What is Service Tax?

Service Tax is a master stroke played by Govt of India where an entrepreneur has to pay the service tax @10.3% of the total receipts and it is assumed that you would have had charged this service tax from the client.

Service Tax Definition

As the name suggests, service tax is a tax on service. ‘Service’ includes practically everything today, although it is recommended that you study notifications to see if your service is covered. It is scarcely imaginable that in 1994 only 3 services were taxed but today, over 114 services including many in the e-commerce space are liable to taxation.
So many services are being added that the Government has decided to bring in a negative list, such that the items on the list are not subject to taxation (and other items are), but this change is likely to be seen only in the proposed Goods and Services Tax regime.

Service Tax Registration

You need to get service tax registration done if your receipts are more than Rs 10 Lakh per annum by virtue of rendering services. On registration, you get service tax number which can be surrendered if one fails to make transactions more than Rs 10 Lakh in any succeeding year.

Service tax rate

Service tax rate is 10.3% of your total receipts.

Service Tax Calculation Formula

Total Receipt/110.3%=Net service*10.3%

Service Tax Return

Service tax return needs to be filed every quarter by 05 of the month in which next quarter is beginning like for the qtr. 01 Apr-30 June; you need to pay service tax by 05 July failing which one can be penalized with interest component @ 1% Per month for due service tax. Now this tax penalty is not pro rata and you will have to pay 1% interest even if your return is late even by a day. However you can relax as Income tax authorities are not strictly enforcing this penalty component.

Service Tax Cheque is to be Made in favour of

Service Tax cheque is to be made in favour of YOURSELF ACCOUNT SERVICE TAX

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