Service tax came into effect in 1994 when its introduced by Dr. Manmohan Singh. It’s levied by the central government and the end users have to pay this for certain services.
While presenting the Budget 2015, the Finance Minister had increased the Service Tax Rate from 12.36% to 14% with effect from 1st June 2015.
From 15th Nov 2015, Swachh Bharat Cess @ 0.5% added to the existing rate of 14%. Therefore the effective rate of Service Tax is currently at 14.5% with effect from 15th Nov 2015.This means for every 1000 rupees paid for a service, end user will be taxed Rs. 145 (14.5% on Rs 1,000).
In budget 2016, our finance minister Mr. Arun Jaitley has introduce an additional cess of 0.5% known as Krishi Kalyan Cess on all taxable services with effect from 1st June 2016.
Krishi Kalyan Cess has been levied to finance and promote initiatives to improve agriculture.
With the addition of 0.5% krishi kalyan cess, the new service tax rate with effect from 1st June 2016 is 15%. 15% will be charged on total value of services.
Any service that attracts service tax like restaurant bills, air tickets and mobile phones will now become more expensive from 1st June 2016.
Please remember until 1st June 2016, 14.5% will be charged as service tax.
Service provider is required to apply for registration if the value of services provided by him during the financial year is more than Rs. 9, 00,000. But, service tax will be payable only when the value of services provided is more than Rs. 10, 00,000.
If value of taxable service is Rs. 10,000 then 15% should be charged on Rs. 10,000. If you charge, then service tax amount will be Rs 1500. In this case total amount to be billed will be Rs. 11, 500.