producer/ distributor in relation to
delivery of content of Cinema in Digital Form
are exempt from service tax.
• Value of goods and materials sold by service
provider are exempt.
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18. Abatement
In case of certain services, the benefit of abatement
(rebate) is allowed to the service provides. In such
cases, the service providers charges tax from the
client after taking into account the abatement
available or on net amount (net of abatement).
Example: if invoice for servicing is to be raised for
Rs. 1000/- and abatement of 75% is available (as in
case of Goods Transport Agency), then service tax
will be imposed only on Rs. 250/-
[1000 – 75% of 1000].
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19. Service Tax Rate
Period Rate
From 1.7.1994 to 13.05.2003 5%
From 14.5.2003 to 09.09.2004 8%
From 10.9.2004 to 17.04.2006 10%
From 18.4.2006 to 10.05.2007 12.24%*
From 11.05.2007 to 24.02.2009 12.36%*
From 25.02.2009 10.3%*
*Inclusive of cess
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20. Payment of Service Tax
Payment of Service Tax through G.A.R. 7
Other than
Individual/Firm
Individual/Firm
Quarterly Monthly Payment
Payment
I, II & III IV Quarter Ending Months Month of
Quarter on 31st March Apr - Feb March
5th of the 5th of the Up to 31st
Up to 31
st
Month Next Month March
March
following
Quarter
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21. e-Payment of Service Tax
E – Payment
Optional Mandatory
E - Payment E - Payment
Rs. 50 Lakhs or More
Less than Rs. 50
(Cash+CENVAT)
Lakhs
(Cash+CENVAT)
In case of Large
Other than LTU
Taxpayer Unit
Check the Limit Check Cumulative
Individually for Every Limit for All
Registered Premises Registered Premises
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22. Due Date of e-Payment of Service Tax
Individual/ Firm
6th of the Month following the Quarter End
Other than Individual/ Firm
6th of the following Month
Note:
1. e-payment can be made up to 8 p.m.
2. due date of payment will 31st March for the last
quarter or month of march as the case maybe
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23. Failure to Pay Service Tax
• Interest(sec. 75) :- Interest @13% p.a. is
payable on the short-fall or unpaid tax for
delayed period.
• Penalty(sec. 76) :-
Rs.200 for every day during which failure
continues, or
2% of tax per month, whichever is higher.
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24. Service Tax Return
Form No. ST-3, Half-Yearly
Half-Year Due Date
April – September 25th October
October – March 25th April
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25. How to file Service Tax Returns?
• The details in respect of each month of the period for
which the half-yearly return is filed, should be
furnished in the Form ST-3, separately. The
instructions for filing return are mentioned in the
Form itself. It should be accompanied by copies of
all the GAR-7 (TR-6) Challan for payment of Service
Tax during the relevant period.
• Filing of return is compulsory, even if it may be a nil
return, within the prescribed time
limit, failing which penal action is
attracted.
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26. Service Tax Return
Input Service Distributor
Half-Year Due Date
April – September 30th October
October – March 30th April
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27. Delay in Filing Return
Period Fine/Penalty
Up to 15 days Rs.500/-
16 to 30 days Rs.1000/-
Rs1000/- plus Rs.100/- per
Beyond 30 days day from the 30th day till
date of furnishing return
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28. Input Service Distributor
An office (of the output service provider) which
receives invoices for the procurement of input
services and issues invoices for the purpose of
distributing the credit of Service Tax paid to such
provider of output service is an “Input Service
Distributor”.
The credit of the tax amount so distributed to
various places shall not exceed the total Service
Tax amount contained in the
original invoice / bill.
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29. Large Tax Payer Unit (LTU)
A tax-payer means a service provider who
has paid service tax of Rs. 5 Crores or more
during the year.
LTU has Submit Return for each registered
premises.
However, Consolidated Return shall be
submitted, if he has obtained
centralized registration.
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30. Refunds
Where an assessee has paid to the credit of the
Government in respect of a taxable service, which is
not so provided by him, either wholly or partially for
any reason, the assessee may adjust the excess
Service Tax so paid by him (calculated on a pro-rata
basis) against his Service Tax liability for the
subsequent period, if the assessee has refunded the
value of taxable service and the Service Tax thereon
to the person from whom it was
received (Rule 6(3) of the STR,
1994).
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31. Contd…
n all other cases of excess payment, refund claims
have to be filed with the Department. It is important
to note that any amount of Service Tax paid in
excess of the actual liability, is refundable, only if it
is proved that the claimant of refund had already
refunded such amount to the person from whom it
was received or had not collected at all.
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33. What is CENVAT Credit Scheme ?
• The CENVAT Credit Rules, 2004, introduced with
effect from 10.9.2004, provides for availment of the
credit of the Service Tax paid on the input services /
Central Excise Duties paid on inputs / capital goods /
Additional Customs Duty leviable under the Customs
Tariff Act, equivalent to the duties of excise.
• Such credit amount can be utilized towards payment
of Service Tax by an assessee on their Output
Services. (Refer to Rule 3 of
CENVAT Credit Rules, 2004).
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34. Contd…
Duties paid on the inputs, capital goods and the
Service Tax paid on the 'input' services can be
taken as credit. Education Cess paid on the
Excise duty and Service Tax can also be taken
as credit only for payment of Education Cess
relating to output service.
The interest and penalty amounts cannot be
taken as credit.
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35. Inputs
All goods except Light Diesel Oil, High Speed
Diesel Oil and Motor Spirit, commonly known as
petrol, whether used for providing service,
irrespective whether used directly or indirectly
and whether contained in the final product or
not.
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36. Input Service
Any service availed by a provider of taxable
service for providing output service.
Services availed in relation to;
i. setting up, modernization, renovation or repairs of
a factory premises of provider of output service or
an office relating to such factory or premises;
ii. advertisement or sales promotion, market
research, storage up to the place of removal,
procurement of inputs,
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37. Contd…
i. activities relating to business such as accounting,
auditing, financing,
ii. recruitment and quality control, training,
computer networking,
iii. credit rating, share registry and security,
iv. inward transportation of inputs or capital goods
and outward transportation up to the place of
removal are also input services
Refer:[clause (1) of rule 2].
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40. When Credit is Available:
Preconditions
The CENVAT credit in respect of inputs may be
taken immediately on receipt of the inputs in the
premises of the provider of Output Services.
Credit of Service Tax on the input services can be
availed, only after making payment of the amount
indicated in the invoice / bill / challans. Thus,
Payment of Input Service is a Pre-condition.
The above requirement is not applicable in
respect of credit of duties paid on
inputs and capital goods.
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42. Utilizing CENVAT Credit - Conditions
• Where both exempted as well as taxable
services are rendered & Separate Accounts are
maintained, then CENVAT Credit is allowed only
on inputs / input services utilized for rendering
taxable services. (Ref. Rule 6 (2) of CENVAT
Credit Rules, 2004).
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43. Contd…
Example: Ram Associates provides Accounting as well
as Legal services & maintain separate accounts for both
services rendered. It paid Rs. 15,000 as fees & Rs. 1545
as service tax to chartered accountant (input service) for
providing accounting services (output service) to its
clients with a mark-up of Rs. 5000 i.e. for fees of Rs.
20000 + 2060 as service tax. As it maintained separate
accounts it can claim CENVAT Credit Rs. 1545 against
its liability of Rs. 2060. Thus, it needs
to pay Rs. 515 in cash and balance
Rs. 1545 will adjusted against
CENVAT Credit available.
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44. Utilizing CENVAT Credit - Conditions
Where both exempted as well as taxable services are
rendered & No Separate Accounts are maintained,
then provider of output services shall utilize credit
only to extent of an amount not exceeding 20% of the
amount of service tax payable, on taxable output
service. (Ref. Rule 6 (3) of CENVAT Credit Rules,
2004).
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45. Contd…
Example:
Service tax liability for a specific period is Rs. 1000/-
and there is a credit of Rs. 500/- available, the credit
can be utilized only to the extent of Rs. 200/- and
the balance Service Tax liability (i.e Rs. 1000-200 =
800) has to be paid in cash / cheque. The remaining
credit can be carried forward and used for the
subsequent period in a similar manner.
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46. Contd…
W.e.f. 1.4.2008, following additional options are available
to Service Provider (not having separate accounts)
instead of utilizing CENVAT credit to the extent of 20% of
their liability.
•pay an amount equal to 8% of value of exempted
services or
•an amount equivalent to the CENVAT credit attributable
to input / input services used in, or in
relation to exempted services.
[Not.No.10/2008CE (NT) dt. 01.03.2008.)]
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47. Contd…
However, in terms of Rule 6(5) of CENVAT Credit
Rules 2004, even though no separate accounts are
maintained in respect of Services listed in
Appendix 5, CENVAT credit shall be allowed
unless such services are exclusively used in or in
relation to the manufacture of exempted goods or
providing exempted services.
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