In India, Service tax registration is considered a tax imposed on service delivery businesses. Service tax registration can also be said to be an indirect tax imposed on service providers, while the service providers recover same from their customers. Currently, the value of the taxable service imposed on service provider is about 12.3%. It is important to state here that not all businesses pay service tax. A service provider must meet certain requirements before service tax can be imposed on such service provider.
In India, It is mandatory for businesses that provide a taxable service to members of the public of at least Rs. 9lakhs in Value to comply with the service tax registration. In India, the 1994 Finance Act provides the necessary legal backing for the government to impose service tax on service providers. The essence of the service tax registration is to ensure the following:
- Identification of the business owner
- Deposit service tax
- File service tax return
- Undertake various processes
Section 77 of the Finance Act of 1994 clearly states the penalty that would be meted out to service providers that fail to comply with the service tax registration
The intention of this article is to take you through the process of service tax registration, how to obtain a service tax registration certificate, as well as the benefit of remitting your business’ service tax into the coffers of the government.
WHAT IS A SERVICE TAX?
A service tax is a government imposed tax on all taxable service providers that are delivering services to members of the public in India. This tax is actually borne by the clients of these service providers and it is categorized under Indirect tax. Service tax came to being after the promulgation of the 1994 Finance Act.
REASONS TO REGISTER A SERVICE TAX.
The following are some of the reasons to register a service tax:
- Establish a presence: India has a competitive market, hence establishing your business’ presence becomes a herculean task. However, registering a service tax for your business would make potential clients see your business as a serious business. When potential customers, suppliers, and vendors find out that your business is service tax compliant, they would like to do business with you knowing that your business generate enough income. Whether your business is actually doing well or not, you would have succeeded in registering a psychological effects on your potential customers.
- Shape the policies which affect you: When businesses comply with the Finance Act of 1994, the chances of government to analyse financial data increases. The bigger the number of service providers that comply with this Act, the better financial data would be analysed. This will then help the government to project revenue growth, as well as formulate policies that would affect your businesses positively.
- Lowers individual Income Tax Rates: When service providers comply with the service tax registration, the tendency for the personal income tax to be reduced will increase. From the Financial data collected, the government would strive a balance on the amount set for person income tax.
- Boosts Savings and Investment:one good thing about service tax registration is the fact that consumers pay this tax only when they buy goods and services from taxable service providers. Therefore, members of the public would be able to save more money for investment without the worry of being taxed.
- Lower Cost of doing business and administration: Registering your taxable business for service tax will have an effect in the cost of doing business and administration. Government will have more money to create a conducive environment for businesses to thrive. Therefore, business won’t spend much money on Overcost of running the business.
WHO SHOULD PAY SERVICE TAX
If as an individual you provide services or you have a business that provides services for the benefits of public, then you are liable to pay service tax according to the Finance Act of 1994. Also, you are liable to pay service tax if in a year your business turnover is above 9 lacs. Once your turnover exceeds 10 lacs, then at this point you will start collecting the service tax from your customers as soon as you rendering services. For example, when you walk into a small shop to buy some stuffs, the shop owner won’t charge you service task because the shop’s turnover is less than the set standard. But when you go shopping in a big mall,you will pay a service tax which would be collected alongside the cost of the service you purchase. The service tax will be collected from you at the current rate of 12.36% and then paid to the coffers of the government. The Finance Act of 1994 has made it mandatory for service providers to remit the service tax to the coffers of the government, otherwise, a penalty would be imposed on the service providers under section 77 of the Act.
WHEN TO PAY SERVICE TAX
Service tax is normally paid either monthly or quarterly depending on service providers registration. Under section 66, it is mandatory for service providers providing taxable service to collect service tax and remit same to the coffers of the government using the current 12.36% rate.
If you a sole proprietorship, individual, LLPs or Partnership, then your service tax must be paid on a quarterly basis (four times yearly). It should be noted that the service tax due date is the 5th of any month you intend to pay. If you are paying electronically, then the payment should be done on or before one 6th.
Owners of service providers are to ensure that they comply with the payment of this tax, otherwise, the provision of section 77 of the Finance Act of 1994 would be imposed on any violator.
HOW TO APPLY FOR SERVICE TAX REGISTRATION ONLINE
Application for the registration of service tax has been made pretty easy. Applicants are to fill form ST-1 and then submit same online. If you are a first time users, then it is required that you create an account before filling form ST-1. The website to create the account is https://www.aces.gov.in/STASE/ui/jsp/common/registerWithACES.do. Once you are done creating the account, you will be issued with a default password. You need to change this password to your custom password and then do not disclose your password to third parties. For all matters relating to service task registration, your username and password on the above website would be required. After successfully changing your password, you will login into your account via the portal, and then fill form ST-1. The form is available under the “REG tab.”
If you are doing more than one business or providing different services in several locations, you will fill all these information in the form ST-1 by clicking on the option that reads “Services Offered” and then select all your services.
ISSUE OF SERVICE TAX REGISTRATION
According to the Service Tax Rules number 4 of 1994, the Superintendent after verifying the form ST-1 you submitted shall either grant approval for the issuance of the Service Tax Registration Certificate or inform you why your application is not granted. After 2 days of submitting form ST-1 to the Superintendent, and then approval/refusal has not been given to your application, under the Service Tax rules, it means that the Service Tax Registration Certificate has automatically been granted to you. The certificate shall be issued to you depending on how you earlier indicated in your application form (either post or online). If you decide to get the certificate online, then you have to visit your home page in order to download a copy.
In addition, you shall be assigned a 15-characters Service Tax number, which you must quote in all your correspondences or invoice.
DOCUMENTS TO BE SUBMITTED FOR SERVICE TAX REGISTRATION
The following are the documents that should be submitted during your application process via Speed post or a registered post to the Superintendent within 7 days of submitting form ST-1:
- Copy of the proprietor’s PAN card or a registered legal entity
- Proof of ID and photograph of the applicant such as:
- Passport
- PAN Card
- Voter ID card
- Driving lincence
- Aadhar Card
- Any other ID approved by the state or central government.
- Business premises document such as rent or lease agreement, proof of ownership, no objection letter from the legal owner, as well as allotment letter from the government.
- Details of the main bank account
- Memorandum or Article of Association or director’s list
- Board of Director’s authorisation
- Business transaction number from other agencies of government like the Import Export code number, Customs Registration Number, State sales tax number, Company Index number, and Central sales tax number.
All the above listed document must reach the office of the Superintendent not later than 15 days from the date your form ST-1 was submitted. In addition, if the department finds out that your documents are incorrect or incomplete, then your application for a service tax registration certificate would be revoked.
Therefore, it is important that you cross check all your documents before submitting same to the department for verification.