What is Service Tax?

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 

                          A

Consultancy Services    100000

+ Service Tax                    15000

Total                                115000

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?

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A is service provider

B is Service Receiver

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Is Service tax Direct Tax or Indirect Tax?

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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

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Who Deposits Service tax? Service Provider or Service Receiver?

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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)

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How is Service Tax Different from Vat?

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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

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