Is my Service is liable for Service Tax? – Check the Service tax Applicability on Your Business

Introduction

Is my service is liable for service tax? Do I require the service tax registration? You may also have come across the similar question while delivering your service to the end user. Service tax is a wide concept and takes years to get the mastery done over this subject. But don’t worry; only a finance person has to get through that pain.

 

But, still you must take a little pain to learn the basic applicability of the service tax on your service. Just read the basic steps about the applicability mentioned below. We have created a flow; try to answer the questionnaire to you to know the better of service tax.

Before going to further understand the basic questionnaire, let us learn some basics about the Service tax:

1. Service tax is an indirect taxes levied on the services rendered by any person in India against a consideration. Indirect taxes means the burden of the tax does not fall on the person who is liable to pay.
   
   E.g. Restaurant is liable to pay the service tax on the services provided to the government, but it collects the same from the customers.
    

2. If you are into trading business, then you are not liable for service tax. However, if you are doing both i.e. providing service as well as the trading or manufacturing, then you will fall under the service tax ambit. E.g. restaurant business, construction business, etc.
    
3. The rate of service tax is 14.5% (w.e.f 1 June 2016 the rate will be 15% on account on the increase due to an addition of 0.50% Krishi Kalyan Cess).
    
4. A Service provider is liable for service tax collection and payment and hence, in case Service Provider is not able to collect it from the customers, then he needs to pay the taxes from his pocket.
    

The Questionnaire: After Basics

Since now we have discussed the basics, let us understand the questionnaire through which you can judge whether you fall under service tax ambit or not;

#Question 1: Understand the Nature of Business: The first step is to understand the fundamental nature of your business. If you are rendering any service, then you must see whether you are providing the services or dealing in goods or both. The three situations can be treated in the following manner:

• Dealing only in Goods: Service tax is not applicable.
• Rendering services: Service tax registration is mandatory, proceed to next step.
• Dealing in Services and goods both: Service tax is applicable, proceed to next step.
   

#Question 2: Check the revenue side: After understanding your business in depth, let us check the revenue and its impact on service tax. The service tax has a concept of Small Scale Industries (SSI). According to which any business is having the turnover less than 10 lakh per annum is exempt from tax.

The mechanism of SSI exemption works as follows:

If you have crossed the threshold of 10 Lakh rupees, then proceed to next step.

#Question 3: Categorise Your Service and check for Exemption: Once the answer to Question 3 is affirmative, then you should first categorise your service. Under service tax, taxability differs according to the service. Through maximum services are very straight forward and covered fully under the ambit.

How should I categorise my Service?
This is very simple. There are 119 services defined in the act. And Categorization is done according to that.

E.g. If you are a Chartered Accountant, you are providing Chartered Accountant service or if you are a farmer, then must be providing agriculture Services.

Once, you are done with the categorization, check the negative list of services and the exemption notification on your category of service. If you are covered under any of the two, then you are not required to charge any service tax.

However, if you are not covered by any of the services, then proceed to next step.

Question 4: Check the Declared Service: Once, you are passed through the Question 3, and before getting into registration, you must verify the declared service as mentioned under Section 66E of Declared Services. Because there may be cases when you are not covered in any of the points before but you may fall under this section.

If you fall under any of the services, then you must get registered and pay the taxes. However, SSI exemption will still be valid. Some of the services mentioned in section 66E;

• Renting of immovable property
• Construction of Complex, building, civil structures, etc
• Operating leases
• Works contract etc.
   

#Question 5: Get the Registration and Compute the taxes: Once you are liable for service tax, then the first step to getting the service tax registration and then compute the taxes correctly.
 

Conclusion

Service tax is very wide in itself, so it is very difficult to sum up all the things into one article. However, we have tried our best to get all the things into one article.  In the case of any doubt or any other query, ask us directly by clicking here.

Register for Service tax online from anywhere in India.