Service Tax: Revenue Source For Government Of India

Service Tax

Service Tax is a form of tax levied by Central Government of India on services provided or to be provided by business owners. All services except services covered under negative list are liable to pay service tax. Person liable to pay service tax is governed by Service Tax Rules, 1994 he / she may be service provider or service receiver or any other person made so liable.

Service Tax

Let us go through various concepts of Service Tax:

Service tax applicable for large businesses

Service tax is only liable to be paid in case the total value of the service provided during the financial year is more than Rs.10 Lakhs.This exemption is called Small Scale Exemption.

While all services except included in negative list are liable for service tax charge, however, the Government of India issued a notification and declared that following services are also liable for service tax charge.

 Declared Service

  1. Renting of Immovable property for Commercial Purpose.
  2. Construction of a complex, building, civil structure or a part thereof
  3. Temporary transfer or permitting the use or enjoyment of any intellectual property right
  4. Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software
  5. Activities in relation to delivery of goods on lease/ hire-purchase or any system of payment by installments
  6. Transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods
  7. Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act
  8. Service portion in execution of a works contract
  9. Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as part of the activity

 Negative List

As of date, the following services are not covered under Service Tax laws and hence no service is charged on below services:

  1. Services provided by Government or local authority
  2. Services provided by Reserve Bank of India
  3. Services by a foreign diplomatic mission located in India
  4. Services relating to agriculture or agricultural produce.
  5. Trading of goods
  6. Processes amounting to manufacture or production of goods
  7. Selling of space or time slots for advertisements other than advertisements broadcast by radio or television
  8. Access to a road or a bridge on payment of toll charges
  9. Betting, gambling or lottery
  10. Entry to Entertainment Events and Access to Amusement Facilities
  11. Transmission or distribution of electricity
  12. Specified services relating to education
  13. Services by way of renting of residential dwelling for use as residence
  14. Services provided by banks and other financial institutions
  15. Services relating to transportation of passengers
  16. Service relating to transportation of goods
  17. Funeral, burial, crematorium or mortuary services including transportation of the deceased

Mega Exemption notification

Clubbing all the provisions related to various exemptions under the Service Tax laws, a Mega Exemption Notification No. 25/2012-Service TaxDated 20th June, 2012 was passed, and the Central Government notified 39 services as fully exempt from levy of Service Tax.

Place of Provision of Service is being decided based on the provisions of Service Tax Law and Service Rules 2012

Concept of Bundled Service

It means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.

The services may be bundled naturally or Artificially.

Concept of Input Service Distributor (ISD)

When Companies have distributed network of manufacturing and / or Service provision, but have centralized billing and accounting, they receive invoices for some common services or common inputs. They can register their centralized office as ISD to distribute the input cenvat credit to various other premises or offices on the basis of taxable output produced or taxable services rendered.


Every person liable to pay the service tax is required to make an application for registration to the superintendent of Central Excise under whose jurisdiction the premises, wherefrom services are given, is situated. can help you in registration of your Service Tax application and provide you other compliance services.

A Service Provider willing to avail Small Scale Exemption is required to apply for registration for  Service Tax within 30 days of his turnover exceeding Rs. 9 lakhs.

Where an assessee is providing more than one taxable services, he may seek a single registration for all such services provided by him.


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Valuation of Taxable Services:

Valuation of Taxable services is done as per different Valuation Rules prescribed by the Central Government.

General Provisions of Service Tax Compliances

  1. Periodicity
Entities Payment Returns
Corporates Monthly Six Monthly
Others Quarterly Six Monthly
  1. Due Dates for payments
Cash / Cheque 5th of next month from end of Month / Quarter
Online 6th of next month from end of Month / Quarter


  1. Due Date for returns
Apr to Sep 25th of Oct
Oct to Mar 25th of Apr


4.A A A  Interest on late payment of Service Tax
Period of Delay Simple Interest
Upto 6 months 18{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9}
6 months – 1 year 24{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9}
More than 1 year 30{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9}
5.A A A  Penalty for late return filing
Period of Delay Penalty
Upto 15 days 500
15 to 30 days 1000
More than 30 days 1000 + 31st day onwards 100 per day
(Max upto 20000)


  1. Payment of service tax on reverse charge basis

In case of few specified services, the liability of payment of service tax shall be both on the service provider and the service recipient partially.In case of service provider, service tax is payable on month or quarterly basis, as the case may be, but the receiver of service is liable to pay on monthly basis.

For example :

Nature of Service Service Provider Service Receiver
service portion in execution  of works contract 50{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} 50{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9}


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  1. Rate of Service Tax

General rate of Service Tax (including Education & Secondary & Higher Education Cess) upto 31/05/15 was 12.36{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} which is now increased to 14{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} w.e.f. 01/06/15. The service tax rate now is consolidated rate as education cess& secondary higher education cess are subsumed with 2{06122e3a69f2011a565f88e0aeb17786618f68e9df77764f2353ddee6b5145e9} of “Swachh Bharat Cess” yet to be notified by the Government

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