SERVICE TAX Services constitute a very heterogeneous spectrum of economic activities.

Service sector now occupies the centre stage of the economy. With the increasing role of service sector and its contribution to GDP, the Government felt that this sector should not go untaxed. This offers tremendous revenue potential to the Government. It is expected that in due course, service tax would reduce the tax burden on international trade and domestic manufacturing sector. This process requires levy of taxes on new services, without substantial rise in the rate or cost of collection. Indirect tax :It is the source of revenue for the Government in the form of indirect taxes. No separate Act :There is no separate act for taxing the services. Central government has the power to make rules to carry out the provisions of the Act.

Uniform rate :There is a uniform rate of tax on all services. Currently, it is 10.3 percent {i.e., 10 % service tax + 2% EC + 1% SHEC} No double taxation :Services falling under two or more sub clauses cannot be taxed twice if the service is provided only once. BASIS OF CHARGE OF SERVICE TAX The rate of service tax is applied on the value of taxable services provided or to be provided. Currently the rate of service tax is 10.3 percent {i.e., 10 % service tax + 2 % of the service as education cess + 1 % of service tax as secondary & higher education cess}. The cess paid on input services is allowed as credit for payment of cess on output services VALUATION OF TAXABLE SERVICES Value of Taxable = Service  Gross amount charged x 100 ---------------------------------100 + Rate of service tax The Gross amount is value of taxable service plus service tax payable.

HOW SERVICE TAX IS PAID Credit for input services. Registration requirements. Tax to be paid on amounts actually received. No service tax on free services. Service tax on payments received in advance. Manner of payment of service tax.

or profit tax. VALUE ADDED TAX € VAT is based on value addition to the goods. Lowering tax burden. When the tax is levied on the income of companies. NEED FOR INTRODUCING VAT VAT is more equitable way of taxing as all dealers share the tax burden. Tax transparency. and the related VAT liability of the dealer is calculated by deducting input tax credit from tax collected on sales during the payment period. or regressive. Income taxation can be progressive. Individual income taxes often tax the total income of the individual (with some deductions permitted). MERITS OF VAT Eliminates multiple tax. Simpler easy computation and easy compliance. trucks are fully deductible in the Canadian tax system. and additional write-offs). it is often called a corporate tax. Uniformity. With introduction of VAT. while corporate income taxes often tax net income (the difference between gross receipts. Credit for input taxation leading to cost efficiency. Various systems define income differently. with varying degrees of tax incidence.Adjustment of service tax. Tax evasion will be reduced. Higher tax revenue. Various income tax systems exist. while a corporate sports car is only partly deductible) over their useful lives by using percentage rates based on the class of asset they belong to. corporate income tax. Better compliance through self policing. Corporate expenses related to capital expenditures are usually deducted in full (for example. Prevents cascading effect by providing input rebate. Earnings are generally considered gross revenue minus expenses. and often allow notional reductions of income (such as a reduction based on number of children supported). other taxes will be abolished. expenses. This input tax credit in relation to any period means setting off the amount of input tax registered dealer against the amount of his output tax. Stable source of revenue INCOME TAX € An income tax is a tax levied on the income of individuals or businesses (corporations or other legal entities). CORPORATE TAX € Corporate tax refers to a direct tax levied on the profits made by companies or associations and often includes capital gains of a company. proportional. .

DTH Services. Under a property tax system. the Union power to tax shall supersede the power of the State to levy tax on the taxable event or in relation to the subject or object of taxation. Employee payroll taxes are taxes which employers are required to withhold from employees' pay. This article also provides that in case of conflict between the powers of Union and the States. and tax is assessed in proportion to that value. and personal property (movable man-made objects). Pay TV Services. Since. These withholdings contribute to the payment of an employee's personal income tax obligation. Thus. The component of entertainment is intrinsicially intertwined in the transaction of service. that it can not be separated from the whole transaction. Historically. improvements to land (immovable man-made objects. Forms of property tax used vary between countries and jurisdictions. PROPERTY TAX € A property tax (or millage tax) levy on the value of property. the employee may be eligible for a tax refund or carry forward to future periods. etc. where a large gathering of Indians could have caused rebellion or mutiny. There are three species or types of property: land. entertainment is being provided through the services such as Broadcasting Services. ENTERTAINMENT TAX € In India. also known as withholding. if the payments exceed this obligation. The fiscal principle underlying article 246 of the constitution of India separates the sources of taxation for the Union and the States and also maintains the exclusivity. Entertainment falls in List 2 of the Seventh Schedule of the Constitution of India and is exclusively reserved as a revenue source for the state governments. € . large commercial shows and large private festival celebrations may incur an entertainment tax. movie tickets. After independence. pay-as-you-earn (PAYE) or pay-as-you-go (PAYG) tax. Property tax can be defined as a "tax imposed by municipalities upon owners of real property within their jurisdiction based on the value of such property.PAYROLL TAX € A payroll tax generally refers to two kinds of taxes: employee and employer payroll taxes. Real property (also called real estate or realty) means the combination of land and improvements. Cable Services. various entertainment tax acts of the state governments permit the rate of tax beyond100%. the state requires and/or performs an appraisal of the monetary value of each property. before India acquired independence British government imposed heavy taxes on the events of amusements and entertainment. Given the nature of transaction of service. This source of revenue has grown with the advent of Pay Television Services in India. it is being subjected to tax by the Union and the State governments both. such as buildings). old enactments continued and there has been no revision or repeal of these acts. an ad valorem tax that the owner is required to pay.

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