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Service Tax Meaning and Example

Service Tax Meaning and Example : Service Tax is a “Tax on Services Firstly, we need to know that ‘What is Service’?

 Meaning of Service –

  1. Any activity for consideration.
  2. Carried out by a person for another.
  3. Includes a declared service.
  4. Exclusions from definition of service –  “IMAGE”

I           –        Immovable Property Sale

M         –        Movable Property Sale

A          –        Actionable claims

G          –        Goods

E          –        Employees

Service Tax Meaning and Example :

Service Tax Meaning and Example

Service Tax Meaning and Example

Service Tax Meaning and Example :

Meaning of Service Tax
Some Sources of service tax laws
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 Activity must be for a consideration (nexus / reciprocity).

 Activity – includes both activity as well as non-activity.

 Consideration – includes both monetary and non monetary consideration.

 Two persons are involved.

1.Service provider

2.Service receiver

 Only services provided by one person to another are taxable.

 Person – natural as well as artificial.

Service Tax Meaning and Example

Meaning of Service Tax –Service tax is indirect tax. There shall be lived a tax at a fixed rate (at present 14%) on the value of all service, other than those service specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.

Service Tax Meaning and Example

Historical Part of Service Tax

ARTICLE 246 OF CONSTITUTION

Levied (imposed) after recommendation by committee headed by Raja J Chelliah in 1994-95. Service tax was first imposed on telephones, non-life insurance and stock brokers @ 5%. As per Constitution of India any tax can be imposed only by any Act. No special Act was made for service tax. Finance Act 1994 was used for charging service tax. CBEC is given the work of service tax.

There are two approaches of imposing tax on services –

  1. Under selective approach, only few selected services are taxable.
  2. Under Comprehensive approach, all the services are made taxable and a negative list is provided to exempt some of the services.

In year 2012, the comprehensive approach was adopted and currently is in effect.Entry 92C was introduced in the schedule VII in the Union list vide Constitution (92th Amendment) Act, 2003 with effect from 07-01-2004.

Service Tax Meaning and Example

Some Sources of service tax laws

  1. Finance Act, 1994
  2. Rules on service tax
  3. Circulars of Office Letters on service tax
  4. Notification on service tax
  5. Orders on service tax
  6. Trade Notice on service tax

Service Tax Meaning and Example

Some Example of services –

  1. Renting of Immovable Property
  2. Constructions services
  3. Temporary transfer/ permitting the use or enjoyment of any intellectual property right
  4. Work contract etc.

 Some Example of service tax –

  1. A Chartered accountant is service provider. When he provides service he needs to charge service tax from client.
  2. A Goods transport agency (GTA) is a service provider. They provide service to their clients on contract. In this case buyer needs to pay service tax by reserves charge mechanism.

If seller provides transport facility to buyer without any contract than it is not a service.  No need to pay service tax in this case.

Service Tax Meaning and Example

Some more related topic on cakart

  1. Negative List
  2. Declared services
  3. Date of determination tax rate, value and exchange Rate
  4. One mega notification
  5. REVERSE CHARGE MECHANISM
  6. Service tax procedure

Service Tax Meaning and Example

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