New Delhi, Oct 12 (KNN)  Service tax, as the name suggests, is a tax on services.  It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994.

It is an indirect tax (akin to Excise Duty or Sales Tax) which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service.

Who is liable to pay service tax?
 
Normally, the “person‟ who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government.   
 
However, in the following situations, the receiver of the services is responsible for the payment of Service tax:
 
(i) Where taxable services are provided by foreign service providers with no establishment in India, the recipient of such services in India is liable to pay Service Tax.
 
(ii) For the services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be paid by the Insurance Company.
 
(iii) For the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight is liable to pay Service Tax, if the consignor or consignee falls under any of the seven categories viz. (a) a factory (b) a company (c) a corporation (d) a society (e) a co-operative society (f) a registered dealer of excisable goods (g) a body corporate or a partnership firm.
 
 (iv)  For the taxable services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.

What is the rate of Service Tax?
 
At present, the effective rate of Service Tax is 10.3 per cent on the value of the taxable service. The above effective rate comprises of Service Tax @10 per cent payable on the “gross value of taxable service”, Education Cess @ 2 per cent on the service tax amount, and Secondary and Higher Education Cess @ 1 per cent on the service tax amount.

What is meant by ―Registration? Who should apply for registration under Service Tax law?
 
In terms of Section 69 of the Finance Act, 1994 (Chapter V) read with rule 4 of the Service Tax Rules, 1994:

Every person who has provided a taxable service of value exceeding Rs 9 lakhs, in the preceding financial year, is required to register with the Central Excise or Service Tax office having jurisdiction over the premises or office of such service provider.
 
In case a recipient is liable to pay service tax, he also has to obtain registration. The “Input Service Distributors” are also required to register them.  Every person who provides taxable service is liable to pay service tax.
 
Why registration is necessary?
 
Registration is identification of an assessee. Identification is necessary to deposit service tax, file returns and undertake various processes ordained by law relating to service tax. Failure to obtain registration would attract penalty in terms of section 77 of the Finance Act, 1994.

What does the word ―person appearing in the definition of taxable service mean?
 
The word "Person" shall include any company or association or body of individuals, whether incorporated or not. Thus, this expression includes any individual, HUF, proprietary firm or partnership firm, company, trust, institution, society etc.

What is the procedure for Registration? Who should be approached for Service Tax Registration?
 
A prospective Service Tax assessee (service provider or service receiver) or “Input Service Distributor” seeking registration should file an application in Form ST-1 (in duplicate) before the jurisdictional Central Excise/Service Tax officer. To verify the correctness of declaration in the said form, certain documents such as copy of PAN card, proof of address of business premise(s), constitution of the business [proprietorship, firm, company, trust, institute etc.] etc. may be required by the registering authority. The copies may be self-certified by the applicant. In case of doubts in select cases, original documents may have to be presented for verification.

Is PAN allotted by the Income Tax Department a must for obtaining Service Tax Registration?
 
Having PAN is essential because the Service Tax Code/Registration number is generated based on the PAN issued by the Income Tax Department. The PAN based Service Tax Code/Registration number is a must for payment of service tax using the G.A.R. 7 Form. 

For further details, refer to Central Board of Excise and Customs (CBEC) website.  (KNN)