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Service Tax Rates
CURRENT PROVISIONS EARLIER PROVISIONS
General Rate of Service Tax

Service Tax came into force w.e.f. 01-07-1994 and initial rate of Service Tax was 5%, since then rates have changed from time to time.

Currently Service Tax is levied at the rate of 12 % vide charging section 66 of the Finance Act 1994 (Chapter V), However, vide Service Tax Notification no. 8/2009 dated 24-02-2009,  the Central Government, exempts all the taxable services from so much of service tax leviable there on under section 66 of the Finance Act, as is in excess of the rate of ten per cent of the value of taxable services. Thus, although charging section 66 specifies rate of 12% but, effective rate of service tax will be 10% with effect from 24-02-2009.. [Please Refer : Service Tax Notification No. 8/2009 ST, dated 24-02-2009.] However such Notification has been rescind by Notification No. 2/2012 ST, which has restored Service Tax rate from 10% to 12%

Such 12% rate of Service Tax is applicable from 01.04.2012.

In addition to the basic rate of 12%, Education Cess at the rate of 2% and Secondary and Higher Secondary education Cess at the rate of 1% are levied on service tax  rate in respect of all taxable services. Thus effective rate of Service Tax as of now is 12.36%. (12% Basic Rate + 2%EC on 12% + 1%SHEC on 12%)

Illustration

Particulars Amount (Rs.)
   
Value of Taxable Service Provided (A) 10,000/-
   
Add:    Service Tax @ 12%              (12 % of 10,000) 1,200/-
Add:    Education Cess @ 2%         ( 2 % of 1200) 24/-
Add:    Secondary and Higher Secondary Education Cess @ 1% (1% of 1200)
12/-
Total service tax payable  (B) 1,236/-
Total Amount to be Billed (A + B) 11,236/-

 

Alternate Rate of Service Tax (Exceptional Cases)

1. Rate of tax in case of an insurer, carrying on life insurance business, shall have the option to pay tax as mentioned below towards the discharge of his service tax liability instead of paying service tax at the rate specified in [section 66B] of Chapter V of the said Act:

(a) on the gross premium charged from a policy holder reduced by the amount allocated for investment, or savings on behalf of policy holder, if such amount is intimated to the policy holder at the time of providing of service;

(b) in all other cases, 3 per cent. of the premium charged from policy holder in the first year and 1.5 per cent of the premium charged.

Where the entire premium paid by the policy holder is only towards risk cover in life insurance such option shall not be available.

[Please refer : Service Tax Rules, 1994, Rule 6(7A)]

2. The person liable to pay service tax in relation to purchase or sale of foreign currency, including money changing, shall have the option to pay an amount calculated at the following rate towards discharge of his service tax liability instead of paying service tax at the rate specified in section 66B of Chapter V of the Act, namely:-

(a) [0.12 per cent.] of the gross amount of currency exchanged for an amount upto rupees 100,000, subject to the minimum amount of rupees 30;

(b) rupees [120 and 0.06 per cent.] of the gross amount of currency exchanged for an amount  exceeding rupees 100,000 and upto rupees 10,00,000; and

(c) rupees [660 and [0.012] per cent.] of the gross amount of currency exchanged for an amount exceeding rupees 10,00,000, subject to maximum amount of rupees 6000;

The person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

[Please refer: Service Tax Rules, 1994, Rule 6(7B)]

3. The distributor or selling agent, liable to pay service tax for the taxable service of promotion, marketing, organising or in any other manner assisting in organising lottery, shall have the option to pay an amount at the rate specified in column (2) of the Table given below, subject to the conditions specified in the corresponding entry in column (3) of the said Table, instead of paying service tax at the rate specified in section 66B of Chapter V of the said Act:

TABLE

Sr. No. Rate Condition
(1) (2) (3)
1. Rs. [7000] on every Rs. 10 Lakh (or part of Rs. 10 Lakh) of aggregate face value of lottery tickets printed by the organising State for a draw If the lottery or lottery scheme is one where the guaranteed prize payout is more than 80%
2. Rs. [11000] on every Rs. 10 Lakh (or part of Rs. 10 Lakh) of aggregate face value of lottery tickets printed by the organising State for a draw If the lottery or lottery scheme is one where the guaranteed prize payout is less than 80%

Provided that in case of online lottery, the aggregate face value of lottery tickets for the purpose of this sub-rule shall be taken as the aggregate value of tickets sold, and service tax shall be calculated in the manner specified in the said Table :

The distributor or selling agent shall exercise such option within a period of one month of the beginning of each financial year and such option shall not be withdrawn during the remaining part of the financial year

[Please refer : Service Tax Rules, 1994, Rule 6(7C)]

 

 

Case Laws Related

  • STO 2013 CESTAT 139
  • Demand: Stay: Appellants collected service tax at higher rate immediately after budget though it was not implemented immediately, but did not deposit with the exchequer: Directions issued to make pre deposit.

  • STO 2013 CESTAT 27
  • Service Tax: Rate: Rate of tax applicable is rate applicable on the date of providing taxable service.

    News Related

  • The effective rate of the Service Tax as on the day of providing service is to be taken into consideration
  • Service Tax Rate down to 10 % from 12 %
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