How to Calculate Service Tax in India?

Before calculating Service Tax, it is important to understand what is Service Tax. Successive Government's have altered Service Tax to improve government revenues and have added and deleted the list of services, that come under the purview of Service Tax.

Today, this form of tax has become an important source of revenues to the government. Service Tax can simply be defined as a type of tax that is levied on a service. This could be services rendered at a hotel or simply in your telephone bill.

Service Tax was levied by the Congress led Government when India's Finance Minister was Manmohan Singh, the then Finance Minister. Today, the tax collected by Service Tax is roughly Rs 1,32,518 crores in 2012-13. This is a staggering sum and has over the years helped the government to cut its fiscal deficit.

How to Calculate Service Tax in India?

At the moment Service Tax is levied at a flat rate of 12 per cent. But, as always the case there is an education cess @ 2 per cent on the 12 per cent and also a higher education cess. This takes the effective service tax rate to 12.36 per cent.
Let's cite an example on how you would pay service tax in India. Say, that you have hired a Chartered Accountant and his fees amount to Rs 100,000. Now, on this there is a service tax that is payable at the rate of 12.36 per cent. So, you would end-up paying a Service Tax of Rs 12,360. This can sometimes be a severe burden.

Negative List of Service Tax

Not all services come under the purview of Service Tax. There are certain services like those rendered by government agencies where there is no Service Tax levied. It's quite common at post office and other government departments to see no service tax. Do check the list of services that are in the negative list of service tax, which means they do not attract service tax.

Assesses are required to main proper records of Services rendered and those that are taxed. The taxed amount has to be then deposited with the proper authorities.