Service tax
There are basically two types of taxes a. direct tax b. indirect tax. Direct taxes includes the income tax because the incidence of tax is directly levied upon an individual. Indirect taxes are collected from the public by providing them commodities or services. Taxes like sales tax, service tax, luxury tax, WCT tax are known as indirect tax.
Service tax is charged by the service providers for rendering services like labour, professional services or even works like printing. The laws of service tax differs from nation to nation. The rate of tax rates fluctuate according to the government policies and economic trends in a country. Service tax is basically bifurcated into three categories. A. basic service tax. B.basic education cess. C. higher secondary education cess.
Service tax is not application to the supply of commodities or when purchases takes place. When you buy a commodity from a dealer he does not charge service tax, but collects tax is the form of sales tax. Overall, service tax is charged either by the works contractor or a professional such as doctor, lawyer, chartered accountants etc. a person levying service tax must be either a proprietor of a firm or a practicing professional. An individual working as a chartered accountant in an MNC cannot collect service tax from the visitors who come to him to seek advice.
Service tax can be imposed by only a registered dealer. A cobbler mending the shoes of several people in the early morning hours cannot collect service tax from the people. When the service provider levies service tax to the people he must maintain the track of the total tax collected by him.
Depending upon the laws followed by the nation, certain exemptions are laid by the service providers to its benificiers. Usually, if the provider exceeds a certain limit of his income, only then he can levy tax. Depending upon the kind of service provided by him, the service tax with some amount is refunded.
Service tax can be refunded under certain circumstances. If the person is providing input services to the receiver which is convertible into another type of services, then the receiver can claim service tax from the receiver. For eg, if a company manufactures control panels and receives services from the contractors for manufacturing the raw materials required to prepare switch boards, then the service provider charges service tax. Under this condition, the manufacturing company can claim the service tax.
When the vendor prepares invoice to give it to the purchaser, he must systematically maintain the track of service tax on the invoice. He must separate mention the basic service tax, basic education cess and higher secondary education cess. The rates must be mentioned accurately. The service registration on the invoice must be present. Otherwise, it should be at least sealed with the service tax number. The purchaser has the right to reject the bill if the number on the invoice is not found.
Nowadays days due to the advent of the new technologies, service tax is been levied on many kinds of services such as ATM, processing of loans and credit facility.
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