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:

Illustration : Mr. J of Jammu and Kashmir is providing advertisement service in the state of Jammu and Kashmir as well as in other parts of India. Service tax is not applicable for services rendered in the state of Jammu and Kashmir. However, he is liable to pay service tax on those services which are rendered outside the state of Jammu and Kashmir. Service tax liability is based on the place where the service has been rendered, but not the place from which the service is provided.

Statutes Governing The Levy Of Service Tax :
The following are the sources provide provisions relating to service tax. Service tax is governed by

Various Rules in force

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 10.36 %. 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 106 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”.

Taxable Event In Service Tax :

Tax Liability :
Taxable event happens when taxable services are rendered. Tax liability taxes place as soon as payment for service is received. The payment may be received in advance (ie) before the execution of the service or in arrears (ie) after rendering the service. If service provider receives advance payment; tax liability to pay service tax arises.

Persons Liable To Service Tax :

*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.

Illustration: X ltd has a place of business at Chennai and is registered under Service tax in Chennai. He has factories at Trichy, Coimbatore with separate registrations and a unit in Hyderabad. X ltd make centralized purchases for its entire unit and distribute the input goods and services. It decides to distributes available tax on input services of Rs.20, 000/- in the suitable ratio (as the case may be) in the ratio 20:30:20:30. Every input service distributor, distributing credit of taxable services should issue an invoice, a bill or challan signed by him or a person authorized by him for each of the recipient of credit distributed. The invoice or bill must be serially numbered.

*Services covered under section 68 (2): [Deemed service providers]

Who Is Liable To Register ?

Registration Procedures :
Any person liable to pay service tax has to register with the Superintendent of Central Excise within 30 days from the date of commencement of the business of taxable service. Invoice should be issued within 14 days from the date of completion of taxable service or receipt of any payment towards value of taxable service.

Registration procedure under Service Tax :
Step 1: Apply for registration in Form ST – 1 to the Superintendent of Central Excise. Online application can also be made.
Step 2: Submit along with Form ST – 1 the following documents

Step 3: The Superintendent of Central Excise will grant a certificate of Registration in Form ST- 2 within 7 days of the date of receipt of application.
Step 4: Certificate of Registration can be surrendered if the assessee ceases to provide the taxable service for which he had been registered.

Where a service rendered from different location falling under different Commissionerates, multiple registrations are required, however, even in this case a single Registration is possible, with the permission from the Department, if the assessee maintains centralized accounting for multiple services provided from more than one premises. If the registration certificate issued by the department is lost, the assessee can make written request for duplicate registration certificate.

Payment Of Service Tax :

Filing Of Returns :
Returns are filed half yearly in Form ST – 3 [ Form ST – 3A for PA]. If the service provider is not able to estimate the tax amount properly, he may apply for Provisional Assessment.

Due dates are as follows:
(a) 25th October for the half year ending 30th September.
(b) 25th April for the half year ending 31ST March.

Revised returns can be filed within 90 days from the date of filing of original return.
Nil return has to be filed even there is no tax liability and no taxable services rendered.

Records To Be Maintained :
The records as maintained by the assessee in accordance with the various laws in force shall be accepted. Every assessee is required to furnish to the Superintendent of Central Excise a list of accounts maintained by him in relation to service tax. This is to be submitted only once at the time of filing the first ST- 3 return.

Such records need to be preserved at least for a period of five (5) years immediately after the financial year to which such records pertain.

PENALTIES – SEC. 76, 77 & 78Sl.no	Nature of Violation	Penalty
1	Failure to pay Service Tax [sec.76]	Not less than Rs.200 per day of default or 2 % p.m. of tax due which ever is higher. In no case penalty exceed the tax amount.
2	Suppression of value	100% or 200% of service tax sought to be charged
3	Failure of Registration	Rs.5,000 or Rs.200 per day which ever is higher from the 1st day after due date till the day of Actual compliance
4	Failure to furnish information called by officer or Central Excise officer	Rs.5,000 or Rs.200 per day which ever is higher from the 1st day after due date till the day of Actual compliance