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De-mystifying Service Tax in India

De-mystifying Service Tax in India

Taxation is one of the most important aspects that you need to give considerable time to when starting your own business. Not only is it is legally binding on all business entities, but also, non-adherence to its requirements invoke penalty and revoking of licenses or permits.

Numerous types of taxes come under the ambit of ‘taxation’ in India. However, for the ease of understanding, we will discuss ‘Service Tax’ in greater detail in this article.

What is Service Tax?

Service Tax, a part of the Central Excise Tax in India and a type of indirect tax, is levied on services provided in India. It extends to the whole of India excepting Jammu and Kashmir.

Which services come under the ambit of Service Tax?

Service Tax was first imposed in India in July 1994 for three services. Over the years, it has spread over many more services and now has 125 services in its ambit.

Who has to pay Service Tax?

The liability to pay service tax has been placed on the ‘service provider’

Is there any turnover limit?

The turnover limit, i.e., the aggregate value of taxable service for threshold based exemption is, currently, Rs. 10 lakh in a year.

However, a person availing of this exemption is required to register with the department on achieving a turnover of Rs 9 lakh in a financial year in respect of all taxable services provided by him

What is the rate of Service Tax?

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.

How to Register for Service Tax number?

You have to make an application to the concerned Superintendent of Central Excise in Form ST-1 for registration of your service tax number within 30 days of starting your business. Note the procedure for filing the application:

1. Fill the Form ST-1 in duplicate. (Form ST-1 is available at website

2. Enclose:
a. Photocopy of your PAN card,
b. Proof of address of your business to be registered, and
c. Copy of Memorandum of Association or Partnership Deed of the business.

3. Remember, that copy of your PAN card is necessary as a PAN based code (Service Tax Code) is allotted to every business entity.

4. Submit the application form along with the enclosures to the Central Excise office under whose jurisdiction your business falls

5. 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.

When is Service Tax paid?

• In case you have a sole-proprietorship or a 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.

• In case of any other category of service provider other than proprietorship or partnership, 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.

Hope this article helps you as you plan to start your own business venture. We would like to get your comments and feedback on it.

De-mystifying Service Tax in India


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