Definition of 'Service Tax' Definition:
Service tax is a tax levied by the government
on service providers on certain service transactions, but is
actually borne by the customers. It is categorized under
Indirect Tax and came into existence under the Finance Act,
1994.
FEATURES-
The salient features of levy of service tax are:
1. Scope: It is leviable on taxable services ‘provided’ or ‘to be
provided’ by a service provider. The services ‘to be provided’ in
future are taxed only if payment in its respect is received in
advance.
Two separate persons required Payment to employees not
covered: For charge of service tax, it is necessary that the
service provider and service recipient should be two separate
persons acting on ‘principal to principal basis’. Services
provided by an employee to his employer are not covered
service tax and, therefore, salaries or allowances paid to them
cannot be charged to service tax.
2. Rate: It is leviable @ 12% of the value of taxable services.
Education Cess @ 2% and Secondary and Higher Education
Cess @ 1 % are chargeable on the amount of service tax, thus,
making the effective rate of service tax at 12.36% of the value
of taxable service.
3. Taxable services: Service tax is leviable only on the taxable
services. Taxable services mean the services taxable under
section 65(105) of the Finance Act, 1994.
4. Value: For the levy of the service tax, the value shall be
computed in accordance with section 67 read with Service Tax
(Determination of Value) Rules, 2006.
5. Free services not taxable : No service tax is leviable upon
the services provided free of cost.
6. Payment of service tax : The person providing the service
(i.e. the service provider) has to pay service tax in such manner
and within such period as is prescribed in the Service Tax Rules,
1994. The service tax is to be paid only on the receipt of
payment towards the value of taxable services.
7. Procedures: Provisions have been made for registration,
assessment including self assessment, rectifications, revisions,
appeals and penalties on the service provider.
8. CENVAT credit: The credit of service tax and excise duty
across goods and services is allowable in accordance with the
CENVAT Credit Rules, 2004. Accordingly, output service
provider (i.e. provider of any taxable service) can avail credit
not only of the service tax paid on any input service consumed
for rendering any output service but also of the excise duty paid
on any inputs and capital goods used for rendering output
service.
9. Services provided by an unincorporated
association/body to its members also taxable
[Explanation to Sec. 65] : ‘Taxable service’ includes any taxable
service provided or to be provided by any unincorporated
association or body of persons to a member thereof, for cash,
deferred payment or any other valuable consideration.
Hence, the services (falling under any category of taxable
service) provided or to be provided by any unincorporated
association/body to member thereof shall be liable to service
tax. This provision is an exception to the ‘principle of
mutuality’.
11. Import/Export of services: While import of services is
chargeable to tax u/s 66A, the export of services has been
made exempt from tax.
SERVICEAND EXCISE DIFFERENCE
Excise:- is one of the tax received by goverment.this duty
is a tax levied on the producer of certain goods,
commodities and activities. this tax is now known as the
Central Value Added Tax (CENVAT).
Service tax:- is a tax levied on service providers in
India, except the State of Jammu and Kashmir.
The responsibility of collecting the tax lies with the
Central Board of Excise and Customs(CBEC). Central Board of
Excise and Customs (CBEC) is a part of the Department of
Revenue under the Ministry of Finance, Government of India
Service Tax .: Service Tax only For Service Charges. As.
TransPotr, Doctor , C.A E.T.C But Apply the more Condition.
Excise Duty .: Excise Duty Only for Manufacturing Goods.
But Provided that Company Trun Over Above 1.5 Crore
Sales Tax
Sales tax is levied on the sale of a commodity, which is
produced or imported and sold for the first time. If the product
is sold subsequently without being processed further, it is
exempt from sales tax.
Sales tax is recovered from the buyer as a part of consideration
for sale of goods.
Sales tax is paid by every dealer on the sale of any goods made
by him in the course of inter-state trade or commerce, despite
the fact that no liability to tax is raised on the sale of goods
under the tax laws of the appropriate state.
Types of Sales Tax:
Retail Sales Tax – This is a tax charged on sale of retail
goods and is directly paid by the final consumer.
Manufacturers’ Sales Tax – This tax is levied on the
manufacturers of certain goods.
Wholesale Sales Tax – This tax is levied on individuals who
deal with wholesale distribution/sale of manufactured
goods.
Use Tax – This is a tax levied on the consumer for goods
which are purchased without sales tax (generally from
vendors who are not under the tax jurisdiction).
Value Added Tax – This is an additional tax levied on all
sales by certain governments.
Sales Tax Exemptions:
States offer tax emptions in certain cases, which can be humanitarian or to avoid double taxation.
Sellers with genuine state resale certificates are exempted from tax when they resale products.
Products sold to charities or schools are provided tax exemptions.
There are a list of essential and local commodities which are exempted from sales tax.
Calculation of Sales Tax:
Sales Tax might seem like a complicated term to a lot of people and a lot of us think that calculating
it is extremely hard, if not impossible. It is however far from the truth, as calculating sales tax is no
Herculean task if one gets the basics right.
Total Sales Tax = Cost of item x Sales tax rate
Value Added Tax
VAT is the indirect tax on the consumption of the goods, paid
by its original producers upon the change in goods or upon the
transfer of the goods to its ultimate consumers. It is based on
the value of the goods, added by the transferor. It is the tax in
relation to the difference of the value added by the transferor
and not just a profit.
All over the world, VAT is payable on the goods and services as
they form a part of national GDP. It means every seller of goods
and service provider charges the tax after availing the input tax
credit. It is the form of collecting sales tax under which tax is
collected in each stage on the value added of the goods.
Method of Collection
There are two methods for collection of VAT in India. In the first
method, tax is charged separately on the basis of the tax which
is paid on purchase, and the tax that is payable on the sale
(shown separately in the invoice). Therefore, the difference
between the tax paid on purchase and the tax payable on sale
as per the invoice is the VAT.
In the second method, tax is collected and charged on the
aggregate value of the tax payable on sale and purchase, by
applying the rate of tax applicable to the goods. Therefore, the
difference between the sale price and purchase price would be
VAT. It means VAT is the tax which consumers ultimately face,
which is collected at each stage.
“Place of removal” is defined in section 4 of the Central Excise
Act 1944 (hereinafter, the Act) as follows: [Section 4(3)] (c)
"place of removal" meansi)
1-a factory or any other place or premises of production or
manufacture of the excisable goods;
ii) a warehouse or any other place or premises wherein the
excisable goods have been permitted to be deposited without
payment of duty,
iii) a depot, premises of a consignment agent or any other
place or premises from where excisable goods are to be sold
after their clearance from the factory, from where such goods
are removed; Thus, in terms of the definition, a place from
where goods are sold after their clearance from the factory
comes within the meaning of ‘place of removal’.
Definition of 'Customs Duty'
Definition: Customs Duty is a tax imposed on imports and
exports of goods.
Types of Custom Duty:
Custom duties are levied almost universally on all goods
imported into the country. Export duties are levied on a few
goods as specified under the Second Schedule. Import duties
are not levied on a few items including lifesaving
drugs/equipment, fertilizers, food grains etc. Import duties are
further divided into basic duty, additional customs duty, true
countervailing duty, protective duty, education cess and anti-
dumping duty or safeguard duty.
Basic Custom Duty:
Basic custom duty is applicable on imported items that fall
under Section 12 of the Customs Act, 1962. These duties are
levied at the rates prescribed in First Schedule to Customs Tariff
Act, 1975,. The levied rates may be standard or preferential as
per the country of import.
Additional Customs Duty (Countervailing Duty (CVD)):
This duty is levied on imported items under Section 3 of
Customs Tariff Act, 1975. It is equal to the Central Excise Duty
that is levied on similar goods produced within India. This duty
is calculated on the aggregate value of goods including BDC and
landing charges.
Protective Duty:
Protective duty may be imposed to shield the domestic industry
against imports at a rate recommended by the Tariff
Commissioner.
Education Cess:
This duty is levied at 2% and higher education cess at another
1% of aggregate of customs duties.
Anti-dumping Duty:
Anti-dumping duty may be imposed if the good being imported
is at below fair market price, and is limited to the difference
between export and normal price (dumping margin).
Safeguard Duty:
Safeguard duty is levied if the government feels that a sudden
increase in exports can potentially damage the domestic
industry.
PERSON INCHARGE UNDER SECTION 2(31)OF CUSTOM ACT
Section 2(31) in the Customs Act, 1962
(31) “person-in-charge” means,—
(a) in relation to a vessel, the master of the vessel;
(b) in relation to an aircraft, the commander or pilot-in-charge
of the aircraft;
(c) in relation to a railway train, the conductor, guard or other
person having the chief direction of the train;
(d) in relation to any other conveyance, the driver or other
person-in-charge of the conveyance;
