In simple language
Service tax is a tax charged by government on services.
Suppose A provides Consultancy sevice to B of 100000
and Service tax Rate is 15%
In this case,A will send B a bill in which it will charge Service tax as follows
Consultancy Services 100000
+ Service Tax 15000
B will pay him 115000
and A will deposit this 15000 Service tax to Government as shown below
Who is the Service Provider and Receiver in this case?
A is service provider
B is Service Receiver
Is Service tax Direct Tax or Indirect Tax?
Service tax is an Indirect Tax as
Person collect tax from customer and pays to government
In our case,A pays tax by collecting it from B
Who Deposits Service tax? Service Provider or Service Receiver?
It is normally deposited by Service Provider (A in our case)
However in some cases,it is also deposited by B (Service Receiver) which is called Reverse Charge (this we will do later)
How is Service Tax Different from Vat?
Vat is charged on Sale of Goods.Goods are items which we can see and touch like clothe,food items etc
Service tax is charged on Sale of Services like Professional Service,Taxi Service,Consultancy Service etc