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Basics of Service Tax Registration in India


Basics of Service Tax Registration in India

Service tax is one of the widely levied forms of tax on services provided across India and any person or entity which provides taxable service is liable to collect and pay to the Government of India, service tax on the taxes provided by that person or entity. In this article, we look at the basics of service tax in India.

Service Tax

Service tax is a tax on services provided in India levied by the Central Government under the Finance Act, 1994. It is an indirect tax which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service. However, in some cases the person or entity that receives the taxable service which is responsible for payment of the service tax. Some instances where the receiver of the services is responsible for payment of service tax include: 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 and 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.

Taxable Services

Almost all of the services provided in India are taxable under service tax and a list of taxable services have been specified under Section 65(105) of the Finance Act, 1994. Some of the taxable services include advertising, architects, chartered accountants, beauty parlours, clubs, consulting engineers, cosmetic surgeries, interior decorators, packaging services, real estate agents, restaurants and security agencies; click here for the complete list of taxable services.

Services Exempt from Service Tax [Service Tax Negative List]

Negative list of services is those services that are not subject to service tax. In addition to the negative list, there will be exemptions, abatements and composition schemes as issued by the authorities from time to time. Some of the services which are not taxable include health care services by a clinical establishment or an authorised medical practitioner, services by way of training or coaching in recreational activities relating to arts, culture or sports and services provided by a restaurant, eating joint or a mess which do not have or the license to serve alcoholic beverages.
Also, in an effort to protect and boost small service providers, the Government of India has exempted small services provided who earn less than Rs.10 lakhs of taxable service in a year from the service tax regime. Also, any taxable service provided to Diplomatic Missions for official use of such Mission as well as for the personal use or for the use of the family members of diplomatic agents or career consular officers posted in a foreign diplomatic mission or consular post in India is exempt from service tax. For a complete list of services which are not taxable, click here.

Rate of Taxation

At present, the service tax rate is 12.36% on the gross value of the service provided. It can be broken down as Service Tax of 10.3% on the value of the taxable service, Education Cess @ 2% on the service tax amount, and Secondary and Higher Education Cess @ 1% on the service tax amount. The “value of taxable service” means, the gross amount received by the service provider for the taxable service provided or to be provided by him.

Service Tax Registration

Service tax registration should be obtained within 30 days of commencing a business of providing a taxable serviceEvery person who has provided a taxable service of value exceeding Rs. 9 lakhs, in the preceding financial year, is also required to register with the Service Tax office having jurisdiction over the premises and obtain registration. Obtaining service tax registration helps with the identification of an assessee and is also necessary to deposit service tax, file returns and undertake various processes ordained by law relating to service tax. Failure to obtain registration would attract a penalty of up to Rs.10000/- or Rs. 200/- for every day during which such failure continues, whichever is higher.
For registration as a Service Tax assessee, the person or entity should file an application in Form ST-1 before the jurisdictional Central Excise/Service Tax officer. Documents such as a copy of PAN card, proof of address and constitution of the business [Proprietorship, Partnership, LLP, Company] are also required by the registering authority. The Registration certificate should be issued within a period of seven days from the date of submission of application ST-1. In case the registration certificate is not issued within seven days, the registration applied for is deemed to have been granted.

Payment of Service Tax

Service tax payment can be made through designated banks, cheques and electronically, using e-payment facility. Form G.A.R.7 (previously known as TR6 Challan) should be used to make service tax payments. In the case of individuals, proprietary firms and partnership firms, service tax payment can be made quarterly. The service tax payments must be made monthly in the case of companies or societies or trusts. In case of non-payment of service tax dues, the simple interest of 18% per annum is applicable to the service tax amount due. Also, in addition to such tax and interest, a penalty is also applicable, which shall not be less than Rs.100/- for every day during which such failure continues or @1% of such tax per month, whichever is higher. However, the penalty amount payable shall not exceed the amount of Service Tax payable.
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