||What is Service Tax?
||It is a tax levied on the transaction of certain specified
services by the Central Government under the Finance Act, 1994.
It is an indirect tax, which means that normally the service
provider pays the tax and recovers the amount from the recipient
of taxable service
||Can recipient of service be also asked to pay
||In certain cases Government may shift the liability of
payment of service tax to the receiver of service as a measure
of administrative convenience. It is often referred to as
‘reverse charge’ in common language. [Refer Question 1.8]
||Under which authority service tax is levied?
||Vide Entry 97 of Schedule VII of the Constitution of India,
the Central Government levies service tax through Chapter V of
the Finance Act, 1994. The taxable services are defined in
section 65 of the Finance Act, 1994. Section 66 is the charging
section of the said Act.
||What are the taxable services?
||The list of the services is available at home page of this
web site www.servicetaxinda.co.in . The Accounting Heads are
also mentioned in the list, which need to be mentioned on the
tax payment documents (GAR-7 or TR-6), while depositing the
Service Tax and other related dues in the banks.
||How to decide whether Service Tax is payable by a
||A.) If you are engaged in providing service to your
customer, please check:—
- Whether the service rendered by you is falling under the
scope of any of the taxable services .
- Whether there is a general or specific exemption
available for the category of service provided under any
- Whether you are entitled to the value based exemption of
Rs. 10 Lakhs available for small service
- Whether the service charges were received for the
services provided or to be provided.
In case the service provided by a person falls within the
scope of the taxable services and if such service is not fully
exempted, the service tax is payable on the value of the taxable
service received subject to the eligible abatements.(if any)
B.) If you are availing the services of the service
provider, please check:—
- Whether the service received by you is falling under the
scope of any of the services where the recipient of the
service is liable to pay Service Tax in terms of
Section 68(2) of the Act read with Rule 2(d) of the Service
Tax Rules, 1994.
- In case the service received by recipients of such
service is falling under the scope of any of the taxable
services defined under section 65 of the Finance Act, 1994,
the recipients of the service shall pay Service Tax having
regard to the exemptions/abatements admissible, if any.
- Please note that the value based exemption for small
scale service providers under Notification No. 6/2005-ST,
dated 01.03.2005 effective from 01.04.2005 is not admissible
to such recipients of taxable services.
||What is the rate of Service Tax?
||At present, the rate of Service Tax is 12%,
payable on the "gross value of taxable
service". In addition to this, Education Cess is payable at the
rate of 3% on the Service Tax amount.
12.36% on the value of the taxable service). – Refer
section 66 of the Finance Act, 1994 (12% Service Tax),
Section 85 of the Finance Act, 2004 (2% Education
Cess) and Section 126 of the Finance Act, 2007(1%
Secondary and Higher Education Cess). The rate of tax may
change during Annual Budget by a Finance Act.
History of rates:
The table below shows the service tax rates from time to time .
Secondary & Higher Edu. Cess
||14.05.2003 to to 9.09.2004
2% of the S.T.
2% of the S.T.
||12 .05. 2007.
2% of the S.T
1% of the S.T.
||What is meant by “value of taxable service"?
- Normally, the "value of taxable service" means, the
gross amount received by the service provider for the
taxable service provided or to be provided by him. Section
67 of the Finance Act, 1994 read with Service Tax
(Determination of Value) Rules, 2006, has to be followed to
arrive at the taxable value.
- For certain services, a specified percentage of
abatement is allowed from the gross amount collected for
rendering the services, subject to the conditions, inter
alia, that CENVAT Credit has not been availed by the
service provider and cost of goods sold in the process of
providing the subject service is not deducted in terms of
Notification No. 12/2003-ST, dated 20.6.2003.
- There is also a composition scheme for ‘works contract
service’, where the person liable to pay service tax in
relation to works contract service shall have the option to
discharge his service tax liability on the works contract
service provided or to be provided, instead of paying
service tax at the rate specified in section 66 of the Act,
by paying an amount equivalent to 4% of the gross amount
charged for the works contract..
||Who is liable to pay Service Tax?
||Generally, the ‘person’ who provides the taxable service on
receipt of service
charges is responsible for paying the Service Tax to the
Government (Section 68
(1) of the Act), except the following:
- the recipient of such services in India is liable to pay
Service Tax, where taxable services are provided by foreign
service providers with no establishment in India;
- the Service Tax is to be paid by the Insurance Company
for the services in relation to Insurance Auxiliary Service
by an Insurance Agent.
- the person who pays or is liable to pay freight for the
taxable services provided by a Goods Transport Agency for
transport of goods by road, is liable to pay Service Tax, if
the consignor or consignee falls under any of the seven
categories viz. (a) a factory (b) a
company (c) a corporation (d) a society (e)
a co-operative society (f) a registered dealer of
excisable goods (g) a body corporate or a
- the taxable services provided by Mutual Fund
Distributors in relation to
distribution of Mutual Fund. In this regard, Service Tax is
to be paid by the Mutual Fund or the Asset Management Company
receiving such service. Refer: Sec. 68(2)
of the Act read with Rule 2(d) of the Service
Tax Rules, 1994.
||Is there any exemption from payment of service tax
to Diplomatic Missions for official use and individuals and
their family members posted in a Diplomatic Mission?
||Yes, exemption from payment of service tax relating to all
taxable services is available to Diplomatic Missions for
official use of services as well as for the personal use or for
the use of the family members of diplomatic agents or career
consular officers posted in a foreign diplomatic mission or
consular post in India, by notifications 33/2007- ST dated 23rd
May, 2007 and 34/2007-ST dated 23rd May, 2007 respectively, but
subject to procedures specified under those notifications.
||If yes, what procedure is required to be followed
for exemption from payment of service tax to Diplomatic Missions
for official use of services?
||The following procedure is specified:
- the foreign diplomatic mission or consular post in
India, is issued with a certificate by the Protocol Division
of the Ministry of External Affairs that it is entitled to
exemption from service tax, as stipulated in the
certificate, based on the principle of reciprocity;
- the head of such foreign diplomatic mission or consular
post, or any person of such mission or post authorized by
him, shall furnish to the provider of taxable service, a
copy of such certificate duly authenticated by him or such
authorized person, along with an undertaking in original,
signed by him or such authorized person, bearing running
serial number commencing from a financial year and stating
that the services received are for official purpose of the
said foreign diplomatic mission or consular post;
- the head of such foreign diplomatic mission or consular
post or such authorized person shall maintain an account of
such undertakings issued during a financial year and such
account shall contain:—
(a) the serial number and date of issue of such
(b) the name and the registration number of the
provider of taxable service; and
(c) the description of taxable service and invoice
- the invoice or bill or as the case may be, the challan
issued under the provision contained in rule 4A of the
Service Tax Rules, 1994 shall, in addition to the
information required to be furnished under the said rule,
contain the serial number and the date of the undertaking
furnished by the said head of foreign diplomatic mission or
consular post; and
- The provider of taxable service shall retain the
documents referred to in point number (i) above
along with a duplicate copy of invoice issued, for the
purposes of verification.
||What is meant by registration? Who should apply for
registration under Service Tax law?
- Every person providing a taxable service of value
exceeding Rs. 9 lakhs, is required to register with the
central excise or service tax office having jurisdiction
over the office of such service provider.
- In case a recipient is liable to pay service tax,
registration is required by him.
- There is also provision for centralised registration
- The ‘Input Service Distributors’ also require
||Why registration is necessary?
||Registration is identification of an assessee.
Identification is necessary to deposit service tax, file returns
and undertake various processes ordained by law relating to
||What is the meaning of an ‘assessee’ in relation to
||‘Assessee’ means a person liable to pay Service Tax and
includes his agent.
||When can a prospective assessee obtain registration?
- When a person commences business of providing an
existing taxable service, he is required to register himself
within 30 days of such commencement.
- In case a new taxable service is introduced, an existing
service provider must register himself, unless he is
eligible for exemption under any notification, within a
period of 30 days from the date of new levy.
||What does the word “person” appearing in the
definition of taxable service mean?
||The word "Person" shall include any company or association
or body of individuals, whether incorporated or not. Thus this
expression includes any individual, HUF, proprietary firm or
partnership firm, company, trust, institution, society etc.
||What is the procedure for Registration? Who should
be approached for Service Tax Registration?
||An application in Form ST-1 (in duplicate) has to be filed
before the jurisdictional Central Excise/Service Tax officer.
Certain documents to verify the correctness of declaration in
the said form as may be required by the registering authority,
such as copy of PAN card, proof of address of business
premise(s), constitution of the business [proprietorship, firm,
company, trust, institute etc.] etc. The copies may be
self-certified by the applicant. In case of doubts in select
cases, original documents may have to be presented for across
the counter verification and return.
||Is there any provision for centralized registration?
||Service providers having centralised accounting or
centralised billing system, at their option, can have
Centralised registration at one or more places. Commissioner of
Central Excise/Service Tax in whose jurisdiction centralized
account or billing office of the assessees exists, is empowered
to grant centralized registration.
||Does one require registration certificates for each
||Only one Registration certificate is to be taken even if the
person provides more than one service from the same premises for
which registration is sought. If there is centralised
registration, only one registration certificate is required for
services provided from different premises, declared in the
application for centralized registration.
||What is to be done when the existing assessee
commences providing of a service not mentioned in the
||An application has to be made in ST-1 for amendment
(endorsement) in the Registration certificate indicating only
the amendment/rectification required to be made in the
registration certificate, along with a copy of the original
registration certificate. No fresh documents are required for
verification by the officer unless there is change in the
details given in original or earlier application(s).
||Is PAN allotted by the Income Tax Department a must
for obtaining Service Tax Registration?
||Having PAN is essential because the Service Tax Registration
number is generated based on the PAN issued by the Income Tax
Department. However, in the absence of PAN, a temporary Service
Tax registration number would be issued for assessees who are
not having PAN at the time of filing the application (ST-1) for
Service Tax registration till such time they obtain PAN. Once
the PAN is obtained, the Service Tax assessee should obtain the
PAN - based Service Tax Registration number.
||Cessation of business of providing taxable service
-what is to be done with the Service Tax Registration?
||The Service Tax Registration certificate (ST-2) should be
surrendered to the concerned Central Excise/Service Tax
||A taxpayer transfers his business to another person
- what is to be done with the Registration?
||In the event of transfer of the business, the transferee
should obtain a fresh certificate of Service Tax registration.
The transferee will have his own PAN.
||Whether a service provider can make payment of
Service Tax and file returns before the grant of registration by
the proper officer?
||No. However, service provider should apply well in advance
to obtain registration, which is normally granted within 7 days
of filing of application. Since service tax is payable once in a
month or quarter, an assessee gets sufficient time for
||Is there any penal provision for non-registration?
||A person, who fails to take registration within the time
stipulated shall be liable to pay penalty which may extend to
Rs. 5,000/- or Rs. 200/- per day after the due date, which ever
is higher. The provisions says, a person fails to “take”
registration, whereas it should have been fail to “apply”
registration, as some time the Department take it own time to
grant the registration as recognized by the Board in its
instruction Dy. No.294/Com(ST)/2007 dated 03.09.2007.
||If a registration certificate issued by the
Department is lost, can duplicate be issued? What is the
procedure in this regard?.
||The assessee is required to make written request for
‘duplicate’ registration certificate. The same will be issued by
the Department after suitable entry in the registers/ records of
||How to pay Service Tax?
||You may pay service tax by G.A.R.7 (previously known as TR6
Challan which was yellow in colour) in the specified branches of
the designated banks. The details of such Banks and branches may
be obtained from the nearest Central Excise Office/Service Tax
Office. Service Tax can also be paid electronically, called
||When is Service Tax required to be paid? For
individual or a proprietary or partnership firm.
||—Quarterly -by the 5th day of the month following
each quarter and by the 6th day of the month following each
quarter if the duty is deposited electronically through internet
banking. For example, Service Tax for the quarter ending 30th of
June is to be paid by 5th or 6th of July as the case may be.
For all other categories (Company, Society,
Trust etc.).—Monthly -
by the 5th day of the succeeding month and by the 6th day of the
succeeding month if the duty is deposited electronically through
Exception: For the month of March
or quarter ending March, all assessees have to pay by 31st
of March of the Calendar year (Rule 6(1) of the STR, 1994
||If full details are not available to assess correct
service tax, how can service be paid by due date?
||You may seek in writing, provisional assessment, giving
reasons, from the jurisdictional Asst./Deputy Commissioner of
Central Excise/Service Tax under rule 6 (4) of the STR, 1994. He
may allow payment of Service Tax on provisional basis, on such
value of taxable service as may be specified by him.
||Can excess payment be adjusted while paying tax for
the next month or quarter?
- Yes. Where an assessee has paid to the credit of the
Government in respect of a taxable service, which is not so
provided by him, either wholly or partially for any reason,
the assessee may adjust the excess Service Tax so paid by
him (calculated on a pro-rata basis) against his Service Tax
liability for the subsequent period, if the assessee has
refunded the value of taxable service and the Service Tax
thereon to the person from whom it was received (Rule 6(3)
of the STR, 1994).
- Further, assesses having centralised registration who
paid excess amount of Service Tax, on account of non-receipt
of details regarding the receipt of gross amount for the
services at his other premises or offices, may adjust such
excess amount against the Service Tax liability for the
subsequent period and furnish the details of such adjustment
to the Jurisdictional Superintendent of Central
Excise/Service Tax within 15 days from the date of such
adjustment (Rule 6(4A) of the STR, 1994).
- In all other cases of excess payment, refund claims have
to be filed with the Department. The refund claims would be
dealt as per the provisions of Section 11B of the Central
Excise Act, 1944, which is made applicable to Service Tax
under Section 83 of the Finance Act 1994.
- It is important to note that any amount of Service Tax
paid in excess of the actual liability, is refundable, only
if it is proved that the claimant of refund had already
refunded such amount to the person from whom it was received
or had not collected at all (Section 11 B of the Central
Excise Act, 1944 which is applicable to Service Tax matters
under Section 83 of the Act).
||What is the head of account into which the Service
Tax amount is to be paid in respect of various services?
||Separate “Head of account ” has been specified for each
taxable service. This must be mentioned on G.A.R. 7 (previously
known as TR-6) challans for proper accounting. ( See List of
Service tax Code Visit Home Page)
||What is GAR-7 challan? Where is it available?
||GAR-7 is the document for payment of service tax.
GAR-7 or TR-6 challan is also available in any stationary
shop selling government forms. You can download this challan
from www.servicetaxindia.co.in . Click Home page and then FORMS
||Can the Service Tax be deposited in Non-designated
||No. For payment of Service Tax, specific bank has been
nominated for every Central Excise/Service Tax Commissionerate.
If Service Tax is deposited in a Branch/Bank other than the
nominated Bank/Branch, it amounts to non-payment of Service Tax
(Rule 6(2) of the STR, 1994). In any case, a nondesignated bank
will not accept service tax challans.
||Whether the payment of Service Tax is to be made for
the billed amount or for the value received?
||The Service Tax for a particular period is payable on the
amount/value of taxable service received during that period and
not on the gross amount billed to the client.
If the charges for the taxable service have been received in
advance prior to rendering of the services, the Service Tax is
payable even if the services are yet to be provided by them
(Section 67 and Rule 6(1) of the STR, 1994).
refer to the Service Tax (Determination of Value)
||Can service tax be paid by cheque?
||Yes, you can pay service tax be paid by cheque.
||When paid by cheque, which date will be treated as
date of payment?
||The date of deposit of cheque is the date of payment of
Service Tax. If the cheque is dishonoured, it would mean as if
the Service Tax has not been paid and the relevant penal
consequences would follow. (Rule 6(2) of the STR, 1994).
||When payment is made by a client to an assessee
after deducting his Income Tax liability under the Tax deduction
at source (TDS) provision, whether the Service Tax liability of
the assessee is only towards the amount actually received from
that client or tax is to be paid on the amount including the
Income Tax deducted at source also?
||Service Tax is to be paid on the gross value of taxable
service which is charged by a Service Tax assessee for providing
a taxable service. Income tax deducted at source is includible
in the charged amount. Therefore, service Tax is payable on the
gross amount including the amount of Income Tax deducted at
||What is the interest rate applicable on delayed
payment of Service Tax?
||Every person, liable to pay the service tax in accordance
with the provisions of section 68 or rules made thereunder, who
fails to credit the tax or any part thereof to the account of
the Central Government within the period prescribed, shall pay
simple interest @13% per annum. Interest is payable for the
period from the first day after the due date till the date of
payment of any defaulted service Tax amount. Refer to Section 75
of the Finance Act, 1994.
||Can interest be waived, and by whom?
||Interest payments are mandatory in nature and cannot be
waived in ordinary jurisdiction.
||What are the penal consequences if the Service Tax
is not paid or paid late?
||A mandatory penalty, not less than Rs. 200 per day or @2% of
such tax per month, whichever is higher, shall be imposed by the
adjudicating authority. However, the penalty amount payable
shall not exceed the amount of service tax payable. - (Refer to
section 76 of the Finance Act, 1994).
||Whether Service Tax is payable after providing the
service or after the receipt of the service charges?
||Service Tax is payable on the amount received towards
provision of a taxable service including any amount received in
||What are the Returns a service tax assessee has to
||ST-3 Return – For all the registered
assessee, including Input Service
ST-3A Return – The assessee who is making
provisional assessment under rule 6(4) of the Service Tax Rules,
||When to file returns?
||ST-3 Return is required to be filed twice in a financial
year – half yearly. Return for half year ending 30th September
and 31st March are required to be filed by 25th October and 25th
||How to file Service Tax Returns?
||The details in respect of each month of the period for which
the return is filed, should be furnished in the Form ST-3,
separately. The instructions for filing return are mentioned in
the Form itself. It should be accompanied by copies of all the
GAR-7 (TR- 6) Challans for payment of Service Tax during the
||Where to file return?
||ST-3 or ST-3A is filed in triplicate to the Superintendent
of Central Excise/Service Tax with whom the assessee has
||Is filing of return compulsory even if no taxable
service provided or received or no payments received during a
period (a particular half year)?
||Filing of return is compulsory, even if it may be a nil
return, within the prescribed time limit, failing which penal
action is attracted.
||Whether a single Return is sufficient when an
assessee provides more than one service?
||A single return is sufficient because the ST-3 Return is
designed to capture details of each service.
||Is there any penalty for non-filing or delayed
filing of the Returns?
||If a person fails to furnish the ST-3 Return within the due
date [25th October and 25th April every year] he shall be liable
to penalty which may extend to an amount not exceeding Rs 2000/-
depending upon Period of Delay.
||Is there any statutory documents prescribed by the
Government such as specified invoice proforma, specified
registers etc. for use by the service providers?
||There are no specific records which have to be maintained by
a Service Tax assessee. The records including computerized data,
if any, which are being maintained by an assessee on his own or
as required under any other law in force, such as Income Tax,
Sales Tax etc. are acceptable for the purpose of Service Tax -
(Rule 5(1) of the STR, 1994). However, it is important to note
that a list of all such accounts maintained by an assessee
including the memorandum received from the branch offices shall
be furnished to the Superintendent of Central Excise at the time
of filing the Return (ST-3) for the first time (Rule 5(2) of the
||Whether issue of Invoice/Bill/Challan is mandatory?
When should the same be issued?
||Issue of Invoice/Bill/Challan by a Service Tax assessee is
mandatory as per Rule 4A of the STR, 1994. The same should be
issued within 14 days from the date of completion of taxable
service or receipt of payment towards the service, whichever is
earlier. However, if the service is provided continuously for
successive periods of time and the value of such taxable service
is determined or payable periodically, the Invoice/Bill/ Challan
shall be issued within 14 days from the last day of the said
period (Proviso to Rule 4A (1) of the STR 1994).
||Is there any prescribed format for the Invoice/Bill?
||There is no prescribed format for issue of Invoice. However,
the invoice/bill/challan should contain the following
information (Rule 4A of the STR, 1994):
Note: If the service provider is a Banking company, the
details at Sl. No (i) and (iii)
- Serial number.
- Name, address and registration no. of the service
- Name and address of the service receiver.
- Description, classification and value of taxable service
- The amount of Service Tax payable (Service Tax and
Education cess should be shown separately)
are not necessary. In respect of the taxable services relating
to the transport of goods by road, provided by the Goods
Transport Agency, the service provider should issue a
consignment note containing the following information (Rule 4B
of the STR, 1994):—<
- Serial Number
- Name of the consignor and consignee
- Registration no. of the vehicle
- Details of the goods transported
- Details of the place of origin & destination
- Person liable for payment of Service Tax
||Is the amount of Service Tax charged from the client
compulsorily to be indicated separately in the
Bills/Invoices/Challans raised on him?
||Yes. It is mandatory to separately indicate the amount of
Service Tax charged in the Bills/Invoices/Challans raised on the
clients. as per Section 12A of the Central Excise Act, 1944
which is made applicable to Service Tax, under Sec.83 of the
Finance Act, 1994. Such mention of the Service Tax amount in the
Invoice/Bill/Challans, would also facilitate the service
receiver to avail the CENVAT credit of the Service Tax paid on
the input services.
||What is the preservation period for service tax
records and documents?
||All records and documents concerning any taxable service,
CENVAT, transactions etc. must be preserved for a minimum period
of 5 preceding financial years.
||What is the procedure for claiming refund?
- Application in the prescribed form (Form - R) is to be
filed in triplicate with the jurisdictional Asst./Deputy
Commissioner of Central Excise/Service Tax.
- The application should be filed within one year from the
relevant date as prescribed in Section 11B of the Central
Excise Act, 1944 which has been made applicable to Service
Tax refund matters also.
- Application should be accompanied by documentary
evidence to the effect that the amount claimed as refund is
the amount actually paid by him in excess of the Service Tax
due and the incidence of such tax claimed as refund has not
been passed on to any other person.
||What are the exemptions available for small service
||Service Tax is fully exempted in respect of the taxable
services of aggregate value not exceeding Ten lakh rupees in any
financial year. w.e.f 1-4-2008
The above mentioned exemption based on the turnover is not
available to the persons who are liable to pay Service Tax but
are not the service providers. For example:
This exemption was introduced with effect from 01.04.2005.
(Notification No. 6/2005-ST, dated 01.03.2005).
- The recipient of services from an overseas service
provider who has no registered office in India
- A company incurring the Transportation charges for
availing the services from Goods Transport Agencies, for
transportation of goods by Road.
||What are the conditions for availment of the
exemption from Service Tax by the small scale service providers?
||Some of the important conditions for availment of the
exemption are as follows:
- If the aggregate value of taxable services rendered by
the service provider from one or more premises exceeds
rupees eight lakhs in the preceding financial year, the
service provider is not eligible for the exemption for the
- The exemption shall apply to the aggregate value of all
taxable services and from all premises and not separately
for each premise or each service.
- The benefit of the exemption shall not apply to taxable
services rendered by a person under a brand name or trade
name whether registered or not, of another person.
- The exemption shall not apply to persons who are other
than the service providers, but liable to pay Service Tax
under section 68 (2) of the Act.
- The provider of the taxable service shall avail the
CENVAT credit only on such inputs or input services
received, on or after the date on which the service provider
starts paying Service Tax, and used for the provision of
taxable services for which Service Tax is payable.
- CENVAT Credit of Service Tax paid on any input services,
under Rule (3) or Rule (13) of the CENVAT Credit Rules 2004,
used for providing the services under the above exemption,
is not admissible for persons availing the above exemption.
- CENVAT Credit under Rule (3) of the said Rules, is not
admissible on the capital goods which are received in the
premises of the service provider during the exemption
- An amount equivalent to the CENVAT Credit taken, if any,
in respect of the inputs lying in stock or in process as on
the date on which the provider of taxable service starts
availing the exemption should be paid; the balance credit
amount, if any, shall lapse.
||Are there any other General exemptions?
||The following general exemptions from payment of whole of
the amount of Service Tax are available for the Service
- Services provided to the United Nations or International
Organisations (Notification No. 16/2002-ST, dated
- Services provided to a developer of Special Economic
Zone or a unit of Special Economic Zone (Notification
No.04/2004-ST, dated 31.03.2004).
- The value of the goods and materials sold by the service
provider to the recipient of the service is exempted from
payment of the Service Tax, if there is a documentary proof
specifically indicating the value of the goods and materials
- no credit of duty paid on such goods and material
sold, has been taken under the provisions of CENVAT
Credit rules, OR
- where such credit has been taken by the service
provider on such goods and materials, but such service
provider has paid the amount equal to such credit
availed before the sale of such good and materials.
(Notifn.12/2003-ST dated 20.06.2003).
Under this notifcation, the service tax paid by an exporter on
these services is refunded to the exporter on complinace of
conditions mentioned in the notification.
- Exemptions to Diplomatic Missions for official use of
taxable services and also to the officers and their families
of a Diplomatic Mission for personal use of taxable
services-Refer Notification Nos. 33/2007-ST and 34/2007-ST,
both dated 23.5.2007-See Question No. 1.13, 1.14 and 1.15,
- Specified taxable services, namely, port service, other
port service, goods transport service and containerised
transport service, received by an exporter and used for
export of goods (Notification No. 40/2007-ST dated
||Is there any exemption from payment of Service Tax
if the receiver/provider of the service is the Central/State
Government organization and Public Sector Undertakings?
- No. There is no such exemption. All service providers,
including the Central/State Government Organisations and the
Public sector undertakings rendering the specified taxable
service, are liable to pay Service Tax.
- If a Government Department (sovereign)/public
authorities performs any mandatory or statutory function
under the provisions of any law and collect any fees, such
activity shall be treated as activity purely in public
interest and will not be taxable.
- If such authority performs a service, which is not in
the nature of statutory activity, for a consideration, the
same shall be taxable.
- However, the taxable services provided by a Banking
company or a financial institution including a non
banking financial company, or any other body corporate
or any other person, to the Government of India or the
Government of a State, in relation to collection of any
duties or taxes levied by the Government of India or the
Government of a State, are exempted from the payment of
Service Tax. (Notification No. 13/2004-ST, dated
||What are the penal provisions for various
contraventions of the Service Tax Law?
||The Penal provisions for various contraventions of the
Service Tax Law are as follows:—
- A person, who fails to take registration within the time
stipulated shall be liable to pay penalty which may extend
to Rs. 5,000/- or Rs. 200/- per day after the due date,
which ever is higher. The provisions says, a person fails to
“take” registration, whereas it should have been fail to
“apply” registration, as some time the Department take it
own time to grant the registration as recognized by the
Board in its instruction Dy. No.294/Com(ST)/2007 dated
- A person Non payment or delayed payment of service tax -
A mandatory penalty, not less than Rs. 200 per day or @2% of
such tax per month, whichever is higher, shall be imposed by
the adjudicating authority. However, the penalty amount
payable shall not exceed the amount of service tax payable.
- A person fails to furnish the ST-3 Return within the due
date [25th October and 25th April every year] he shall be
liable to penalty which may extend to an amount not
exceeding Rs 2000/- depending upon Period of Delay
- A person, who fails to keep, maintain or retain books of
account and other documents as required in accordance with
service tax law, shall be liable to pay penalty which may
extend to Rs. 5,000/-.
- A person, who fails to furnish information, produced
documents, when called by an officer or fails to appear
before the Central Excise Officer when issued summon, shall
be liable to a penalty which may extend to Rs. 5000/- or Rs.
200/- per day after the due date, which ever is higher.
- A person, who fails to pay tax electronically, through
internet banking, shall be liable to pay penalty which may
extend to Rs. 5,000/-.
- A person, who issues invoice incorrect or with
incomplete details for fails to account for an invoice in
his books of account, shall be liable to pay penalty which
may extend to Rs. 5,000/-.
- Suppression of the value of taxable services: Penalty to
an extent ranging from 100% to 200% of the Service Tax which
was not levied or paid or erroneously refunded, can be
imposed on any person, if such short levy or short payment
or erroneous refund is by reason of fraud collusion, willful
mis-statement, suppression of facts; or contravention of the
Act or the rules made thereunder with an intent to evade
payment of Service Tax. Such liability towards penalty would
be in addition to the Service Tax amount evaded or
erroneously refunded and the interest thereon .
||Is there any provision to waive the penalty under
Service Tax law?
||The penal provisions under Service Tax are provided under
Sections 76, 77 and 78 of Finance Act, 1994. Although the
penalty is liable to be imposed for the circumstances covered
under the said provisions, the Section 80 of the Finance Act,
1994, provides provisions not to impose penalty, for any failure
referred to in the said provisions, if the Service Tax assessee
proves that there was sufficient cause for such failure. Lack of
funds or time is not construed as ‘sufficient cause’
||Why show cause notices are issued by the Department?
||When any amount is demanded as service tax or other dues
from any person under the Finance Act, 1994 and rules made
thereunder and/or any person is liable to penalty under the said
Act/Rules, notices are issued in the interest of natural justice
to enable such person to understand the charges and defend his
case before an adjudicating officer.
||Can show cause notice be waived?
||Where any service tax has not been levied or paid or has
been short-levied or short paid or erroneously refunded, the
person chargeable with the service tax, or the person to whom
such tax refund has erroneously been made, may pay the amount of
such service tax on the basis of his own ascertainment thereof,
or on the basis of tax ascertained by a Central Excise Officer
before service of notice on him and inform the Central Excise
Officer of such payment in writing. In such a case show cause
notice will not be issued.
and determination of tax
||Adjudication and determination of tax?
- When show cause notices are issued under provisions of
the Finance Act, 1994 charging any person for contravention
of any provisions of the said Act and rules and/or
notifications issued thereunder and penal action is proposed
the competent officers of the Department adjudge the case
and issue orders. This process is called adjudication.
- Often notices are issued under section 73 of the Finance
Act, 1994 for determination of tax, and the matter is
decided by a competent officer. This is also referred to
adjudication in common parlance.
||Is the presence of a Chartered Accountant necessary
||No. The Noticees can defend their case themselves. They may
engage a lawyer , duly authorised to defend their case before an
||Who should be approached when an assessee is
aggrieved by an order/decision of the Adjudicating authority
subordinate to the Commissioner of Central Excise in respect of
Service Tax? What is the procedure for filing the Appeal?
- An assessee aggrieved by such order/decision may file an
Appeal to the Commissioner (Appeals) in Form ST-4, in
- A copy of the order/decision appealed against should be
- The Appeal should be filed within 3 months from the date
of receipt of the order/decision.
- There is no fee for filing an Appeal before the
Commissioner of Central Excise (Appeals) (Section 85 of the
Act and Rule 8 of the STR, 1994).
||Can the time limit of three months for filing the
appeal to the Commissioner (Appeals) be extended? If yes, under
||Yes. If the Commissioner (Appeals) is satisfied that the
appellant was prevented by sufficient cause from presenting the
Appeal within the statutory period of three months, he may allow
the Appeal to be presented within a further period of three
months. The law does not provide for further extension of time .
||Can an Appeal be filed against the order/decision of
the Commissioner of Central Excise or Commissioner (Appeals)? If
so, what is the procedure for that?
||Yes. The procedure is as follows:—
- The Appeal against the order of the Commissioner of
Central Excise or Commissioner (Appeals) can be filed before
the Customs, Excise and Service Tax Appellate Tribunal (In
short, CESTAT). The Appeal should be filed within three
months of the date of receipt of the order sought to be
- It should be filed in the prescribed Form (ST-5) in
- It should be accompanied by a certified copy of the
order appealed against.
- The Appeal should be accompanied by the prescribed fee
based on the amount of Service Tax and interest demanded and
penalty levied. Rs. 1000/- if the amount involved is Rs. 5
lakhs or less, Rs. 5000/- if the amount involved is more
than Rs. 5 lakhs but not exceeding Rs. 50 lakhs and Rs.
10,000/- if the amount involved is more than Rs. 50 lakhs.
(Section 86 of the Act and Rule 9 of the STR, 1994).
||What is CENVAT Credit Scheme with reference to
Service Tax assessees?
||The CENVAT credit Rules, 2004 which was introduced with
effect from 10.9.2004 provides for availment of the credit of
the Service Tax/Central Excise duties paid on the input
services/inputs/ capital goods. Such credit amount can be
utilized towards payment of Service Tax by an assessee on their
In fact, such credit availed by a
manufacturer can also be utilised for discharging their
liability towards Service Tax and/or Central Excise duties.
||What are the duties/taxes that can be availed as
||Duties paid on the inputs, capital goods and the Service Tax
paid on the ‘input’ services can be taken as credit. Education
Cess paid on the Excise duty and Service Tax can also be taken
as credit. However, the credit of Education Cess availed can be
utilized only for payment of Education cess relating to output
service. The interest and penalty amounts cannot be taken as
||What is meant by ‘input’, ‘input service’ and
‘capital goods’ for a service provider?
||These terms have been defined in the CENVAT Credit Rules,
||Is it compulsory that the inputs/capital goods are
to be purchased only from the manufacturers for the purpose of
availment of credit?
||No. The inputs/capital goods can be procured from the First
stage and Second stage dealers also. Those dealers should have
0 $!3$ 2 $ 4($, $$" ` e`4 t`` Bd.`pal ```1 D`part $ `` a,"bacd" accpd` "1 4( %5$$ %" ``d 0"bpd ``$aid" a`d5 d`a a`e` h` d5 p cd `oc` c-"$2$, 0 , $4" d`0 `d 4daa"< 0a` cha0A, "a`p" c.,"d`< 04$ 400 $$"h`d !"d thd `d"`del `p%"`babdd d"2 (``e` h` t CEBDA 0 $ 02, 340, $4 ``$(,`p8 `, ,`d "$.- p.0d`` f A$<"A`p#"& 4`20d$"P`a cem`dp1 "$ ( `red) aah `e ``il `p% @c
,ar 0 !0! cl p`p% ! , , !6 `bab% hasq$` `h `d - "4 4are` ``` ( r `dp- " $, $ "$ !& `r 4.h`, @`.Ad Ea"$ 4a` ` ``` pebt an` `)" ! 0, #&1( "$ ` a`abt" 4- I2
4 ( apaa ``` bebd `ag` `% 2 !$ 04$ " ` p`e
`bdb! Dp`(#% De abda$fd (#d)" 8,h.@`l` id ht` 4&l >
$` 2H`pe)"`%B` #Ch`d`!" !1 $ 1 $ ! hrad%" b` a.`td P``da dc ,a2$, 2Abt" ce/B``," , , 00$ " p`d b`dt Cd"``ad dhp`b`"4
<<% Af` Ada aRaad` Bh ``a 0(#@BI&4#@DM@ m>d)
of STR, 1994].
||Whether it is necessary to avail credit only after
making payment against the bill/invoice/challan in respect of
||Credit of Service Tax on the input services can be availed,
only after making payment of the amount indicated in the
invoice/bill/challans. This is necessary because, the input
service provider will be paying the Service Tax to the Govt.
only after he realizes the payment, as the payment of Service
Tax is only upon realization.
The above requirement is not
applicable in respect of credit of duties paid on inputs and
||Who is an “Input Service Distributor”?
||An office of the manufacturer or provider of output service
who receives invoices for the procurement of input services and
issues invoices for the purpose of distributing the credit of
Service Tax paid to such manufacturer or provider of output
service is an “Input Service Distributor”.
The credit of the
tax amount so distributed to various places shall not exceed the
total Service Tax amount contained in the original invoice/bill.
||What is the format of the invoice/bill/challan to be
issued by the input service distributor?
||No specific format has been prescribed. However, the same
should contain the following information:—
- Name, address and Registration No. of the service
- Sl. No and date.
- Name and address of the input service distributor.
- The name and address of the recipient to whom the
Service Tax credit is distributed.
- The amount of credit being distributed.
||Whether the input service distributors should get
themselves registered with the Department? Whether they have to
file any returns with the Department?
||Yes. They have to register themselves as per the provisions
made under Service Tax (Registration of Special Category of
Persons) Rules, 2005. They have to file half yearly returns by
the end of the month following the half year.
||What are the records to be maintained by the persons
||There is no specific format of records to be maintained.
However, they have to maintain adequate records showing the
details such as receipt, disposal, consumption and inventory of
inputs and capital goods, the amount of credit taken and
||What should be done, if an assessee is rendering
both taxable services as well as exempted services, but the
inputs and input services are common?
- Separate accounts are to be maintained
for the receipt, consumption and inventory of input and
input service meant for providing taxable output service and
for use in the exempted services. Credit should be taken
only on that quantity of input/input services which are used
for the service on which Service Tax is payable.
- If separate accounts are not maintained, the provider of
output service shall utilize credit only to extent of an
amount not exceeding 20% of the amount of service tax
payable on taxable output service. For example, if Service
Tax liability for a specific period is Rs. 1000/- and there
is a credit of Rs. 500/- available with them, the credit can
be utilized only to the extent of Rs. 200/- and the balance
Service Tax liability (i.e.
Rs.1000-200=800/-) has to be paid in cash/cheque. The
remaining credit can be carried forward and used for the
subsequent period in a similar manner.
- However, an option is available to general insurance
service providers providing taxable as well as exempted
insurance schemes and do not maintain separate input/input
services credit accounts to utilise CENVAT credit
proportionate to the inputs and input services used in
providing taxable services. The scheme is optional and is
effective from 1st April, 2007. Refer Rule 6(3) of CENVAT
Credit Rules, 2004 for further details.
on receipt of services from outside [Import of services]
||What is the statutory provision regarding taxing of
services provided from outside India and received in India?
||Section 66A of the Finance Act, 1994, inserted with effect
from 18.4.2006, provides that where any taxable service is
provided or to be provided by a person who has established a
business or has a fixed establishment from which the service is
provided or to be provided or has his permanent address or usual
place of residence, in a country other than India, and is
received by a person who has his place of business, fixed
establishment, permanent address or usual place of residence, in
India, such service shall be taxable service.
||Is the recipient of service liable to pay tax for
the services rendered from abroad?
||The recipient of service shall be liable to pay tax if the
provider of service do not have any established business or a
fixed establishment in India. However, a person carrying on a
business through a branch or agency in any country shall be
treated as having a business establishment in that country
||Where provider of the service has his business
establishments in more than one country, which country should be
treated as the country from which service is provided?
||If the provider of the service (from outside India) has his
business establishments in more than one country, the country,
where the establishment of the provider of service directly
concerned with the provision of service is located, shall be
treated as the country from which the service is provided or to
||What will be ‘usual place of residence’ of a body
||Usual place of residence, in relation to a body corporate,
means the place where it is incorporated or otherwise legally
||What constitutes import of services?
||The Taxation of Services (Provided from Outside India and
Received in India) Rules, 2006 specifies 3 categories of cross
border transaction of services and conditions that will be
construed as import of services, namely,—
Thus, each transaction has to be seen individually to ascertain
if it constitutes import of services, fulfilling the requisite
- specified services which are provided in relation to
immovable properties situated in India – [See list of
services in Appendix-4 (Not reproduced here, already
available in the book)]
- specified services which are provided partly in India –
[ See list of services in Appendix -4 (Not reproduced here,
already available in the book)]
- the remaining taxable services, barring a few
exceptions, when provided in relation to business or
commerce, to a recipient located in India. [ See list of
services in Appendix -4 (Not reproduced here, already
available in the book)]
||Are individuals receiving service from outside India
also liable to pay tax?
||If the recipient of the service is an individual and such
service received by him is otherwise than for the purpose of use
in any business or commerce, service tax will not be payable by
him. If the services received are for the purpose of use in any
business or commerce, then service tax will be leviable.
||What is meant by advance ruling?
||Advance ruling means the determination, by the Authority, of
a question of law or fact specified in the application regarding
the liability to pay duty/service tax in relation to an activity
which is proposed to be undertaken, by the applicant. Activity
means service to be provided.
||What is the scheme of advance rulings?
||Authority for Advance Rulings for Excise and Customs is
meant to provide binding ruling on important issues so that
intending investors will have a clear-cut indication of their
duty/tax liability in advance. Since advance rulings are not
appealable under the Finance Act, 1994, it assures the applicant
of the finality of the tax liability and hence freedom from
spending time, energy and money in legal battles which mostly
||Who can apply for an advance ruling?
- A non-resident setting up a joint venture in India in
collaboration with a nonresident or a resident; or
- A resident setting up a joint venture in India in
collaboration with a nonresident; or
- A wholly owned subsidiary Indian company, of which the
holding company is a foreign company, which proposes to
undertake any business activity in India;
- A joint venture in India,
- A resident falling within any such class or category of
persons, as the Central Government may, by notification in
the official Gazette, specify in this behalf, and which or
who, as the case may be, makes application for advance
ruling under sub-section (1) of section 28H.
- A resident as an applicant who proposes to import any
goods from the Republic of Singapore under Comprehensive
Economic Co-operation Agreement (CECA). –Refer Notification
No. 69/2005, dated 29.07.2005
||On which questions can an advance ruling be sought?
||Advance rulings, concerning service tax matters, can be
sought in respect of—
- Classification of any service as a taxable service under
Chapter V of the Finance Act, 1994;
- Principles to be adopted for the purposes of
determination of value of taxable service under the said
- Determination of the liability to pay service tax on a
taxable service under the said Act;
- Valuation of taxable services for charging Service Tax;
- Applicability of notifications issued under said Act.