A Brief Overview to Service Tax

Service Tax Defined:

• The service tax is a levy placed on those individuals living in India. The Service tax is a part of Central Excise taxation in India.

• The service tax is placed on those companies or small businesses that provide a direct service to the general consumer base in India.

• The Service Tax is outlined in the country’s constitution, specifically in Article 265. This portion of India’s constitution states that no tax shall be collected or levied by any institution other than the appointed authority.

• The service tax is an indirect taxation model which is imposed on specified services that are regarded as “taxable services.” The service tax cannot be collected on any service that is not included in the country’s list of taxable services. The objective behind the service tax is to reduce the intensity and aftereffects of taxation on trade and manufacturing without forcing the governing bodies to compromise their revenue streams.

• In regards to the percentage of tax imposed, the levying of the surface tax is realized by evaluating the value of any taxable service in regards to the gross amount charged by the service provider.

• The service tax was implemented on July 1, 1994. During this time, only three services were responsible for paying the levy, however, as the government’s need for revenue increased, nearly every service in the country is now required to satisfy the service tax

• The service tax is levied on all services provided in India, with the exception of services exchanged in the state of Jammu and Kashmir.

• The Service tax is collected by the Central Board of Excise and Customs, a prominent taxing authority in the country.

• Service Taxes are collected on commercial training and coaching; the Finance Minister of India has developed a budget to merge all like taxes (including the Services tax, Excise Tax, and VAT tax) into a common Goods and Services tax by 2011. To achieve this taxation model, the rate of the Service tax and coordinating taxes will be altered and brought to a common rate. With this universal tax rate in mind, a budget has been recently announced which maintains that all Small service providers whose turnover does not exceed a specified rate is exempt from fulfilling their service tax obligations.

• All taxes in India are levied by the Central Government and the coordinating State Governments. That being said, other taxes (specifically the minor taxes) are levied by local authorities such as the Local Council and the Municipality.

Types of Services Subject to the Tax:

• Telephone Services

• Stockbrokers

• General Insurance Providers

• Advertising Agencies

• Architects

• Custom House Agents

• Courier Agencies

• Air travel agents

• Tour Operators

• Underwriter Agencies

• Market Research Agencies

• Practicing Cost Accountants

• Scientific and Technical Consultancy Service Providers

• Management Consultants

• Manpower Recruitment Agencies

• Dry Cleaning Services

• Business Exhibition Services

• Maintenance and Repair Services

• Mailing Services

• Franchise Services

• Business Auxiliary Services

• Fashion Designers

• Commission and Installation Services

• Dredging Services

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