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.