Service tax was imposed by the government of India on all services rendered in India except in the state of Jammu and Kashmir. Now instead of service tax, Government of India charge GST at the rate of 18% on services.
In India, service tax was charged on all types of services except those that are specifically exempted or mentioned in the negative list.
In India, Service Tax is introduced by the then finance minister Dr. Manmohan Singh in the year 1994. It was initially started @ 5% and slowly enhanced to 14% (with effect from 1st June 2015).
Service tax rates in India
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% was 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.
Example
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.
Now GST (Goods and Services Tax) is charged on services at the rate of 18% as earlier service tax is no more applicable in India.
Negative List of Services Tax
With effect from 1st July 2012 government introduced a list called negative list of Service Tax. Any service comes under a negative list was not be taxable in India. Read this article to know more on the negative list
What is composite service
There can be services out of which you cannot differentiate the amount of services rendered and goods sold. For those kind of situations, its very difficult to arrive at the taxable amount.
For example; foods served at a restaurant is a taxable service in India. But, you cannot differentiate the amount you paid for the services received from the restaurant staff or the cook and the value of goods served to you. For this, abatement of 40% is available. After taking out the abatement portion on the total value charged you have to charge service tax on balance amount.
Service Tax Registration in India
As per law, all persons providing taxable service were required to get registered with the central excise department if their aggregate taxable services exceeded 9,00,000 rupees in a financial year.
For service tax registration, they were required to apply in form ST-1 to the jurisdictional superintendent of central excise within a period of 30 days exceeding the value of taxable services of Rs. 9 lakh.
While taking registration, they were required to specifically mention the type of service that they are going to render. PAN card was a mandatory requirement for getting service tax registration number.
After filing registration form with the department, registration certificate in form ST-2 issued by the government within few days of application.
In case department was not able to issue certificate of service tax registration within 7 days time then the registration applied for is deemed to have been granted and the person applied for registration can carry on his business activities.
Applicability of service tax to the state of Jammu and Kashmir
Service tax was applicable to the whole of India except the state of Jammu and Kashmir or J&K. To get it applicable to the state of Jammu and Kashmir the consent of the state assembly was required which has not been obtained.
Followings are some of the incidence which needs to be examined in detail to know the impact of service tax on the state of J&K;
- Mr. X (Service provider) is from the state of J&K where as Mr. Y (receiver) is not.
- Mr. X and Mr. Y are from J&K.
- Mr. Y is from J&K where as Mr. X is from outside J&K.
To answer all these questions we have to remember that service tax was not be chargeable if it’s consumed in Jammu and Kashmir. This means. if its consumed in India but outside of Jammu and Kashmir then it was charged to service tax.
In the first case, Mr. X was based out of J&K but Mr. Y was from outside J&K. In this case services were rendered outside Jammu and Kashmir (i.e. at the place of receiver) so tax will be chargeable on these types of transactions.
In the second case, both provider (Mr X) and receiver (Mr Y) are in Jammu and Kashmir so nothing was chargeable to service tax.
In the third case its consumed in Jammu and Kashmir even though the provider (Mr X) was from outside the state of Jammu and Kashmir. In this case, service tax was not be charged as it is provided and consumed in J&K.
So to conclude, service tax was chargeable if such services are consumed in Jammu and Kashmir. It does not matter where the offices of the provider or receivers are. These offices can be outside J&K but if it is consumed in the state of J&K then it will not be applicable.
This means Mr X can be from delhi, chennai, kolkata, mumbai or any other parts of India but to charge service tax we need to find out whether the receiver has consumed it in Jammu and Kashmir (J&K) or not. If its consumed in J&K then no Service Tax.