Service Tax

Service tax in India is an indirect tax imposed on services provided by service providers. Governed by Section 66B of the Finance Act of 1994, the Central Government oversees the taxability of services rendered by individuals or firms. It is applicable to all services provided or to be provided within the taxable territory of the country. Certain services are exempt, including those listed in the negative list and those specified in Mega Exemption Notification 25/2012, as amended by Notification No. 40/2016.

Rule 1: short title & commencement
The Rules, 1994, which govern service tax payments, returns, and collection, have been in effect since July 1, 1994.

Rule 2: definitions
The Rules of 1994 define every widely used term, including ‘Act,’ ‘assessment,’ and ‘person liable for paying service tax.’ Of course, the ‘Act’ refers to the Finance Act of 2014, while ‘assessment’ refers to the assessee’s self-assessment of service tax, provisional assessment, and reassessment, and ‘personal liable for paying service tax’ refers to the service recipient.

There are also definitions for ‘quarter,’renting of immovable property,’ and ‘security services.’ The year is divided into four quarters by the Service Tax Rules of 1994: January 1 to March 31, April 1 to June 30, July 1 to September 30, and October 1 to December 31. Renting of the immovable property refers to the services offered by renting of immovable property, whereas security services refer to security and property-related services.

Rule 3: appointment of officers
Central excise officials can only be appointed by the Central Board of Excise and Customs. While VAT is a state responsibility, it has always been under the control of the federal government.

Rule 4: Registration
If their turnover has exceeded Rs. 10 lakh, all service providers having a turnover of more than Rs. 9 lakh in the previous financial year must register for taxation and begin collecting taxes. All service providers who are subject to taxation must apply for registration using Form ST – 1 within 30 days of exceeding the threshold

Rule 4A. All taxable service providers must issue an invoice, bill, or challan signed by the person whose name the registration is in, or a person authorized by this person, containing basic information such as the service provider’s name, address, and registration number, the service recipient’s name and address, the description and cost of taxable services provided, and the amount of service tax to be paid.

Rule 4B. Any service provider offering goods transportation services is required to issue a consignment note.

Rule 5: Keep Records

Even computerized records can be supplied, and the Central Board of Excise and Customs must accept them. Of course, this is no longer relevant, as the government now insists that all filings be done online.

Rule 5 (A): Access to Registered Premises: The commissioner has given all service tax officials permission to enter premises for inspection and verification. In order to protect revenues, this must be done.

Rule 6: Service tax payment regulations

According to Service Tax Rules, service tax payments must be made on a monthly basis. It must be paid to the credit of the central government by the 6th of each month if paid electronically, and by the 5th of each month if paid otherwise.

Rule 6A: Export of Services

If the service provider is based in the taxable territory and the beneficiary is located outside India, any service given or agreed to be delivered is classified as an export of service. Exports, on the other hand, are exempt from service tax.

Rule 7: Returns

By the 25th of the month after the half-year, every service provider must provide half-yearly returns in Form ST-3 or ST-3A, together with a copy of the Form TR-6 filed in triplicate.

Rule 7A: Returns for taxable services provided by transport operators

Returns on services/goods provided by transportation operators must be submitted within six months of the 13th of May, 2003, or face a penalty.

Rule 7B: Revision of Returns

According to this rule, an assesses has 90 days from the date of submission of the return to submit revised returns in Form ST-3 to change or fix any errors.

Rule 7C: Amount to be paid if returns are not filed on time.

Fines from the government, like any fines, can be rather minor. A fee of Rs. 500 must be paid to the central government if the submission of returns to the government is delayed for fewer than 15 days. If the delay is longer than 15 days, you will be charged Rs. 1000. You would have to pay an extra Rs. 100 for each month that the return is delayed.

Rule 8: Appeal to the Commissioner of Central Excise

Under section 85 of the Finance Act, 1994, you can file an appeal with the Commissioner of Central Excise in Form ST – 4

Rule 9: Form of Appeals to the Appellate Tribunal

Using Form ST-5, you can appeal to the Appellate Tribunal under section 86 of the Finance Act, 1994.

Rule 10: Large Taxpayer Facilities and Procedures

The service tax provisions enjoyed by large taxpayers are included in this section of the rules. A large taxpayer is required to file returns for all of their registered locations. When necessary, they may be requested to produce all financial records for verification and security.

Initially, service tax was only applied to a limited number of services. However, numerous additional services have been added since 2012. This includes service from air-conditioned restaurants, as well as short- and long-term accommodations from hotels and private guest houses.

GAR-7, a challan offered at specific bank locations, can be used to pay all service tax payments. This challan must be completed with all required information and submitted to a certain bank. However, because service tax payments can also be done online utilizing e-payment services on the Central Board of Excise and Customs’ website, this approach is a little out of date.

Previously, service tax was exclusively collected in cash, but this is no longer the case. Companies are now required to pay it on an accrual basis. This means they’ll have to pay service tax on the services they provide.

GAR-7, a challan issued at specific bank locations, can be used to pay all service tax payments. This challan must be completed with all required information and submitted to a certain bank. However, because service tax payments can also be done online utilizing e-payment services on the Central Board of Excise and Customs’ website, this approach is a little out of date.

Previously, service tax was exclusively collected in cash, but this is no longer the case. It is now required that businesses pay it on an accrual basis. This means they’ll have to pay service tax on the services they provide.

Service tax billing 

In accordance with Rule 4A of the Service Tax Rules, 1994, it is mandated that a service tax assessee issues a bill or invoice within 14 days from the completion of the taxable service or from the date of receiving payment for the service, whichever occurs earlier. The invoice should contain the following details

• Number of occurrences
• The name of the service receiver, as well as his or her address
• The service provider’s name, as well as his or her registration number as well as address
• The classification and description of the service provided, as well as the taxable value of the service
• The amount of service tax that must be paid

Service tax penalties 

• If you fail to fulfill the basic conditions, the central government may impose a penalty under Sections 76, 77, and 78 of the Finance Act of 1994:
• If you fail to file your ST-3 Return by the deadlines of October 25th and April 25th of each year, you will be fined. In that instance, you will be subject to a penalty fee of up to Rs.2,000, depending on the length of the delay.
• If a person fails to provide information or appear before a Central Excise Officer when required, he or she will be fined up to Rs.5,000 or Rs.200 per day beyond the due date, whichever is more.
• If an assesses fails to retain or maintain the records of account and other papers required by service tax law, a penalty of up to Rs.5,000 may be imposed.
• If a person fails to pay their taxes electronically, they would be subject to a penalty of up to Rs.5,000.
• Non-payment or late payment of service tax results in a penalty cost.
• If a person produces an improper invoice or fails to substantiate their invoice with appropriate details, a penalty of up to Rs.5000 would be levied
• If a person intentionally conceals the value of taxable services or makes deliberate misstatements about the service supplied, a penalty will be imposed.

Not only are there provisions in the  rules for applying penalties if you do not meet the above-mentioned standards, but there are also provisions for not imposing penalties. If a person can show adequate grounds for their inability to pay service tax, they may be excluded from penalty costs under section 80 of the Finance Act, 1994. Insufficient cash or time, on the other hand, are not regarded as sufficient reasons to waive the penalty.