Income Tax

Basics About Service Tax, Every Indian MUST Know!

Introduction to Service Tax

There are commonly two types of taxes- direct and indirect taxes. Service taxes are considered as indirect taxes that are levied on the services stipulated by the Government. These are the services provided to companies, a group of individuals, firms, associations, and the like. This is not to be understood as a charge levied to the business, but to the customer for availing the services.

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Service Tax is charged on the services notified by the Central Government of India. Any services that are carried for consideration by a person to the other are declared services as per the relevant section of Service Tax law.

What Does Not Constitute As “Service” As per Laws

Here is a brief list of what is “Not” considered as a ‘service’,

  • transfer of goods, immovable property either by way of sale or as a gift,
  • mere supply of goods,
  • Transfer or delivery of goods deemed to be sale of good,
  • pure monetary transactions (Loan and Grants),
  • employment provided by the employer to the employee, and
  • fees payable at the court

They are all out of the scope of what is called as service as per the law.

Ways To Determine If Its Comes Under The Service Tax Bracket

The following list of self-explanatory questions can help you in determining if you are required to pay service tax:

  • Does the activity cover the scope of work as mentioned in the Tax Rules?
  • Are you doing this activity for consideration?
  • Are these only monetary transactions or of the same nature?
  • Is this a service of employment by an employer to the employee?
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Apart from these various sections in the Indirect taxes, law seeks to determine if you have levy Service tax for the transactions.

Basics About Service Tax, Every Indian MUST Know!

Services That Are Taxable

  • See if you have agreed for a service or have rendered it
  • Have you provided the services covered under the scope of taxable jurisdiction?

You also need to check the services offered are covered by the negative list laid in the Act.

When To Pay Service Tax

The Indian context of service tax is applicable if in the previous or current assessment year you have rendered services to the aggregate value of less than INR One Million. In addition, there are exemptions to paying from service tax. If your services are exempted from that list, you do not need to pay Service Tax.

The regulatory body releases circulars and notices in pursuance to these laws to amend with trends in the economy.

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