Service tax is levied on the notified services by the Central Government. The rate of its is currently 10 per cent. However, the assistance Tax rate is scheduled to growth to 12 percent with the enactment of the Finance Bill, 200G. Education cess at 2 percent is levied on the this Tax. The productive rate of assistance Tax works out to 10.2%, which would growth to 12.24%.
This is charged on the gross value of services and is commonly payable on a receipt basis. It is an indirect tax - payable by the assistance provider but commonly recovered from the recipient of services. The law requires separate mention of assistance Tax amount in the invoices.
Ordinarily, every person liable to pay this Tax is required to register it with the assistance Tax authorities and comply with procedural requirements like paying taxes, filing returns, etc. However, in the case of non-resident assistance providers who do not have offices in India, this burden is shifted to the recipient of the assistance with succeed from 16 August 2002. Further, with succeed from 16 June 2005, where any taxable assistance is in case,granted by a non-resident even from surface India and received by a resident having a place of enterprise in India, such assistance is also deemed to be a taxable assistance and liable to be taxed in the hands of the recipient. In this regard, the GoI now proposes to generate exact rules that will govern the taxability of a exact assistance rendered from surface India and received in India. Draft rules in this regard have already been issued for comments from the industry.
There is a basic exemption limit of 1,00,000 rupees (Us $ 8,900), which means that assistance Tax shall be exempted for assistance providers providing taxable services up to the aforementioned amount. A mechanism for prestige of input assistance Tax and Cenvat on specified inputs and capital goods is also in place.
Any assistance for which cost was received in convertible foreign transfer in India and which was not repatriated or sent surface India was exempt from levy of assistance Tax up to 14 March 2005 (except for the duration 1 March -19 November 2003 when this exemption was withdrawn). The GoI has now notified the new 'Export of assistance Rules 2005', which defines what constitutes 'export of services'. These rules have been productive from 15 March 2005. Consequently, the exemption from assistance Tax on payments received in convertible foreign transfer has now been removed with succeed from the aforementioned date. When two or more services are bundled together, it would be classifiable under the type that gives vital character to this. Classification rules are in place from 14 May 2003. If, in case of composite activities, one or more of the activities are liable to assistance Tax and others are not. This would commonly be payable only on the charges received for the services to which the tax is applicable. This is in case,granted charges for each operation can be separately identified/determined and it is not incidental to the main service.
This/Cenvat incurred on input services/goods is available as prestige which can be used as a set-off against production Tax liability. However, with respect to tasteless service/inputs budget principles have not been well articulated in law. The language of the law is broad and generic and uses terms such as 'directly or indirectly' and 'in any manner', which raise a amount of issues about the scope of the exact type of service. Revenue authorities have been issuing explanatory circulars from time to time in relation to exact issues. Yet there remains vital ambiguity in the applicability of this law to discrete services.
This is currently levied on 81 notified categories of services. A total of 15 more taxable services will be covered by enactment of the Finance Bill, 2006.
assistance Tax Law - India