Service Tax Overview
Service tax is an indirect tax that is imposed on taxable services. The provider of the taxable services must pay the service tax department when the outstanding service invoice is paid. If the service provider receives a taxable service, and pays the service tax to the vendor, then the provider is eligible for a service tax credit. The service provider can set off this service tax credit or use it toward their existing service tax liability. For more information, see Distributing Input Service Tax Credit.
You can calculate service tax on purchase invoices and sales invoices, and keep track of service tax credit and service tax liability. Service tax credit and service tax liability are captured in the interim account and can be recorded in the Service Tax Entry table. For more information, see Service Tax Entry Table.
When you pay a vendor or receive payment from a customer, then the service tax credit amount or service tax liability amount is populated in the account book and recorded in the Service Tax Entry Details table. For more information, see Service Tax Entry Details Table.
If you make a partial payment for a service invoice or receive a partial payment for a service invoice, the service tax credit or service tax liability is calculated based on the partial amount that you paid or received.
You can track the refund by using the credit memo and add the service tax credit amount or service tax liability amount.
If you purchase or receive services from goods transport agencies, the service tax liability is calculated based on the payment made to the goods transport agencies vendor and is populated in the Service Receiver Book. When you pay the goods transport agencies service tax liability amount to the service tax department, it will be reversed, and you will have a service tax credit. You can use the available service tax credit to release all or part of your service tax liability. If the available service tax credit amount is not sufficient or cannot be used, you can pay the remaining service tax balance by using cash or check.
Service Tax on Transactions with Goods Transport Agencies
You can manage service taxes on transactions with goods transport agencies for all goods that are transported by road. When you make a payment for freight to a goods transport agency, you are liable for the service tax.
The following requirements apply for managing service tax on transactions with the goods transport agency:
Transport services are taxable only if they are provided by a commercial company.
Consignment notes must be issued for the goods transport agency.
The consignor or consignee who is liable for the service tax must be registered under the service tax and identified by the goods transport agency.
The goods transport agencies bill for services includes the service tax. The consignor or consignee pays only the value of services that are rendered to the goods transport agencies and pays the service tax directly to the government in a separate transaction. Service taxes must be calculated and posted.
Liability for service taxes arises when the consignor or consignee pays the service tax to the goods transport agency.
The service tax registration number for the goods transport agency is required.
The goods transport agency can claim the benefit of Central Value Added Tax (CENVAT) credit on taxes that are paid for inputs and capital goods.
Service taxes and educational taxes (eCess) must be shown separately in invoices.
The TR 6 challan must be updated with service tax and eCess information.
The goods transport agency can abate 75 percent of the value of the service, paying tax on only 25 percent of the value of the service.
See Also
Tasks
How to: Set Up Service Tax
How to: Calculate Service Tax Using General Journals
Concepts
Service Tax Entries for Invoices with Normal and Advance Payments
Distributing Input Service Tax Credit