It is an indirect tax. Service tax is a
tax on services provided .The provisions of service tax are contained in
chapter V of the Finance Act, 1994 and administered by the Central Excise
Department. The word ‘Service’ is not defined in Finance Act,
1994.
Applicability of Service Tax:
Rules are supplementary to carry out
the provisions of the Act. Rules can never override the Act and cannot be in
conflict with the same.
Rate of Service Tax :
At present, the effective rate of Service tax is 10.30 %. The above rate
comprises of Service tax @ 10 % on “Gross Value of taxable service”.
Education cess [EC] @ 2 % on service tax amount. Secondary and Higher
Education cess [SHE] @ 1 % on service tax amount.
Taxable Service :
The Act provides the list of services to which the Act applies in section
65 (105) of the Act. At present there are 119 services covered under the
service tax net.
Taxable Value :
Valuation under service tax is only with reference to the valuation rules
namely “Service Tax (Determination of Value) Rules, 2006”.
| S.No. |
Scenario |
Relevant Rule |
First event |
Subsequent event |
Point of Taxation |
| 1 |
Normal Situation (not
covered under rule 4 to 9) |
3(a) |
Issue of invoice |
Completion of service or receipt of payment |
Time of invoice |
| 2 |
3(a) |
Completion of service |
Issue invoice within 14 days |
Time of Invoice |
| 3 |
Proviso to 3(a) |
Completion of service |
Invoice not issued within 14 days |
Date of completion of service |
| 4 |
3(b) and explanation to rule 3 |
Receipt of payment or advance |
Invoice or completion of service |
Time of receipt of payment |
| 5 |
Taxable Service provided
before change in effective rate of service tax |
4(a)(i) |
Invoice issued and payment received after the
change in effective rate |
N.A. |
Date of receipt of payment or date of issuance of
invoice, whichever is earlier |
| 6 |
4(a)(ii) |
Invoice issued prior to change in effective rate |
Payment received after change in effective rate
of tax |
Date of issue of invoice |
| 7 |
4(a)(iii) |
Payment received before change in effective rate
of tax |
Invoice issued after change in effective rate of
tax |
Date of receipt of payment |
| 8 |
Taxable Service
provided after change in effective rate of service tax |
4(b)(i) |
Invoice issued prior to change in effective rate |
Payment received after change in effective rate
of tax |
Date of receipt of payment |
| 9 |
4(b)(ii) |
Invoice issued and payment received prior to
change in effective rate |
Taxable Service provided |
Date of receipt of payment or date of issuance of
invoice, whichever is earlier |
| 10 |
4(b)(iii) |
Payment received before change in effective rate
of tax |
Invoice issued after change in effective rate |
Date of issuing of Invoice |
| 11 |
New service brought
under tax net |
5(a) |
|
N.A. |
No Service tax payable |
| 12 |
5(b) |
Payment received before service became taxable |
Issue invoice within 14 days of provision of
service |
No Service tax is payable |
| 13 |
3(a) |
Service provided before tax became effective |
Invoice within 14 days and payment received after
tax became effective |
No service tax is payable |
| 14 |
Continuous supply of
service (applicable separately to each event as specified in contract) |
6(a) |
Issue of Invoice |
Completion of service or receipt of advance
payment |
Time of Invoice |
| 15 |
6(a) |
Completion of service |
Invoice issued within 14 days |
Time of Invoice |
| 16 |
Proviso to 6(a) |
Completion of service |
Invoice not issued within 14 days |
Date of completion of service |
| 17 |
6(b) and explanation 2 to rule 6 |
Receipt of payment or advance |
Invoice or completion of service |
Time of receipt of payment |
| 18 |
Export of Service |
7(a) |
Completion of service |
Payment received within the period specified by
RBI |
Date of receipt of payment |
| 19 |
7 (a) and first proviso to rule 7 |
Completion of service |
Payment not received within the period specified
by the RBI |
As per rule 3,4,5,6 or 8 (as applicable) Interest
will be payable. |
| 20 |
Service where tax
payable by recipient of service under reverse charge |
7(b) |
Receipt of Service |
Payment made to service provider in advance or
within six months of date of invoice or service provider |
Date of payment |
| 21 |
7 (b) and second proviso to rule 7 |
Receipt of Service |
Payment not made to service provider in advance
or within six months of date of invoice or service provider |
As per rule 3,4,5,6 or 8 (as applicable) Interest
will be payable. |
| 22 |
Professional and firms providing specified
taxable service |
7 (c) |
Invoice, completion of service or receipt of
payment in any sequence |
|
Date of receipt of payment |
| 23 |
Service Provided
from associate enterprises when service provider outside India |
Third proviso to rule 7 |
Date of credit in books of account of person
receiving service |
Date of making payment |
Date of credit in books of account of person
receiving service |
| 24 |
Third proviso to rule 7 |
Date of making payment |
Date of credit in books of account of person
receiving service |
Date of making payment |
| 25 |
Intellectual property service, where
consideration not ascertainable at the time of service |
8 |
Receipt of payment or benefit is received by
service provider |
Invoice issued by the service provider |
Receipt of payment or benefit is received by
service provider |
| 26 |
|
8 |
Invoice issued by the service provider |
Receipt of payment or benefit is received by
service provider |
Invoice issued by the service provider |
| 27 |
Service completed on or before 30-06-2011 |
9 |
Issue of Invoice |
Receipt of payment |
Issue of invoice or date of receipt of payment |
*Where a provider of taxable service
provides one or more taxable service from one or more premises, the
aggregate value of all such taxable services and from all such premises and
not separately for each services or each premises shall be taken into
account for computing “aggregate value of taxable service.
*Input service distributor means on office managing the business of
manufacturer or producer of final products or provider of output services,
which receives credit towards purchase of input services and issues invoice,
bill or, challan for the purpose of distributing the credit of service tax
paid.
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