An excise tax is an indirect tax charged on the sale of a particular good. Indirect means the tax is not directly paid by an individual consumer; instead, the Internal Revenue Service (IRS) levies the tax on the producer or merchant, who passes the tax onto the consumer by including it in the product’s price. It also refers to penalty taxation for ineligible transactions in retirement accounts.
It is an inland tax on the sale, or production for sale of particular goods or a tax on a good produced for sale, or sold, within a country or licenses for specific activities. Excises are different from customs duties, which are taxes on importation. Excises are commonly imposed in addition to another indirect tax such as sales tax or value added tax (VAT).
Service tax is an indirect tax levied on a wide array of services specified by the Central Government under the Finance Act, 1994. The service provider (a restaurant or tour operator, for example) pays the tax and recovers the amount from its customers.
The service provider must be registered with the Central Government if the preceding fiscal year’s turnover is over Rs. 9 lakh. However, collection must start, at the rate of 15%, only when the turnover of the business exceeds Rs. 10 lakh. Once service tax is collected, if even for only a month, the service provider must continue to collect service tax, regardless of whether revenues fall below Rs. 10 lakh per annum. Service Tax is to be paid to the central government via designated branches or online once every quarter by LLPs, partnerships and sole proprietors and once every month by all other entities. Service tax returns must also be filed twice a year. The due dates are October 25 for the period April 1 to September 30 and April 25 for the period October 1 to March 31.
Service tax, applicable at 15%, is to be paid by the recepient of the service. Therefore, it’s the consumer who pays this indirect tax. The tax is collected by the service provider and then pays the amount to the government. Only those service providers offering any of the services on the negative list or with a turnover of less than Rs. 10 lakh are exempt from collecting service tax.
A service tax registration can be obtained within 10 to 20 days. At first, ST-1 is granted, within seven working days. If it is not granted within this time period, it is deemed to have been granted. The ST-2 will take another 10 to 15 working days, depending on whether you have all the relevant documents.
Service tax payments can be made online or offline. In case you are making payment online, you would need to do so via the NSDL website. For offline payments, a simple payment can be made via the GAR-7 challan, which is available at designated branches of most public sector banks.
No, you don’t. Even a freelancer operating out of his residence can have a service tax registration and file returns with government. When filling out the form, remember to put the registration in the name of the entity operating the business. In the absence of an entity (proprietorship or company or LLP), it can be your own name.
Even though registration is needed on reaching Rs. 9 lakh in turnover, service tax need only be collected when your revenues are Rs. 10 lakh or over. But once this you cross this mark, you must always collect the tax even if your turnover is less than this in subsequent years.
Service tax returns are filed twice a year. By October 25, you must file returns on payments made between April and September. By April 25, you must file returns on payments made between October and March. Proprietors, partnerships and individuals must make payment quarterly, while companies and LLPs must make payment monthly.