Service tax calculation is easy and simple to understand. Service tax is levied at a fixed rate. This rate is applied on the gross value of taxable services and the result is called output service tax. The output service tax is then adjusted with the input service tax credit and if there is any positive balance then same is paid to the government otherwise negative balance carried forward to next period.
Let us understand the service tax calculation in detail.
Determine the output service tax payable
As mentioned earlier service tax rate is levied on the taxable value of services. For example, a doctor provides services of Rs. 50,000, then he will have to collect service tax @ 14.5% on Rs. 50,000/- i.e Rs. 7250/-.
He will raise the bill as given below:
|Particulars||Amount in Rs.|
|Service tax @14.5%||7,250|
In the above case the Doctor knew in advance that how much he needed to charge as service tax and accordingly he added in the bill and collected from the client.
But there may be a case when the Doctor recovered only the Fees from the customer and forget to charge service tax. In this case it will be assumed that the total amount collected includes service tax portion also.
The formula to exclude the service tax portion is given below:
Hence the service tax portion will be calculated as given below:
50,000/114.5 X 14.5 = Rs. 6,332/-
So, Rs. 6,332 will be service tax amount and Balance Rs. 43,668 will be doctor’s fee.
If you will calculate the 14.5% of 43,668 you will get Rs. 6,332/-
New Current Service tax rates
Determine the input service tax payable
It is quite easy to calculate. You need to sum up all input service tax paid by you on input services used for providing taxable services.
Remember that no input credit is available for Swatch Bharat Cess. So the output Swatch Bharat Cess @0.5% need to paid in full.
Balance Tax payable or credit carried forward
The balance amount will be calculated as given below:
|Output service tax payable||XXXX|
|Less: Input service tax available||XXXX|
|Balance Service tax payable, if positive otherwise carried forward to adjust with next month balance.||XXXX|
You can also claim service tax exemption of Rs. 10 Lac.
Small service provider exemptions
Please comment for any query on service tax calculations.