Service tax is a tax on provision of services. It is collected by the provider of services from the consumer and deposit with the government. It is levied on the total value of services provided. Service Tax Rate is specified under section 66B ( Chapter V of the Finance Act 1994 ).
The current Service Tax rate in India is 15%.
The Break up of New Current service tax rates in India is as follows:
|Service tax rates (Basic)||
|Swachh Bharat Cess||
|Krishi Kalyan Cess||
|Total service tax rates||
From 1st June 2016 onward the new rate of service tax is 15% due to the introduction of Krishi kalyan Cess @0.5%.
Earlier, till 31st May 2015 the service tax rate was 12.36%.
12% was the basic rate, 2% was Education Cess and 1% was Secondary and Higher Education Cess.
And again it was increased to 14.5% by introducing Swachh Bharat Tax @0.5% from 15th Nov 2015.
Hence the Current Service Tax Rate is 15%.
The rate of service tax are listed in below given chart.
|Service tax Rates/Date||Basic Rates |
of service tax
(on Basic Rate)
|Secondary & Higher|
(On Basic Rate)
|Swach Bharat Cess |
|Krishi Kalyan |
( On Taxable value of
|1st Junly 1994 to 13th May 2003||5%||5%|
|14th May 2003 to 9th Sept 2004||8%||8%|
|10th Setp 2004 to 17th April 2016||10%||2%||10.2%|
|18th April 2006 to 10th May 2007||12%||2%||12.24%|
|11th May 2007 to Upto 23rd Feb 2009||12%||2%||1%||12.36%|
|24th Feb 2009 to 31st March 2012||10%||2%||1%||10.30%||Click|
|1st April 2012 to 31st May 2015||12%||2%||1%||12.36%||Click|
|1st June 2015 to 14th Nov 2015||14%||14%||Click|
|15th Nov 2015 to 31st May 2016||14%||'0.5%||14.5%||Click|
|1st June 2016 onwards||14%||'0.5%||'0.5%||15%||Introduced by budget 2016|
As per section 65B(44) of the Finance Act, 1994, services means an activity carried out by one person for another for a consideration.
The power to levy service tax vests with Central Government. The administration of service tax is done by central excise department. It was introduced in the year 1994 but there is no independent act on service tax yet. It is applicable on all services except the negative services specified in section 66D.
In addition to negative list, a mega exemption notification No. 25/2012-ST, dated 20-06-2012 has been issued exempting many services from payment of service tax.
To avoid disputes between sale of goods and services, section 66E provides certain activities to be specifically treated as declared services.
How to determine service tax rates
Service tax rates are determine by section 67A and point of taxation rules, 2011. Section 67A provides that service tax rate shall be the rate on the date on which service was provided or agreed to be provided. From 14th May 2016 ( date of applicability of finance Act 2016) the section is amended to obtain specific rule making powers in respect of Point of Taxation Rules, 2011.
Payment of service Tax
The service tax is paid on or before 5th day of every following month in which service tax liability arises.
The day is extended to 6th day if the same is paid online. The service tax can be paid online or offline by challan GAR 7.
In general the service tax is paid by the service provider to the government. However in some cases, specified by the central government, the service tax is paid by service receiver itself. This concept is called reverse Charge mechanism.
The service tax is exempted up Rs 10 lac for small service provider as per Notification No. 33/2012 dated 20.06.2012.
Change of Service Tax Rate
As per section 67A the service tax rate shall be rate in force or as applicable when taxable service has been provided or agreed to be provided.
To know whether a service has been provided or agreed to be provided for a consideration and its point of taxation, three main ingredients i.e. provision of taxable service, raising of invoice and receipt of payment are important. Service provided or agreed to be provided cannot be considered as taxable service if there is no consideration. Consideration is known only if invoice is raised or payment is made.
In view of Section 67A of the Finance Act, services where there is no confusion in time of provision of service, receipt of payment and raising on invoice, rate of service tax will be as applicable at the time when taxable service has been provided or agreed to be provided.
However, in case of complex situations, where it is not possible to determine the time, when the taxable service has been provided or agreed to be provided, point of taxation would be determined as per Rule 4 of the Point of Taxation Rules, 2011.
Therefore, rule 4 would be applicable as under:
|Sr. No.||Service Provided||Invoice w.r.t. rate change||Payment w.r.t. rate change||Point of Taxation Rule||Rate of service Tax|
|1||Before rate of change||After||After||4(a)(i)||14.5%|
|4||After rate change||Before||After||4(b)(i)||14.5%|
The service tax rate may get changed by Budget 2016 from 14.5% to 16%.
If a new levy is introduced like Krishi Kalyan Cess, or a service taxed for first time then Rule 5 is to be referred.
you may also like to read Chapter V of Finance Act 1994.
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