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Service Tax Procedures

1. Levy of service tax

1.1     As on 1st May, 2011, 119 services are taxable services in India. These taxable services are specified in Section 65(105) of the Finance Act,1994.  Section 64 of the Finance Act, 1994, extends the levy of service tax to the whole of India, except the State of Jammu & Kashmir.

 

          Generally, the liability to pay service tax has been placed on the 'service provider'. However, in respect of the taxable services notified under Sec.68(2) of the Finance Act,1994, the service tax shall be paid by such person and in such manner as may be prescribed at the rate specified in Sec.66 of the Act and all the provisions of Chapter-V shall apply to such person as if he is the person liable for paying the service tax.

The following services have been notified under Sec.68(2) of Finance Act,1994:

A. the services,-

(i)         in relation to telecommunication service;

 

(ii)        in relation to general insurance business;

 

(iii)       in relation to insurance auxiliary service by an insurance agent; and

 

(iv)      in relation to transport of goods by road in a goods carriage, where the consignor or consignee of goods-

 

(a)  any factory registered under or governed by the Factories Act, 1948 (63 of 1948);

(b) any company established by or under the Companies Act, 1956 (1 of 1956);

(c) any corporation established by or under any law;

(d)  any society registered under the Societies Registration Act, 1860 (21 of 1860) or under  any law corresponding to that Act in force in any part of India;

(e)  any co-operative society established by or under any law;

(f)  any dealer of excisable goods, who is registered under the Central Excise Act, 1944 (1 of 1944) or the rules made thereunder; or

(g)  anybody corporate established, or a partnership firm registered, by or under any

 

(v)       In relation to Business Auxiliary Service of distribution of mutual fund by a mutual fund distributer or an agent, as the case may be;

 

(vi)      in relation to sponsorship service provided to any body corporate or firm located in India;

  1.      Any taxable service provided or to be provided from a country other than India and received in India, under Sec.66a of the Finance Act,1994.   

            

     ( Sec. 68(2) of Finance Act,1994, Notification 36/2004-S.T. dated 31.12.2004 as amended)

      

 In the following situations, the liability to pay service tax is as follows :

  1. in relation to [telecommunication service]

(a)      the Director General of Posts and Telegraphs,

(b)      the Chairman-cum-Managing Director, Mahanagar Telephone Nigam Ltd, Delhi, a company registered under the Companies Act

(c)      any other person who has been granted a license by the Central Government.

  1. in relation to general insurance business, the insurer or re-insurer, as the case may be, providing such service;
  2. in relation to insurance auxiliary service by an insurance agent, any person carrying on the general insurance business [or the life insurance business, as the case may be,] in India;
  3. in relation to any taxable service provided or to be provided by any person from a country other than India and received by any person in India under section 66A of the Act, the recipient of such service;
  4. In relation to taxable service provided by a goods transport agency, where the consignor or consignee of goods is- any factory, any company, any corporation, any  registered society, any co- operative society, any registered dealer of excisable goods , any body corporate or a partnership firm;
  5. in relation to business auxiliary service of distribution of mutual fund by a mutual fund distributor or an agent, as the case be, the mutual fund or asset management company, as the case may be, receiving such services;
  6. in relation to sponsorship service provided to any body corporate or firm located in India, the body corporate or, as the case may be the firm who receives such sponsorship service;

( Rule 2(d) of Service Tax Rules, 1994)

 

1.2    From 01.06.2007 to 23.02.2009, the Service tax was payable @ 12% of the 'gross amount' plus 2% Education Cess on service tax plus 1% Secondary Higher Education Cess on service tax i.e totaling to 12.36% ( in specific cases partial deductions are allowed, refer section 67 of the Finance Act) charged by the service provider for providing such taxable service. From 24.02.2009, vide Notification No.8/2009-ST dated 24.02.2009 the rate of service tax is 10% on gross value of the taxable service plus 2% Education Cess on the service tax amount and 1% Secondary Higher Education Cess on the service tax amount.

 

Example: Suppose the value of taxable service is Rs.100. Service tax @10%  will be Rs.10 and Education Cess @2% of the Service Tax will be Rs.0.20 and Secondary & Higher Education Cess @1% of the service tax will be 0.10.

1.3     The Table below shows the category of services which are taxable with the date of introduction of such service. The table also shows the 'accounting heads' for each category service, for the purpose of payment of service tax:

 

Sr.No Service Category Date of
 Introduction
Accounting codes
Tax Collection Other Receipts
1 Advertising 01.11.1996 00440013 00440016
2 Air Travel Agent 01.07.1997 00440032 00440033
3 Airport Services 10.09.2004 00440258 00440259
4 Architect 16.10.1998 00440072 00440073
5 ATM Operations, Management or Maintenance 01.05.2006 00440346 00440347
6 Auctioneers' service, other than auction of property under directions or orders of a count of or auction by Central Govt. 01.05.2006 00440370 00440371
7 Authorized Service Station 16.07.2001 00440181 00440182
8 Auxiliary to General Insurance 16.07.2001  00440169 00440170
9 Auxiliary to  Life Insurance 16.08.2002
10 Banking & Other Financial Services 16.07.2001 00440173 00440174
11 Beauty Parlor 16.08.2002 00440209 00440210
12 Broadcasting 16.07.2001 00440165 00440166
13 Business Auxiliary Service 01.07.2003 00440225 00440226
14 Business Exhibition Service 10.09.2004 00440254 00440255
15 Business Support Service 01.05.2006 00440366 00440367
16 Cable Operator 16.08.2002 00440217 00440218
17 Cargo Handling 16.08.2002 00440189 00440190
18 Chartered Accountant 16.10.1998 00440092 00440093
19 Cleaning Service 16.06.2005 00440318 00440319
20 Clearing & Forwarding Agent 16.07.1997 00440045 00440046
21 Clubs and Associations 16.06.2005 00440322 00440323
22 Commercial or Industrial Construction 10.09.2004 00440290 00440291
23 Commercial Training or Coaching 01.07.2003 00440229 00440230
24 Company Secretary 16.10.1998 00440100 00440101
25 Construction of Residential Complex 16.06.2005 00440334 00440335
26 Consulting Engineer 07.07.1997 00440057 00440058
27 Convention Centre 16.07.2001 00440133 00440134
28 Cost Accountant 16.10.1998 00440096 00440097
29 Courier Services 01.11.1996 00440014 00440018
30 Credit Card, Debit Card, Charge Card or other payment card related services 01.05.2006 00440394 00440395
31 Credit Rating Agency 16.10.1998 00440088 00440089
32 Custom House Agent 15.06.1997 00440026 00440027
33 Dredging 16.06.2005 00440310 00440311
34 Dry Cleaning 16.08.2002 00440221 00440222
35 Erection, Commissioning or Installation 01.07.2003 00440233 00440234
36 Event Management 16.08.2002 00440197 00440198
37 Fashion Designer 16.08.2002 00440213 00440214
38 Forward Contract Services 10.09.2004 00440282 00440283
39 Franchise Service 01.07.2003 00440237 00440238
40 Foreign Exchange Broker 01.07.2003 00440173 00440174
41 General Insurance 01.07.1994 00440005 00440006
42 Health Club & Fitness Centre 16.08.2002 00440205 00440206
43 Intellectual Property Service 10.09.2004 00440278 00440279
44 Interior Decorator 16.10.1998 00440076 00440077
45 Internet Caf 01.07.2003 00440241 00440242
46 Internet Telecommunication Service 01.05.2006 00440382 00440383
47 Life Insurance 16.08.2002 00440185 00440186
48 Mailing List Compilation and Mailing 16.06.2005 00440330 00440331
49 Management Consultant 01.07.1997 00440116 00440117
50 Maintenance or  Repair Service 01.07.2003 00440245 00440246
51 Mandap Keeper 16.10.1998 00440035 00440036
52 Manpower Recruitment or Supply  Agency 07.07.1997 00440060 00440061
53 Market Research Agency 16.10.1998 00440112 00440113
54 On-line Information & Database Access or Retrieval Service 16.07.2001 00440153 00440154
55 Opinion Poll Service 10.19.2004 00440274 00440275
56 Outdoor Caterer 10.09.2004 00440051 00440052
57 Packaging Service 16.06.2005 00440326 00440327
58 Pandal or Shamiana Services 10.09.2004 00440054 00440055
59 Photography 16.07.2001 00440129 00440130
60 Port Service ( Major Ports) 16.07.2001  
 
00440177
 
 
 
00440178
61 Port Services( Other Ports) 01.07.2003
62 Public Relations Service 01.05.2006 00440374 00440375
63 Rail Travel Agent 16.08.2002 00440201 00440202
64 Real Estate Agent / Consultant 16.10.1998 00440104 00440105
65 Recovery Agent 01.05.2006 00440350 00440351
66 Registrar to an Issue 01.05.2006 00440338 00440339
67 Rent - a - Cab Operator 16.07.1997 00440048 00440049
68 Sale of space or time for  Advertisement, other than print media 01.05.2006 00440354 00440355
69 Scientific or Technical Consultancy 16.07.2001 00440125 00440126
70 Security Agency 16.10.1998 00440108 00440109
71 Share Transfer Agent 01.05.2006 00440342 00440343
72 Ship Management service 01.05.2006 00440378 00440379
73 Site Preparation 16.06.2005 00440306 00440307
74 Sound Recording 16.07.2001 00440161 00440162
75 Sponsorship service provided to any body corporate or firm, other than sponsorship of sports event 01.05.2006 00440358 00440359
76 Steamer Agent 15.06.1997 00440029 00440030
77 Stock Broker 01.07.1994 00440008 00440009
78 Storage & Warehousing 16.08.2002 00440193 00440194
79 Survey & Exploration of Minerals 10.09.2004 00440270 00440271
80 Survey and Map Making 16.06.2005 00440314 00440315
81 T.V. & radio Programme Production Services 10.09.2004 00440286 00440287
82 Technical Testing & Analysis 01.07.2003 00440249 00440250
83 Technical Inspection & Certification Agency 01.07.2003 00440249 00440250
84 Tour Operator 01.09.1997 00440063 00440064
85 Transport of goods by Air 10.09.2004 00440266 00440267
86 Transport of goods by Road 01.01.2005 00440262 00440263
87 Transport of goods in containers by rail {'other than Indian railway'   omitted w.e.f. 01.09.2009} 01.05.2006 00440390 00440391
88 Transport of goods other than water, through Pipeline or other conduit 16.06.2005 00440302 00440303
89 Transport of passengers embarking on international journey by air, other than economy class passengers 01.05.2006 00440362 00440363
90 Transport of persons by cruise ship 01.05.2006 00440386 00440387
91 Travel Agent other than Air & Rail Travel 10.09.2004 00440294 00440295
92 Underwriter 16.10.1998 00440084 00440085
93 Video Tape Production 16.07.2001 00440157 00440158
94 Telecommunication 01.06.2007 00440398 00440399
95 Renting of immovable property 01.06.2007 00440406 00440407
96 Works contract 01.06.2007 00440410 00440411
97 Content Development & Supply 01.06.2007 00440414 0440415
98 Asset Management 01.06.2007 00440418 00440419
99 Mining Services( Oil & Gas) 01.06.2006 00440402 00440403
100 Design Services 01.06.2007 00440422 00440423
101 Information Technology Software services 16.05.2008 00440452 00440450
102 Investment Management for ULIP 16.05.2008 00440430 00440431
103 Recognized Stock Exchange 16.05.2008 00440434 00440435
104 Recognized Associations-Commodity Exchange Services 16.05.2008 00440438 00440439
105 Clearing & Processing House services 16.05.2008 00440442 00440443
106 Supply of Tangible Goods services 16.05.2008 00440445 00440447
107 Cosmetic or Plastic Surgery Services 01.09.2009 00440460 00440463
108 Transport of Coastal goods, Goods through National Waterways or Goods through Inland Waterways 01.09.2009 00440470 00440473
109 Legal Consultancy Services 01.09.2009 00440480 00440483
110 Promotion, marketing or organizing  of games of chance including lottery, bingo etc. services 01.07.2010 00440595 00440596
111 Health services undertaken by Hospitals or Medical establishments 01.07.2010 00440598 00440599
112 Maintenance of Medical Records services 01.07.2010 00440601 00440602
113 Promotion of Brand of Goods, Services etc. 01.07.2010 00440604 00440605
114 Services of Permitting Commercial Use or Exploitation of any event 01.07.2010 00440607 00440608
115 Electricity Exchange Services 01.07.2010 00440610 00440611
116 Copyright Services 01.07.2010 00440613 00440614
117 Services provided by Builder in relation to preferential location, internal/external development etc 01.07.2010 00440616 00440617
118 Services of Air-conditioned restaurants having license to service alcoholic beverages in relation to service of food or beverages. 1.5.2011 00441067 00441068
119 Services of providing of accommodation in hotels / inns/ cubs/ guest houses/ campsite for a continuous period of less than three months 1.5.2011 00441070 00441071

Note:

1. Accounting Code for 'Education Cess' is '00440298' for all services.

2. Accounting Code for 'Secondary & Higher Education Cess' is '00440426' for all services.

3. The sub-head 'Other receipts' is meant for interest, penalty on delayed payment of service tax.

 

2. Registration

 

2.1     Every person liable for paying the service tax shall make an application to the concerned Superintendent of Central Excise in Form ST-1 for registration within a period of thirty days from the date on which the service tax under section 66 of the Finance Act, 1994(32 of 1994) is levied:

             Provided that where a person commences the business of providing a taxable service after such service has been levied, he shall make an application for registration within a period of thirty days from the date of such commencement. (Refer section 69 of Finance Act, 1994 & Rule 4 of the Service Tax Rules,1994)

 

          Also, the following two categories of persons have been identified as 'Special Category of Persons' under The Service Tax (Registration of Special Category of Persons) Rules, 2005:

  1. Input Service Distributor;
  2. Any provider of taxable service whose 'aggregate value of taxable service' ('aggregate value' has been defined in Rule 2(b) of  The Service Tax (Registration of Special Category of Persons) Rules, 2005)  in a financial year exceeds nine lakh rupees.

                   

'Input service distributor' as defined under Rule 2 (m) of CENVAT Rules, 2004 means an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider, as the case may be.

 

             In case a service recipient is liable to pay service tax, as detailed at para 1.1 above, he also has to obtain registration.

2.2    The service tax is administered by the Central Excise Department. The government website www.exciseandservicetax.nic.in gives the details of the jurisdictional offices of the Central Excise Department, State-wise, District-wise as well as Commissionerate-wise.

 

2.3      Total 67 Central Excise & Service Tax Commissionerates, 7 exclusive Service Tax Commissionerates and 5 Large Taxpayer Units administer Service tax collection in India.

2.4      Following are the 7 Service tax Commissionerates:

  1. Mumbai-I
  2. Mumbai-II
  3. Delhi
  4. Chennai
  5. Kolkata
  6. Bangalore
  7. Ahmedabad

2.5     There are 5 Large Taxpayer Units (LTUs) as listed below:

          1. Bangalore,

          2. Chennai,

          3. Mumbai,

          4.  Delhi  and

          5. Kolkata 

 

3. Procedure for Registration

3.1     Fill the Form ST-1 in duplicate. (Form ST-1 is available on the departmental website Enclose photocopy of PAN card, proof of address to be registered and copy of constitution /partner ship deed etc. of the firm, if any.

 

3.2     Copy of PAN card is necessary as a PAN based code (Service Tax Code) is allotted to every assessee.

 

3.3     These forms are required to be submitted to the jurisdictional Central Excise office (in case of seven Service Tax Commissionerates, to the jurisdictional Division office). There are separate service tax commissionerates in Mumbai, Chennai,  Delhi , Kolkata,  Bangalore  and Ahmedabad  as mentioned in the previous chapter).

 

3.4    A person liable to pay service tax should file an application for registration within thirty days from the date on which the service tax on particular taxable service comes into effect or within thirty days from the commencement of his activity.

 

(Refer Rule 4 (1) of Service Tax Rules, 1994)

 

3.5     Where a person, liable for paying service tax on a taxable service,

(i)           provides such service from more than one premises or offices; or 

(ii)         receives such service in more than one premises or offices; or,  

  1. is having more than one premises or offices, which are engaged in relation to such service in any other manner, making such person liable for paying service tax,

 

and has centralized billing system or centralized accounting system in respect of such service, and such centralized billing or centralized accounting systems are located in one or more premises, he may, at his option, register such premises or offices from where centralized billing or centralized accounting systems are located.

 

3.5.1   The registration under sub-rule 2 of Rule 4 of the Service Tax Rules,1994, shall be granted by the Commissioner of Central Excise in whose jurisdiction the premises or offices, from where centralized billing or accounting is done, are located:

            

Provided that nothing contained in this sub-rule shall have any effect on the registration granted to the premises or offices having such centralized billing or centralized accounting systems, prior to the 2nd day of November, 2006.

 

3.6     A single registration is sufficient even when an assessee is providing more than one taxable services. However, he has to mention all the services being provided by him in the application for registration and the field office shall make suitable entries/endorsements in the registration certificate.

(Refer Rule 4 (4) of Service Tax Rules, 1994)

 

3.7     An assessee should get the registration certificate (registration number) within 7 days from the date of submission of form S.T.1, under normal circumstances.

(Refer Rule 4 (5) of Service Tax Rules, 1994)

 

3.8     A fresh registration is required to be obtained in case of transfer of business to another person.

(Refer Rule 4 (6) of Service Tax Rules, 1994)

 

3.9     Any registered assessee when ceases to provide the taxable service shall surrender the  registration certificate immediately.

(Refer Rule 4 (7) of Service Tax Rules, 1994)

 

3.10    In case a registered assessee starts providing any new service from the same premises, he need not apply for a fresh registration. He can simply fill in the Form S.T.1 for necessary amendments he desires to make in his existing information. The new form may be submitted to the jurisdictional Superintendent for necessary endorsement of the new service category in his Registration certificate.

 

4. General Procedures

 

4.1.  Every person providing taxable service is required to issue (within 14 days of completion of service or receipt of payment towards value of service, whichever is earlier) an invoice, a bill or challan signed by him or a person authorized by him. Such invoice, bill or challan should be serially numbered and should contain following information:

i    name, address and registration number of such person

ii    the name and address of the person receiving services

iii   description, classification and value of taxable service provided, and

iv   service tax payable thereon.

(Refer Rule 4A (1) of Service Tax Rules, 1994)

4.1A   Any goods transport agency which provides service in relation to transport of goods by road in a goods carriage and is liable to pay tax shall issue a consignment note to the recipient of service.

(Rule 4B of Service Tax Rules, 1994)

4.2      Every input service distributor, distributing credit of taxable services should issue an invoice, a bill or challan signed by him or a person authorized by him for each of the recipient of credit distributed and such invoice, bill or challan should be serially numbered and should contain :

  1. i.    name, address and registration number of the person providing input services and the serial number and date of invoice, bill or challan issued by him.

ii    name, address and registration number of the input service distributor

iii   name and address of the recipient of the credit distributed, and

iv   the amount of the credit distributed.

(Refer Rule 4A (2) of Service Tax Rules, 1994)

4.3      Records to be maintained:

The records including computerized data as maintained by the assessee in accordance with the various laws in force shall be accepted.

( Refer Rule 5 (1) of Service Tax Rules, 1994)

 

4.4     Every assessee is required to furnish to the Superintendent of Central Excise a list of accounts maintained by him in relation to service tax. This list is to be submitted once at the time of filing his first S.T.3 return. )(e.g. books of account, viz. sales register, purchase register, cash book, petty cash book, general ledger, etc.)

(Refer Rule 5 (2) of Service Tax Rules, 1994)

 

5. Value of Taxable Service

 

5.1     The valuation under service tax is governed by the provisions made under section 67 of the Finance Act, 1994

 

5.2     Value of taxable service shall be determined on the basis of one of the following:

a. consideration in money for providing the service.

b. consideration in money + consideration in any other form

c. consideration in any form other than money

The consideration in any form other than money shall be determined in a manner as prescribed.

(Refer section 67(1) of the Finance Act, 1994)

 

5.3     Service Tax (Determination of Value) Rules, 2006 have been notified which have the following salient features:

 

5.3.1   the value of taxable service shall be the gross amount charged for providing such service in ordinary course of trade and the gross amount charged is the sole consideration.

 

5.3.2   when value cannot be determined by the method given at 5.3.1, then the service provider shall determine the equivalent money value  of such consideration ( which shall in no case be less than the cost of provision of such taxable service)

 

5.3.3   if the Central Excise Officer is satisfied that the value determined by the service provider is not in accordance with the provisions of the Act or these rules, he shall issue a notice to show cause why the value of taxable service should not be fixed at the amount specified in the notice.

 

5.3.4   Any expenditure or costs incurred by the service provider in course of providing taxable service shall be treated as consideration for the taxable service provided and shall be included in the value of taxable value.

 

5.3.5  Subject to the provisions of Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 , the expenditure or costs incurred by the service provider as a 'pure agent' of the recipient of the service, shall be excludible from the value of taxable service, subject to conditions specified in the rule 5(2) of the Service Tax (Determination of Value) Rules, 2006

 

5.3.6   Specific cases in which the commission, costs, etc. shall be included or excluded are provided under rule 6 of the Service Tax (Determination of Value) Rules, 2006

 

5.3.7   Rule 7 of the Service Tax (Determination of Value) Rules, 2006 provides for actual consideration to be the value of taxable service in case of services provided from outside  India

(refer section 66A of the Finance Act, 1994, as amended)

 

5.4     The gross amount charged can be inclusive of service tax. In such a case the value shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. ( e.g. if gross amount charged, including service tax is Rs.100. Then the value of taxable service shall be Rs.90.75 and the service tax payable shall be Rs.9.07 plus Education Cess  Rs.0.18)

(Refer section 67(2) of the Finance Act, 1994)

 

5.5     The gross amount charged for taxable service shall include any amount received towards the taxable service before, during or after provision of such service.

(Refer section 67(3) of the Finance Act, 1994)

                  

 

6. Payment of Service Tax

 

Any person providing taxable service to any person shall pay service tax at the rate specified in Sec.66 in such a manner and within such period as may be prescribed.

(Sec.68 of the Finance Act, 1994)

The table below shows the rate of service tax applicable at the relevant period of time.

 

Sr.No. Period Rate of Service Tax Rate of Education Cess Rate of Secondary & Higher Education Cess
1. Till 13.05.2003 5% Nil Nil
2. 14.05.2003 to 09.09.2004 8% Nil Nil
3. 10.09.2004 to 17.04.2006 10% 2% of the S.T. Nil
4. 18.04.2006 to 31.05.2007 12% 2% of the S.T. Nil
5. 01.06.2007 to 23.02.2009 12% 2% of S.T. 1% of S.T.
6. From 24.02.2009 10% 2% of S.T. 1% of S.T.

 

6.1     In case of Individuals or Proprietary Concerns and Partnership Firm, service tax is to be paid on a quarterly basis. The due date for payment of service tax is the 5th of the month immediately following the respective quarter ( in case of e-payment, by 6th of the month immediately following the respective quarter). For this purpose, quarters are: April to June, July to September, October to December and January to March. However, payment for the last quarter i.e. January to March is required to be made by 31st of March itself.

( Refer Rule 6 (1) of Service Tax Rules, 1994)

 

6.2     In case of any other category of service provider other than specified at 6.1 above,  service tax is to be paid on a monthly basis, by the 5th of the following month ( in case of e-payment, by 6th of the month immediately following the respective month). However,  payment for the month of March is required to be made by 31st of March itself.      

( Refer Rule 6 (1) of Service Tax Rules, 1994)

 

6.3     Service tax is to be paid to the Central Government in respect of service deemed to be provided as per the rules framed.     

( Refer Rule 6 (1) of Service Tax Rules, 1994)

 

6.4      The facility of e-payment of service tax has been introduced with effect from 11.05.2005. From 1st April, 2010 e-payment of service tax has been made mandatory for the assessees who have paid service tax of Rs.10 Lakhs (cash+ cenvat) and above during the last financial year or who have paid service tax of Rs.10 Lakhs (cash + cenvat) and above during the current financial year. The e-payment shall be made only in designated banks by 6th day of the following month.

(Refer Rule 6 (1) & (2) of Service Tax Rules, 1994) {List of Banks, authorized to accept e-payment is given in para 12)  

 

 

6.5   The assessee is required to deposit the amount of service tax in the designated banks through GAR-7 challan.

(Refer Rule 6 (2) of Service Tax Rules, 1994)

 ( Assessees may contact jurisdictional office for details of the designated banks.)

   

6.6     While depositing the service tax, the appropriate 'account head' pertaining to the particular service category should be mentioned on the challan. The correct accounting heads have been given in the table showing the 'List of Services' in para 1.3.

 

6.7      If the assessee deposits the amount of tax liable to be paid, by cheque, then the date of presentation of the cheque to the designated bank would be treated as the date of payment of service tax.

(Refer Rule 6 (2A) of Service Tax Rules, 1994)

 

6.8       Wherean assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason, or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract the assessee may take credit of such excess service tax paid by him, if the assessee:-

          a) has refunded the payment or part thereof, so received for the service provided to the person from whom it was received or

          b) has issued a credit note for the value of the service not so provided to the person to whom such an invoice has been issued

( Refer Rule 6 (3) of Service Tax Rules, 1994)

 

6.9     The assessee can opt for provisional payment of service tax in case he is not able to correctly estimate the tax liability. In such a situation he may request in writing to the jurisdictional Assistant / Deputy Commissioner for the same.

( Refer Rule 6 (4) of Service Tax Rules, 1994).

 

6.10    Service tax ( including interest, penalty, refund) is to be rounded off to the nearest rupee. 50 paise or more should be rounded off to the next rupee and less than 50 paise should be ignored.

( Refer Board's Circular No.53/1/2003 dated 11.03.2003)

  

6.11    Any person who has collected any sum on account of service tax, is under obligation to pay the same to the Government. He can not retain the sum so collected with him by contending that service tax is not payable.           

( Refer section 73A of the Finance Act, 1994.)

 

7. Import and Export of Service

 

7.1  Import of service:There is noconcept as 'import' of service in the strict sense of the term in the Finance Act, 1994 or the rules made there under. Here the word 'import' is used just to indicate service provided by a person who has established his business or has his permanent address outside India and the recipient of such service is such a person who has his permanent address or usual place of business in India.

 

      Provisions made under section 66A of the Finance Act, 1994 provide for payment of service tax by the recipient of service in cases where the provider of taxable service is from outside  India  and the receiver of service has his permanent address / usual place of business in  India . This is applicable even though the service is received / consumed by the such Indian outside  India . This provision is not applicable in case of individuals who have received such service other than for the purpose of use in business or commerce.

(Refer section 66A of the Finance Act, 1994)

 

          In case where the service provider is a non-resident or is from outside  India  and does not have office in  India , the person receiving the service shall be liable to pay the service tax.

( Refer Rule 2 (1)d(iv) of Service Tax Rules, 1994)

7.2      Export of Service: The export of service is governed by the Export of Service Rules, 2005. ( notified vide Notification No. 9/2005 - service tax, dated 03.05.2005 and subsequently amended by Notification No.28/2005 - service tax, dated 07.06.2005 and Notification No. 13/2006- service tax dated 19.04.2006, Notification No. 02/2007- ST dated 01.03.2007, Notification No. 30/2007- service tax dated 22.05.2007 and  Notification No. 20/2008- service tax dated 10.05.2008 and 6/2010-ST dated 27.02.2010, Notification 42/2011 ST, Notification 22/2011 ST both dated 1/3/2011 and Notification 36/2011 ST dated 25/4/2011 )

 

7.2.1   The taxable services have been divided in three groups and some group-specific criteria are prescribed for provision of a particular service in a particular group to be treated as export of service. However, there is a common condition which is required to be fulfilled by all the taxable services (irrespective of the group they belong to) to qualify as exported services.

 

7.2.2   These two conditions are: (i) such service is delivered outside India and used outside India, and (ii) the payment received for providing such service should be in convertible foreign exchange. It is necessary that the common qualifying conditions as well as the group-specific conditions are  fulfilled so as to treat the provision of any such service as export of service. 

7.2.3   For category 1 comprising of 18 services: the service should be provided in relation to an immovable property situated outside India.

 

7.2.4   For category 2 comprising of 46 services:  the service should be provided outside India, though in case the service is partly performed outside India, it shall be treated as performed outside India.

 

7.2.5    For category 3 comprising of services excluding sub clauses zzzo and zzzv of   S.65(105) of the Finance Act 1994, category at7.2.3 above except when the provision of taxable services specified in sub clauses d, zzzc, zzzr and zzzzm ibid does not relate to immovable property, and those specified in category at category 7.2.4 above, when provided in relation to business or commerce, it should be provided to a recipient located outside India and when not provided in relation to business or commerce it should be provided to a recipient located outside India at the time of provision of such service.

 

8. Returns

 

8.1     Every assessee is required to submit a half yearly return in form S.T.3 or S.T.3A (in triplicate) along with proof of payment of tax. For the purpose of filing returns half year is counted from April to September and October to March. In case the assessee has opted for provisional payment of service tax, he is required to file the service tax return in form S.T.3A.

(Rule 7(1) of Service Tax Rules, 1994)

 

 8.2      The ST-3 Returns can also be got prepared and filed through the 'Service Tax Return Preparers' (STRPs) who have been duly accredited and authorized by the Department. The Board has issued relevant provisions and guidelines in regard of Service tax Return Preparer Scheme vide Notification No.07/2009-ST dated 03.02.2009 as amended. Currently, there are 1477 STRPs functioning at various locations spread out all across the country. The service tax assesses can log on to www trpscheme.com. to know the details of the STRPs available in their area.

8.3      An assessee may submit a revised return, in Form ST-3, in triplicate, to correct a mistake or omission, within a period of ninety days from the date of submission of the return under rule 7. (Rule 7B of Service Tax Rules, 1994)

 

8.4         Date of filing of Returns : The half yearly return is required to be filed by the 25th of the month following a particular half year.

(Rule 7(2) of Service Tax Rules, 1994)

 

8.5       E-filing of Returns: The department has extended the facility of filing the returns on-line (e-filing of returns). This facility is available for all the categories of service providers. However, in respect of assesses who have paid total service tax of rupees ten lakh or more including the amount paid by utilization of CENVAT credit, in the preceding financial year, electronic filing of return is mandatory.

 

9. Interest

 

         The due date for payment of service tax is 6th day of the month following the relevant month/quarter, if electronically paid and in other cases, 5th day of the month following the relevant month / quarter. It is provided under section 75 of the Finance Act, 1994 that in case of delayed payments (after due date) the assessee is required to pay simple interest at the rate prescribed. Notification No. 26/2004 dated 10.09.2004 has specified the rate of interest at 13% per annum. The table below shows the rate of interest applicable at relevant period of time.

 

Sr.No. Period Rate of Interest
1. Till 11.05.2001 1.5% per month
2. 11.05.2001 to 11.05.2002 24% per annum
3. 11.05.2002 to 10.09.2004 15% per annum
4. From 10.09.2004 to 31.03.2011 13% per annum
5. From 01.04.2011 18% per annum

 

 

10. Recovery of Service Tax

 

10.1    Section 73, 73A to 73D and Section 87 provide for recovery of service tax under various circumstances. The provisions made under each section are separately discussed below.

 

10.2    Section 73: This section empowers the Central Excise Officer to serve notice to the person, chargeable with service tax, which has been not levied or paid or short-levied or short-paid or erroneously refunded. Time limit for serving a notice under this situation is 'one year' from the relevant date.

 

10.2.1   In cases where service tax has been not levied or paid or short-levied or short-paid or erroneously refunded by the reason of fraud; or collusion; or willful mis-statement; or suppression of facts; or contravention of any of the provisions of this act or rules made thereunder with an intent to evade payment of service tax, then the time limit for serving the notice is extended up to five years.

 

               Where the service of notice is stayed by order of court, such stay period shall be excluded

 

10.3    Section 73A provides for payment by an assessee of any amount collected in excess of the service tax leviable or recovery of any amount as representing service tax, that has been collected by a person but not deposited with the Central Government.

 

10.4    Section 73B enables the Central Government to collect interest on the amount as determined under sub-section (4) of section 73A at a rate notified by the Central Government( not less than 10% but not exceeding 24% p.a.).

 

10.5    Section 73C provides for provisional attachment by Central Excise Officer of any property belonging to a person on whom notice is served under sub-section(1) of section 73 or sub-section (3) of section 73A during the pendency of such proceedings.

 

10.6    Section 73D provides for publishing the name of any person and any other particulars relating to any proceedings under the provisions of Chapter V of the Finance Act, 1994, in relation to such person, in public interest, in such manner as may be prescribed.

 

10.7    Section 87 provides for recovery of any amount due to the Central Government by any one of the following modes:

a. by deducting such amount from any money owed to such person, under the control of any Central Excise Officer or any officer of Customs.

b. by recovery from any other person from whom money is due to such defaulting person.

c. by restraining any movable or immovable property belonging to such person and detain the same until the amount payable is paid.

d. by preparing a certificate signed by Central Excise officer specifying the amount due and send it to the Collector of district in which such person owns any property or carries on his business. The said Collector, on receipt of such certificate shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue.

 

11. Penalty

 

Penalties have been prescribed under different sections for different types of offences.

 

Sr.
No.
Section Offence Details
1 76 Failure to pay service tax In addition to the service tax and interest, penalty not less than Rs.100/- for every day during which failure continues, or @ 1% of such tax per month, whichever is higher but shall not exceed 50% of service tax due.
2 77 General penalty for contravention of any provisions of chapter V of Finance Act, 1994 or rules made there under for which no penalty is provided
  1. Failure to take registration  in accordance with Sec.69 or rules made thereunder - Rs. 10000 or Rs. 200 per day during which failure continues, whichever is higher.
  2. Failure to keep, maintain or retain records- Up to Rs.10000/-
  3. Failure to furnish information, to produce documents called for by Central Excise Officer or to appear before the Central Excise Officer- Upto Rs.10000/- or Rs. 200 per day during which failure continues.
  4. Failure to pay tax electronically by the person required to pay tax electronically- upto Rs.10000/-
  5. Failure to issue correct invoice with complete details and account for the invoice in his books of accounts_Upto Rs.10000/-
2. For contravention of any other provisions of the Act where no separate penalty is provided- upto Rs.10000/-
3 78 Service tax not been levied or paid or been short-levied or short-paid or erroneously refunded by reason of fraud or collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of chapter V of Finance Act, 1994 or of the rules made there under with intent to evade payment of service tax Shall in addition to the Service Tax and interest thereon, if any payable, be the amount equal to the amount of Service tax not levied or paid or short-levied or short paid or erroneously refunded. But where true accounts are available in specified records, the penalty is reduced to 50%.  Where the service tax and interest is paid within 30 days, from the date of communication of the order the penalty is 25%.  The reduced penalty is available only if the penalty is paid within 30 days of the date of communication of the order.
4 70(1) &
Rule 7C
Late filing of returns Late fee upto Rs.20000/-
 
a)Delay up to 15 days-Rs.500/-
b) Delay beyond 15 days and upto 30 days-Rs.1000/-
c) Delay beyond 30 days-Rs.1000/- plus Rs.100 per day of delay beyond 30 days
Provided the total amount payable in terms of this rule shall not exceed the amount specified in Sec.70 of the Act.
 

 

Section 80 provides for non-imposition of penalty in certain cases falling under sections 76, 77 and 78 if there is reasonable cause for such failure.

 

12. Electronic Tax Administration (ETA)

 

12.1    The ETA comprises of on-line generation of PAN based code numbers, filing of S.T.3 Returns and e-payment of service tax.

 

12.2    The on-line generation of PAN based code is in practice since April, 2003.

 

12.3   On-line submission of S.T.3 Returns was introduced from April, 2003. Initially, this facility was extended for 10 selected categories of services. However, from 20.01.2004 the facility of e-filing of returns has been extended to all the categories of services.

 

 12.4   The facility of e-payment of service tax was introduced from 11.05.2005. Assessees can pay service tax through Internet Banking facility extended by certain banks. The following banks offer the facility of e-payment of service tax:

 

W.E.F. 01.08.2008 vide letter No.Coord II/9-15/e-FPBs/08/54 dated 18.07.2008

Sr.No. Name of the e-FPB Bank Name of the Excise/Service Tax Commissionerate for which the Bank is authorized to collect revenue through e-payment. BSR Code
1 State Bank of Travancore Fort, Mumbai All Commissionerates 0150001
2 Allahabad Bank, Worli Mumbai All Commissionerates 0211775
3 Bank of India, Belapur, Navi Mumbai All Commissionerates 0220282
4 United Bank of India, Fort Mumbai All Commissionerates 0310284
5 State bank of Saurastra, Fort Mumbai All Commissionerates 0140113
6 Canara Bank, Matunga(E) Mumbai All Commissionerates 0240056
7 State Bank of Mysore, Santacruz(W) Mumbai All Commissionerates 0120368
8 IDBI Bank, CBD,Navi Mumbai All Commissionerates 6910333
9 UCO Bank, DN Road, Mumbai All Commissionerates 0320003
10 State Bank of India, Fort, Mumbai All Commissionerates 0005347
11 State Bank of Bikaner & Jaipur, Vashi Navi Mumbai All Commissionerates 0170799
12 Bank Of Baroda, Byculla, Mumbai All Commissionerates 0200388
13 State Bank of Indore, Fort Mumbai All Commissionerates 0160002
14 State Bank of Patiala, Dadar (W) Mumbai All Commissionerates 0130529
15 Dena Bank, Fort Mumbai All Commissionerates 0250271
16 Indian Bank, Fort Mumbai All Commissionerates 0260012
17 Vijaya bank, Fort Mumbai All Commissionerates 0390764
18 Sydicate Bank, Fort Mumbai All Commissionerates 0330569
19 Bank of Maharashtra, Cuffe Parade, Mumbai All Commissionerates 0230498
20 HDFC Bank,Nerul, Navi Mumbai Banglore-I to III & Service Tax, Delhi-I to IV & Service Tax, Kolkata-I to VII,  Service Tax & Haldia, Mumbai-I to V, Belapur, Raigad, Thane-I,II and Service Tax. 0510247
21 Axis Bank, Marinelines, Mumbai Banglore-I to III & Service Tax, Delhi-I to IV & Service Tax, Hydrabad-I to IV, Mumbai-I to V, Belapur, Raigad,Thane-I,II & Service Tax. 6360219
W.E.F.01.08.2009 vide letter No. Coord II/9-14/OBC/07/68 dated 09.07.2009
22 Oriental Bank of Commercial, Mylapore All Commissionerates 0361086

 

[Based on information from the office of the Principal Chief Controller of Accounts, CBEC vide his letter No.Coord II/9-15/e-FPBs/08/54 dated 18.07.2008]

 

 12.4A   E-payment has been made mandatory with the issue of Notification No.1/2010-ST dated 19.2.2010 for an assessee who in the preceeding financial year, has paid total service tax of rupees 10 lakhs or more including the amount paid by utilization of Cenvat credit, to pay service tax and file its returns electronically only.  While the measure is aimed at bringing efficiency by automating the processes, it is anticipated that this would cut down the time and cost of tax payers and also result in a steady increase in more and more assessees adopting this facility.

 

12.5 The procedure to be followed for availing the facility of e-payment is as under:

For taxpayers who opt to maintain account  with the concerned bank and willing to use Internet banking facility :

 

12.5.1   Taxpayer logs on to the bank's web site.

 

12.5.2   The bank's site allows the taxpayer to enter into the secure banking area after verifying the user Id and password provided to the taxpayer by the bank.

 

12.5.3   Once in the secure banking area of the bank, the tax payer can select the "Pay Tax" menu which will further offer option to select various taxes he can pay on-line.

 

12.5.4    Once opted for CBEC (Indirect Tax), the taxpayer is guided to the challan form for filling up the details.

 

12.5.5    There will be an on-line validation for Assessee Code, Location Code, Account Head against the masters provided to the bank from the concerned Pay and Accounts Office.  The validation is mandatory and only successful entrants will be allowed to proceed further.

 

12.5.6   Banks will obtain and keep only such Assessee Codes, in their master, which belongs to the assessee who falls under the Commissionerates for which the bank is authorized to collect Indirect Tax revenue.  This will ensure that the bank is not collecting and accounting indirect tax revenue for a Commissionerate for which it is not authorized.

 

12.5.7    On successful validation of the details in the challan format, the taxpayer is guided to  'make payment screen' showing the payment details filled in by the taxpayer on the challan format.

 

12.5.8    The taxpayer gets an option to "Continue" or "Cancel"

 

12.5.9   On selecting "Cancel", the taxpayer is prompt for entering his user Id and password to enter into the bank's e-transaction module.

 

12.5.10   On selecting "continue", the taxpayer is prompt for entering his user ID and password to enter into the bank's  transaction module.

 

12.5.11    This screen further leads the taxpayer to the page describing his account details with the bank.

 

12.5.12    Taxpayer selects the account to be debited.

 

12.5.13    Authorize the payment transaction.

 

12.5.14    On successful payment transaction, the account of the taxpayer gets debited and taxpayer gets a unique system generated payment confirmation number.

 

12.5.15    The concerned Focal Point Bank prints the challan and includes in the scroll on a day to day basis and forward to the concerned PAO and, to the Range Officer as per the existing procedure and ensures two copies of the challan in delivered to the taxpayer.

 

12.5.16  Fund transaction and settlement with Government will be the exclusive responsibility of the bank as per the existing procedure.