The government of India collects a tax from the various service providers in the country for providing certain services which is known as Service tax. A service provider or service receiver or any person responsible for providing services, can pay service tax to the government of India. Service tax is an indirect tax as the service provider pays the tax and then receives/ recovers it from the consumers/ service receivers who receive the taxable services. This tax is paid to the government for using different services from various providers.
After the introduction of the Finance Act, 1994, the term service tax came into effect in India. Section 65 of the Finance Act, 1994 allows government to impose tax on services of certain nature. The range of services included in service tax has been increased in budget 2012. In this amendment, services like AC restaurants, short and long term lodging offered in hotels/ private guest houses have been included. Also, service tax is charged from companies in India, in addition to individual providers.
Individual service providers have an option to pay service tax in cash. However, companies are allowed to pay it in accrual basis. One needs to pay this tax only if the amount of services paid by them exceeds Rs ten lakhs in a financial year. These amendments are applicable PAN India except the state of Jammu and Kashmir. After 2012, all services, except those specified in the negative list, became liable for service tax collection. The negative list is a set of services listed in the section 66 D of the Finance Act, 1994.