The service tax is the youngest among all other sources of indirect taxes in India. It was introduced to boost up the of tax revenue collections as collections of direct tax had touched the roof already. The provisions for Service Tax was first introduced in July1, 1994, this Act is applicable to all the states and union territories of India except Jammu and Kashmir. The system of submitting self assessed return was introduced with effect from April 1, 2001.
Service Tax Rate in India 2011-12
With effect from February 24, 2009, the service tax rate is 10% of the value of the service tax base amount + 2% of the value of Service Tax amount as Educational Cess + 1% of (10% +2% of 10%) as Higher Secondary Educational Cess or total comes up to10.
The collection of service tax is showing a constant rise since when it was first introduced in 1994. From the initial collection of Rs 410 crores in 1994-95 it rose to RS 58422 crores in 2010-11 and it is estimated to touch Rs 82,000 crores in 2011-12. Presently it is collected on accrual basis not as cash basis.
The last budget of 2011-12 has included service tax in hotel accommodations with room rent over Rs 1,000 per day. It is now also applicable to air conditioned restaurants with bar, diagnostic laboratories, selected hospitals also. Service tax payable on international and domestic air travel
by economy class has been increased by Rs 250 and Rs 50 respectively. The air fare for business or executive class will be flat 10%.
Any person liable to pay this tax must apply for registration within 30 days from the beginning of his service or activity that came in to effect under this Act.
In case of Partnership Firm or Proprietary Concern or Individual, service tax has to deposited quarterly basis. The due date for payment will be in such circumstances on the 5th day from the last date of any quarter. Quarters are every three months commencing from April every year. The tax due on 1st quarter will be 5th day of July.
However, service tax is not applicable under the following:
- Service providers with turnover less than Rs.4 lakhs per annum.
- Export service providers.
- Services provided to United Nations and other specified agencies and Special Economic Zone.
- Services in agriculture.