Service Tax

What is the rate of service tax?

The rate of service tax is 14%

Swachh Bharat cess of 2% was proposed in Union Budget 2015 but it's not yet implemented. In case it is implemented then effective rate of Service tax will be 14%

+ 2% of 14% = 14.28%

Trivia:

1. Service Tax is levied in ‘taxable territory’, which includes the Indian mainland – territorial waters and the airspace above it.

2. Service Tax is NOT levied if services are provided, by anyone, in Jammu and Kashmir. So J&K and rest of the world are – not taxable territories!

3. Sometime even the service receiver has to pay the service tax – this is known as reverse charge!

Latest news on service tax:

 In budget 2015 a higher rate of 14% (inclusive of Education Cesses) was proposed which will come to effect after the approval of the finance bill; which is proposed to be pushed for approval in the second budget session starting after 20th April 2015.

 Service Tax exemption has been granted, w.e.f. 1 April 2015 to the services given byzoos, national parks, wildlife sanctuaries, tiger reserves and museums = they don’t have the obligation to deduct service tax from the public via the tickets.

 Exemption from service tax liability is also forwarded to:

i. Services by life insurance scheme – Varishtha Pension Bima Yojna, 

ii. Retail packing of fruits and vegetables,

iii. Ambulance services

iv. Construction services, when given to Government, in respect of historical monuments, irrigation work, water supply and sewage treatment plants, 

v. services provided by folk and classical artists is exempt if the amount charged by them as fee is less than Rs. 1,00,000

vi. Transportation of food grains, including rice and pulses, milk and salt only, via road, rail or vessel is exempt

 Increase in service tax on air travel services. Earlier service tax was levied on 40% of the ticket value – if your ticket costs Rs. 1000, then service tax will be levied on Rs. 400 – this 40% has now been increased to 60%.

 Service tax will be levied on the services provided in the following cases:

i. by Mutual Fund agents

ii. marketing of lottery tickets

iii. Departmentally run public telephones

iv. Free telephone calls from airports and hospitals

v. by chit fund foremen

vi. Exemption given earlier stands withdrawn for construction, erection, commissioning or installation of original works with regards to airports or ports.