Service Tax

What is service tax?

• Service Tax is a tax imposed by Government of India on services provided in India.

What are the benefits of service tax registration?

• Service Tax Provider can claim CENVAT credit
• An applicant providing more than one service at different locations has to register only once.

Untitled Slide

• Mandatory registration if the value of the services provided by him in a previous financial year exceeds a threshold (currently Rs 10 lakh per annum).

Implications on Small service provider (SSP)

• Service provider is referred to as the small service provider if the amount of taxable services in the previous year does not exceed Rs10 lakh
• Taxable service provider has the option not to avail the said exemption and pay service tax on the taxable service and such option are exercised in a financial year shall not be withdrawn during the remaining part of such financial year
• Not availing exemption can help the service provider to claim benefit of service tax paid by him against the service tax liability

SSP availed and unregistered recipient

• Cost of Material-1000
• Service Tax-123.6
• Subtotal-1123.6
• Profit Margin-876.4
• Selling price to recipient-2000

SSP not AVAILED AND UNREGISTERED RECIPIENT

• Cost of Material-1000
• Service Tax-123.6
• Subtotal-1123.6
• Profit Margin-876.4
• However ST paid is availed as credit so 1876.4 is total cost
• Now charging 12.36% on 1876.4 total amount will be 2108.32(1876.4+231.92)
• Since recipient is unregistered he cannot avail credit hence cost to him is Rs.2108.32

Comparison

• When recipient is unregistered
• SSP scheme is beneficial because he can avail the same service at Rs.2000
• When SSP is not availed the recipient has to pay Rs.2108.32

SSP availed and registered recipient

• Cost of Material-1000
• Service Tax-123.6
• Subtotal-1123.6
• Profit Margin-876.4
• Selling price to recipient-2000

SSP not AVAILED AND REGISTERED RECIPIENT

• Cost of Material-1000
• Service Tax-123.6
• Subtotal-1123.6
• Profit Margin-876.4
• However ST paid is availed as credit so 1876.4 is total cost
• Now charging 12.36% on 1876.4 total amount will be 2108.32(1876.4+231.92)
• Since recipient is registered he can avail credit of Rs.231.92 so net cost to recipient is Rs.1876.4

Comparison

• When recipient is registered
• SSP scheme is not beneficial because he has to pay Rs.2000/- for same service
• When SSP is not availed the net cost to recipient is Rs.1876.4