All about Service Tax & new Service Tax Fee @ 15%

Funds 2016 Replace: Finance Minister whereas presenting the Funds 2016  launched a brand new Cess referred to as the Krishi Kalyan Cess. This Cess could be levied on all taxable companies and could be levied @ 0.5% of the overall worth of service. This Cess could be levied over and above the Service Tax and the Swachh Bharat Cess.

This Cess could be relevant from 1st June 2016. Earlier than 1st June 2016 – solely Service Tax @ 14% and Swachh Bharat Cess @ 0.5% could be relevant however from 1st June 2016 – Krishi Kalyan Cess would even be relevant after which the efficient price of tax would develop into 15%. Earlier than, 1st June – it’s 14.5%.

  • Really useful Learn: All about Krishi Kalyan Cess

The which means and applicability of Service Tax has been defined beneath in easy phrases for Rookies


After we use any service be it a cellphone invoice fee or Rent a room in a lodge we now have to pay out little greater than the precise charges charged. Ever puzzled why? The reason being very meek, we’re made to pay service tax over and above the standard cost however the larger query is What’s Service Tax, why do we now have to pay this Tax when the tax is relevant on the corporate offering the service and in addition what’s the Service Tax Fee. If these questions trouble you, discover solutions beneath.

What’s Service Tax?

Service Tax is a tax which is payable on companies offered by the service supplier. Similar to Excise obligation is payable on items that are manufactured, equally Service Tax is payable on Companies offered.

Service Tax is payable by the supplier of Service to the Govt. of India. Nevertheless, the Service Supplier can gather Service Tax from the Client of Service (additionally known as Recipient of Service) and deposit the identical with the Govt.

Really useful Learn: Due Date for Cost of Service Tax

Applicability of Service Tax

This tax got here into impact in 1994 and was launched by the then Finance Minister Dr. Manmohan Singh.

Earlier Service Tax was payable solely on a specified record of companies however Pranab Mukherjee whereas delivering his price range speech on sixteenth March 2012 introduced that this Tax could be relevant on all companies besides the adverse record of companies. From 1st July 2012 onwards, all companies (besides these specified within the adverse record of companies by the Govt) at the moment are chargeable for service tax.

Nevertheless, there are some companies that are composite companies. For eg: Meals being served in a Restaurant. Though VAT is levied on Meals, however we don’t go to a Restaurant solely to have Meals but additionally to avail the companies of the waiters, kitchen workers and so on. Subsequently, Service Tax can be levied on Meals served in Restaurant. In such instances, it’s virtually unimaginable to segregate how a lot the client has paid for the meals and the way a lot he has paid for the companies.

Such companies are popularly generally known as Composite Companies and in such instances an abatement scheme is introduced by the govt. below which Service Tax is barely levied solely on a specified portion of the Complete Invoice.

Really useful Learn: Service Tax in Restaurant is to be levied solely on 40% of the Meals Invoice

Service Tax on Money Foundation

Earlier Service Tax was charged on money foundation for each service supplier. Presently, it’s charged on money foundation for Particular person service suppliers and for firms it’s being charged on accrual foundation i.e firms legal responsibility to deposit tax arises as quickly as companies are offered regardless of the gathering of funds on the identical.

Nevertheless Particular person Service Suppliers need to deposit this Tax with the Govt solely when the Bill Quantity has been collected. Service Tax Cost is deposited by the Service Supplier with the Govt. quarterly in case of People/Partnership and Month-to-month in all different instances.

Furthermore, each Service Supplier is now required to use for Service Tax Registration if the Worth of Companies offered by him throughout a Monetary 12 months is greater than Rs. 9 Lakhs, however the Tax could be payable solely when the Worth of Companies offered is greater than Rs. 10 Lakhs.

Really useful Learn:-

  • Exemption from fee of Service Tax
  • All about Service Tax Registration
  • What’s Service Tax Quantity

All service suppliers in India, besides these within the state of Jammu and Kashmir, are required to pay this tax in India. Service Tax shouldn’t be levied on the individuals residing in Jammu & Kashmir.

Service Tax Fee

The Service Tax Fee relevant from 1st June 2016 is 15%. This price is an inclusive price and SHEC and Training Cess shouldn’t be required to be charged above this.

This Tax is required to be deposited on a Month-to-month/Quarterly foundation. It may be paid both by manually depositing within the Financial institution or via On-line Cost of Service Tax. In case, of extra fee of Tax by the Service Supplier with the Governement, the Service Supplier can both alter the surplus quantity paid or can declare Refund of the Extra Tax deposited. Refer: Service Tax Refund.

As defined above, Swachh Bharat Cess and Krishi Kalyan Cess would even be levied on all companies on which Service Tax is being levied. And due to this fact, the Service Tax (incl. Swachh Bharat Cess and Krishi Kalyan Cess) relevant from 1st June 2016 could be 15%.

Case Examine

Let’s perceive through easy case, If a Chartered Accountant, gives companies within the capability of auditor to ABC Ltd. and the audit charges is Rs. 1,00,000 then the service tax chargeable (incl of Swachh Bharat Cess and Krishi Kalyan Cess could be 15% on Rs. 1,00,000 i.e. INR 15,000. Therefore, the overall billing to be performed by CA to ABC Ltd can be INR 1, 15,000.

The segregation of Worth of Service Offered (i.e. Rs. 1,00,000) and the Tax payable thereon (i.e. Rs. 15,000) shall be individually exhibiting on the Bill.

In case, no tax is individually charged in Bill or the service receiver makes partial fee then the service tax shall be proportionately taken to be quantity as on the gross quantity acquired by the service supplier for the taxable service offered or to be offered by him.

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