When you live in a rented house, you are expected to pay rent every month. Similarly, when you live in a country and perform certain business activities or services as a profession, you have to pay the Government of the country your dues. This is known as Service Tax. It’s a common tax, found in restaurant bills, phone bills etc, and you would have noticed it in most of the bills you receive and pay.
Service Tax, by and large, is a tax that a business or service provider charges to every customer. And then, at the end of the month, the total service tax charged to all customers in that month is calculated and paid to the Government of India.
Some Key Features to Note about Service Tax:
- The present rate of Service Tax is 12.36%
- Service Tax is charged on a pre-decided list of services / businesses. If the service you provide or business you run figures in the list, then you are liable to charge service tax and pay service tax back to your Government. The list is constantly updated, and it is always best to seek advice from a qualified accountant on whether or not the service you provide, or business you run, attracts service tax.
- In order to pay your Service Tax to the Government, you need to have a valid Service Tax Registration. The application for this registration is not complicated. A qualified accountant can usually walk you through the paperwork.
- Individual entrepreneurs have to pay the tax on a quarterly basis, while companies and societies have to pay it on a monthly basis.
- A Gar-7 Challan document is required to pay the tax. It can be bought by a store selling government forms, and has to be filled before paying the tax. Alternately, ask your appointed CA to source the forms for you.
- For amounts above Rs10 lakhs, electronic payments are mandatory.
Points to Remember for Working Women:
- Service Tax is applicable to women who run their own business. Salaried women who work for other companies are generally liable to pay only Income Tax if their income crosses the minimal mark.
- Unlike Income Tax, where there are separate tax slabs for women and men, in Service Tax, there is no differentiation between a woman entrepreneur and man entrepreneur. If you run a business or provide a service, you may be liable to pay tax.
- For certain services or businesses that fall in the list, there is a limit in place. If your earnings cross that limit then only would you have to pay the service tax.
- Women who run their own business are usually known to run parlours, a boutique, or a bakery. If you have created a company through which you perform your business, the company is liable to pay service tax, as per the sub law laid down for the service you provide.