Service Tax

When we use any service be it a phone bill payment or Hire a room in a hotel we have to pay out little more than the actual rates charged. Ever wondered why? The reason is very meek, we are made to pay service tax over and above the usual charge but the bigger question is What is Service Tax, why do we have to pay this Tax when the tax is applicable on the company providing the service and also what is the Service Tax Rate. If these questions bother you, find answers below.

   What is Service Tax?

Tax which is payable on services provided by the service provider. Just like Excise duty is payable on goods which are manufactured, similarly Service Tax is payable on Services provided.

This Tax is payable by the provider of Service to the Govt. of India. However, the Service Provider can collect this Tax from the Consumer of Service (also referred to as Recipient of Service) and deposit the same with the Govt.

Recommended Read: Due Date for Payment of Service Tax

   Service Tax on Cash Basis

Earlier Service Tax was charged on cash basis for every service provider. Currently, it is charged on cash basis for Individual service providers and for companies it is being charged on accrual basis i.e companies liability to deposit tax arises as soon as services are provided irrespective of the collection of funds on the same.

However Individual Service Providers have to deposit this Tax with the Govt only when the Invoice Amount has been collected. Service Tax Payment is deposited by the Service Provider with the Govt. quarterly in case of Individuals/Partnership and Monthly in all other cases.

Moreover, every Service Provider is now required to apply for Service Tax Registration if the Value of Services provided by him during a Financial Year is more than Rs. 9 Lakhs, but the Tax would be payable only when the Value of Services provided is more than Rs. 10 Lakhs.

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