What is service tax?
Service tax is a tax imposed by the Indian government as part of its taxation system. The tax is applied to services provided in India and it generally ranges from 10-18%, depending on the service. Under GST, Service Tax is replaced by various taxes such as Integrated Goods and Services Tax (IGST). Service tax applies to a wide range of services including telecom, insurance, transport services, and professional services such as those provided by architects, accountants, and lawyers.
How service tax is charged?
All providers of taxable services must pay the service tax, which applies to the value of their service provided, while those receiving such services are liable to be charged the same amount and remit it to the government. It is also levied on all charges like commission, consultancy fees, and professional fees charged while providing any type of service in India. Service Tax registration is mandatory if one's annual taxable service exceeds 10 lakh rupees.
Service Tax vs Service Charge
Service tax is an indirect tax imposed by the Indian government on services, while Service charge is a fee collected by a company providing a service or product. Service tax is levied with certain exemptions as specified by the Government, while service charges are usually decided between the provider and customer, without any governmental intervention.