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Documents Required for Service Tax Registration

Service tax is an indirect tax, which is collected by government from the service providers for the services they provide. Service tax is a burden to be borne by the person who receives services, but it is the responsibility of the service provider to collect and pay to the government.

Service tax is required if you are into business of providing services and once the turnover exceeds Rs. 9 lakhs annually. Service tax levied is deposited to the government account on monthly or quarterly basis.

Any person liable to pay service tax has to apply for service tax registration.

Documents required for Service Tax registration

The following documents are required for filing Service Tax registration in India.

  • PAN card
  • Identity proof such as
    • Copy of PAN card
    • Passport
    • Voter ID card
    • Aadhaar card
    • Driving License
  • Address proof of all Directors
  • Bank account details
  • Memorandum or Articles of Association
  • Business Transaction numbers from other government agencies such as
    • Customs Registration Number (BIN)
    • Import Export Code (IEC)
    • Sales Tax Number (VAT)
    • Company Index Number (CIN)
  • Copy of constitution/partnership deed, etc. in case of Partnership firm
  • Board Resolution assigning a Director to deal with Service Tax related matters in case of Public Limited Company

Once the supporting documents are rightly filed with the Service Tax registration form, the Service Tax registration procedure is completed within ten days from the date of filing.

Service tax Applicability on Director’s Remuneration

If you are a director then it is definitely a matter of concern and that will definitely haunt the minds of various companies. The logic which was placed by the department is that what the directors are receiving is nothing but an amount in return for their services.

But, the salary of directors is shown under the head of Salary in the Income Tax Return puts a question mark on the above statement. Therefore, from this point of view, remuneration received by the director to manage the day to day affairs in the company is in fact in the capacity of the employee and can not be considered as a salary of the employee.

In furtherance to the discussion, followings points are worth to note:

  1. Only managing director or whole-time director are considered as employee of the company whereas other directors are considered as non-executive directors. Therefore, the payments made to the non-executive directors or payments made as sitting fees are liable to service tax.
  1. The company if receiving services from their non-executive directors is liable to pay the service tax under the reverse charged mechanism.

One thing which also be keeping in mind that service tax which will be levied that will be part of the salary, so the company must observe the provision of section 197 while fixing the maximum limit on the remuneration of the directors.

Before adieu to you, I just want to make a conclusion that service tax liability is only applicable to the amounts paid to the directors other than in lieu of salary and I stated above that non-executive directors are not paid salary as they are not involved in the day to day management of the company. Further, the amount on which TDS is deducted by the company, those amounts will not be subject to the service tax liability.

Why Service Tax is so Expensive

Service Tax as the name suggests a tax levied on services by a service provider. In today’s era, service tax hits our pocket so badly which forced us to ponder – are we being tortured in the name of providing services to us, that always force us to think twice before dining out!

Service Tax as we all know service tax is an indirect tax which is paid by end consumer but deposited by the service provider who has valid service tax registration by the government. Let’s understand the brief history of service tax law so as to educate ourselves why it is becoming toll on financial health.

Service Tax first came into the picture in the year of 1994 and at that time which was applicable only to three services. Till 2012, almost 119 services came under the ambit of service tax laws, but this story does not end here. After 2012 the Government changed its approach from “adding services on which service tax levied” To “taxing all services” except few services. These few services list had been called the “Negative list” on which the service tax won’t be charged.   This negative list has been notified by issuing Mega Exemption notification in June 2012.

Effect of Service Tax on Industries:

Though tax consultants or advisors or CAs keep on reiterating that service tax is ultimately paid by the final consumer and even there is no fallacy in the statement, yet its burden is not only being born by the consumer but on service providers as well. A businessman can comprehend the reason very well because services can never be a basic necessity; it is considered to be an extra benefits or facilities in any form. So, whenever there is any notification regarding the increase in a rate of service tax, the news pinches as fiercely to businessman so to the consumers because consumers find the same thing / services costlier and they start cutting their expenditure to suit their penny pockets, and as a result it affects the revenue of industries.

In the Budget 2016, the government made a further addition to the service tax rate by 0.5% and which makes total effective rate is 15% besides other taxes in India.

One last point, to remind you that if you are going to enter into the arena of service tax industries as a service provider then do obtain service tax registration if the value of your taxable services exceeds Rs. 9 lakh because it is mandatory requirement for Service provider.




Reverse Charge Mechanism under Service Tax

Service Tax as we all know service tax is an indirect tax which is paid by end consumer but deposited by the service provider by the government.

Reverse charge mechanism relates to question who will deposit the service tax to the government in certain circumstances. When service recipient deposits the service tax to the government under some circumstances, then it is called “reverse charge Mechanism”.

Under the reverse charge mechanism, the service receiver is liable to pay tax, without any benefit of threshold exemption. It means regardless of turnover taxable services, service recipient has to obtain service tax registration.

 When both service provider and service recipient are required to deposit tax proportionately, then it is called as “partial reverse charge mechanism”.

Followings are few circumstances covered under reverse charge mechanism:

  1. Renting of a motor vehicle to carry passengers. (partial reverse charge mechanism)
  2. Manpower supply & security service.( full reverse charge mechanism)
  3. Works contract.(partial reverse charge mechanism)
  4. Insurance business services by agent.(full reverse charge)
  5. Transportation service by road (full reverse charge mechanism)
  6. Legal services (full reverse charge mechanism)

Salient features of reverse charge mechanism:

  • Reverse charge will not be applicable where service receiver is located in the non-taxable location.
  • Reverse charge mechanism shall only be applicable if service receiver is a registered body corporate.

Cenvat credit of Tax paid under Reverse Charge

Service tax under reverse charge mechanism has to be paid vide GAR Challan No. 7 and can’t be paid by utilising the Cenvat credit. But the service provider can claim Cenvat credit if it is an input service.

Registration and filing of return:

Under reverse charge, service receiver has to obtain service tax registration within 30 days of occurrence taxable event of specified services.

Service tax returns have to be filed half-yearly. Return for April to September should be filed by October 25 and for October to March by April 25.

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