What is Service Tax in India?

These days it's almost impossible to escape service tax and they have been extended to almost every type of service, whether it in a restaurant or paying your telephone bill or advertisements in the media. Earlier, the restriction to service tax was rather limited, but now it extends to almost every type of service except in the case of those on the negative list. At the moment service tax is levied on all service providers, except those that are exempt. Service Tax is Exempted in the State of Jammu and Kashmir.

What Is Service Tax? 

Service Tax is a type of tax that you pay on services rendered. For example, you pay a tax on income that you receive, which is called income tax, on the other hand a tax is levied on goods manufactured and sold, which is called excise duty, so on and so forth.

Negative List of Service Tax

There are many services that are currently on the negative list of service tax. What this means is that the service rendered on these do not attract service tax. Let's give you some examples. The services provided by the government or local authorities is on the negative list. Services provided by the post office like speed post, registered post are all exempt. Services also provided by the Reserve Bank of India is exempt from the list of service tax. 

Union Budget Removes Certain Services From the Negative List

In the Union Budget 2014-15 a few more additions were made, including those on services provided by Radio Taxis. Also, in the Union Budget service tax was added on all advertisements, other than in print media. There are many that fall in the negative list and others that come back under the purview of service tax.

How to Calculate Service Tax in India?

At the moment service tax is levied at the 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... Say, that you have hired a lawyer and his fees amount to Rs 10,000. Now, on this there is a service tax that is payable at the rate of 12.36 per cent. This takes the effective fees to Rs 12,360. It is now the responsibility of the lawyer to deposit the service tax with the concerned authorities.