Why and when is Service Tax registration required?

What is service tax

It is a tax payable on the services rendered by the service provider. It is a Union levy, with a selective approach, whereby it is applicable to selected categories of services and not all. The services are classified as negative list of services, declared services and exemptions accordingly.

Who should pay service tax

Every person providing taxable services shall pay service tax. However, in certain services, the service receiver is also liable to pay service tax.

There is an option of availing service tax exemption where the aggregate value of taxable services does not exceed Rs. 10 lacs in a financial year. Where the value of taxable services exceeds Rs. 10 lacs, service tax is payable on every rupee over the said limit. This exemption being optional, service provider can pay service tax irrespective of value of services.

Service tax registration

Every service provider should apply for services tax registration whose aggregate expected value of taxable service exceeds Rs. 9 lacs in a financial year. Application for registration has to be made within 30 days of the turnover exceeding Rs. 9 lacs.

Thus, application for service tax registration has to be made where the turnover exceeds Rs. 9 lacs, however, service tax is payable when the services rendered exceeds above Rs. 10 lacs.

Rate of Service tax

The rate of service tax has been increased from 5% in the year 1994 to 14% 2015 . However, w.e.f. October 15, 2015, Swachh Bharat Cess @ 0.5% shall also be applicable, further increasing the service tax rate to flat 14.50%. Thus, the effective rate of service tax is 14.50% (w.e.f. 15.10.2015).

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CA Ruchi Shah

CA Ruchi Shah

Author is a Practicing Chartered Accountant with a firm hold on Start-up consultation and International Taxation.