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CA IPCC – Service Tax : By CA B S JOLLYCopyright Protected. All rights reserved. These notes are for personal use only. Copying or transmitting, selling or profiting in anyother manner from these notes is prohibited.

Service Tax – Basic ConceptsBasic Concepts Service tax is an indirect tax levied on providing Services. Services tax was initially imposed by chapter V of Finance Act 1994 on 3 services (telephone, general

insurance and stock broking). Since then more services are added to the taxable list every year andcurrently more than 100 services are liable to service tax.

There is no separate “Service Tax Act”. Service tax is imposed every year by making amendments to theFinance Act 1994.

Amendments made by the Finance Bill, in respect of service tax matters, come into force from the dateof enactment of the Finance Bill i.e., the date on which the Finance Bill receives the assent of thePresident of India.

However, wherever it is specifically provided so in the Finance Bill, certain amendments like new taxableservices introduced vide the Finance Bill and alteration in the scope of existing taxable services, becomeeffective from a date to be notified after the enactment of the Finance Bill.

The service tax is currently levied at a uniform rate of 10.3% (including cess).

Sources of law of Service Tax The following are the main sources of law of service tax:-

(a) Finance Act, 1994 [Sections 64 to 96] as amended from time to time by Finance Act of currentyear.

(b) Service Tax Rules, 1994(c) Service Tax (Registration of Special Category of Persons) Rules, 2005(d) Export of Services Rules, 2005(e) Service Tax (Determination of Value) Rules, 2006(f) Cenvat Credit Rules, 2004(g) Central Excise Rules relating to Appeals(h) Service tax circulars, notifications and case laws(i) Orders and trade notices issued by CBEC

Administrative Set-up of Service Tax The administration of service tax is entrusted to Central Excise department. The central authority that

regulates the matters relating to service tax is Central Board of Excise and Customs (CBEC). The role ofCBEC is:-

(1) To monitor the collection and assessment of service tax;(2) To study the implementation of Service Tax in the field and to suggest measure to increase

revenue collection;(3) To undertake study of law and procedures;(4) To form a database; and(5) To inspect the Service Tax Cells in the Department.

The administrative set-up of Service Tax is as follows:-(i) Ministry of Finance(ii) Department of Revenue(iii) Central Board of Excise and Customs – Headed by Chairman of CBEC(iv) Central Excise Zones – Headed by Chief Commissioner of Central Excise


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(v) Central Excise Commissionerates – Headed by Commissioner of Central Excise assisted byAdditional and Joint Commissioners of Central Excise

(vi) Central Excise Divisions – Headed by Deputy Commissioner or Assistant Commissioner of CentralExcise

(vii)Central Excise Range – Headed by Superintendent of Central Excise assisted by Inspectors Considering the increasing workload due to the expanding coverage of service tax, an office of Director

General (Service Tax) has been formed. The functions and powers of Director General (Service Tax) areas follows:-

(1) To ensure that proper establishment and infrastructure has been created under different CentralExcise Commissionerates to monitor the collection and assessment of service tax.

(2) To study the staff requirement at field level for proper and effective implementation of servicetax.

(3) To study as to how the service tax is being implemented in the field and to suggest measures asmay be necessary to increase revenue collection or to streamline procedures.

(4) To undertake study of law and procedures in relation to service tax with a view to simplify theservice tax collection and assessment and make suggestions thereon.

(5) To form a data base regarding the collection of service tax from the date of its inception and tomonitor the revenue collection from service tax.

(6) To inspect the service tax cells in the Commissionerate to ensure that they are functioningeffectively.

(7) To undertake any other functions as assigned by the Board from time to time. The Directorate of Service Tax coordinates between the CBEC and Central Excise Commissionerates.

Role of Chartered Accountants There is a great scope for professionals like chartered accountants in the field of service tax since being a

relatively new area not many other professionals are practicing in this field of indirect tax. The nature ofservices which a Chartered Accountant can provide are:-(1) Advisory services in respect of nature and application of law of service tax(2) Services for complying with procedural requirement, like registration, filing of return (including e-

filing), etc.(3) Representation services - A chartered accountant is allowed to appear before the (a) Assessment

Authorities, (b) Adjudication Authorities, and (c) Appellate Authorities.(4) Scope for certification and audit under service tax.(5) Tax Planning for clients by keeping abreast of the latest notifications and trade notices in addition to

the changes in law.

Approaches to Levy of Service Tax The levy of a service tax can be based on either of the following 2 approaches:

1. Comprehensive coverage: The comprehensive approach contemplates taxation of all services and anegative list is given in case some services are to be exempted.

2. Selective coverage: In the case of selective approach, only selective are subject to service tax. In thiscase, the legislator attempts to specify and list the services that would be taxable and the scope ofcoverage of each service. There is no residuary category for taxing all services.

India is following the selective approach of taxing services. Service tax is generally payable on specifiedservices by the service provider. However, in certain cases, service tax is payable by the receiver ofservices.

There is no requirement of deduction of service tax at source or payment of service tax in advance.


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the changes in law.







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the changes in law.










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Applicability of Service Tax – Section 64 Service Tax is a destination based consumption tax. Service tax extends to whole of India except the state of Jammu and Kashmir. India includes territorial waters extended upto 12 nautical miles from the Indian land mass. The provisions of service tax have been extended to designated areas in Continental shelf and exclusive

economic zone of India. Exclusive Economic Zone (EEZ) of India extends upto 200 nautical miles insidethe sea from the base line. In this zone, India has exclusive rights to exploit it for economic purposes likefishing, mineral resources and scientific research.

There shall be no service tax on the services consumed in the state of Jammu and Kashmir. However if service provider is in the state of Jammu and Kashmir and provides services to anyone

outside the state of Jammu and Kashmir then service tax shall be imposed on such services rendered.

ExamplesMr. A of Amritsar provides services to Mr. J at Jammu – No Service tax is applicable.Mr. J of Jammu provides services to Mr. K of Kanpur – Service tax is payable.

Scope of Service Tax Service tax is a tax on services and not a tax on any trade or profession. It is leviable only if there is

provision of service. Service implies existence of two parties; Service tax is attracted when there are two parties. One cannot

give service to himself. For charge of service tax, it is necessary that the service provider and service recipient should be two

separate persons acting on “principal-to-principal basis”. Services provided by an employee to hisemployer are not covered under service tax and, therefore, salaries or allowances paid to them cannotbe charged to service tax.

A sub-contractor when provides services to a Principal Contractor, he is liable to pay service tax even ifthe main contractor is paying service tax on the entire value of the contract. However, in such a case, theprincipal contract can avail input credit as per the rules in respect of service tax paid by the sub-contractor.

“Service” means a useful result, product of labour, which is intangible i.e. which cannot be seen througheyes. Thus, service is a value addition that can be felt only but cannot be seen.

There is no charge of service tax on Cost of goods or Material sold by service provider to the receiver ofsuch services. Service Tax is payable only on the services component.

Taxable Service Service tax is imposed on taxable services already provided or to be provided in future by the service

provider. Services to be provided in future shall be chargeable to service tax only if the advance payment for it is

received. Taxable services are mentioned in section 65(105) of Finance Act, 1994. As of today, more than 100

services listed are liable for service tax. Service tax is charged on the value of service provided which shall be computed in accordance with

section 67 of Finance Act, 2004 read with Service Tax (Determination of Value) Rules, 2006. No service tax is leviable upon the services provided free of cost. Service Tax is leviable @ 10% of the value of taxable services. Education Cess @ 2% and Secondary and

Higher Education Cess @ 1 % are chargeable on the amount of service tax, thus, making the effectiverate of service tax at 10.30% of the value of taxable service.


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Charge of Service TaxCharge of Service Tax – Section 66 Service Tax is charged at a uniform rate of 10% of the value of taxable services referred in various sub-

clauses of Section 65(105) of Finance Act, 2004 and collected in such manner as may be prescribed. Service tax is further increased by an Education cess @ 2% and a Secondary and Higher Education cess of

1%. Therefore, the effective rate of service tax is 10.3%.

Alternate Rate of Service Tax Service tax is generally payable @ 10.3% of value of taxable services. However, in the following cases an

option is available to pay an alternative rate instead of general rate of 10.3%:-1. Life insurance services – 1.03% of total premium

The option of tax rate of 1.03% on life insurance business is applicable only if:-(i) the entire premium paid by the policy holder is only towards risk cover in life insurance; or(ii) the part of the premium payable towards risk cover in life insurance is shown separately in any

of the documents issued by the insurer to the policy holder.2. Air Travel Agents services – 0.618% of basic fare in case of domestic bookings, 1.236% of basic fare

in case of international bookings.The option once exercised shall apply for all bookings and shall not be changed during a financialyear.

3. Foreign exchange broker – 0.2575% of gross amount.Such option shall not be available in cases where the consideration for the service provided or to beprovided is shown separately in the invoice/bill/challan issued by the service provider.

Classification of Service Service Tax is payable on the basis of classification of services given in Section 65(105) of the Finance

Act, 2004. If any service is covered under more than one sub-clause then classification is chosen as perfollowing rules:-

(i) Clause providing specific description is chosen over one providing general description(ii) In case of composite services – the clause which matches with the essential character of service

provided is chosen(iii) If service cannot be classified as above – the service which occurs first in numerical order is

chosen.(iv) However, since the rate of service tax is uniform @ 10.3%, classification of service is not of much

practical significance except mentioning in the service tax returns.

Reverse Charge of Service Tax Every person providing taxable service is himself primarily liable to pay service tax. However, Section 68

empowers Central Govt. to notify certain persons to pay service tax in respect of services received.Accordingly Rule 2(1)(d) of Service Tax Rules, 1994 provide for ‘reverse charge’ of service tax in thefollowing cases:-

Notified Services Person liable for paying Service TaxTelecommunication Service D.G. of Post and Telegraph

Chairman of MTNLAny Licensee under Indian Telegraph Act

General Insurance Business Insurer or Reinsurer


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Valuation of Taxable ServiceValuation of Services – Section 67 The consideration of any taxable service is the gross amount charged by the service provider for the

services rendered or to be rendered. The consideration may be received before, during or after the provision of taxable services. The value of service liable to service tax shall be determined as follows:-

Situation Value of ServiceWhere total consideration is‘monetary’

Gross Amount charged by service provider excluding Service tax

Where total consideration is ‘non-monetary’ i.e.- Wholly in kind; or- Partly money-partly in kind

Monetary equivalent to ‘non-monetary consideration’ as follows:-(i) Value of similar services provided to third party(ii) If similar services are not provided to third party, market

value as determined by assessee but not lower than cost ofprovision

Where total consideration is notascertainable

As determined on the basis of Valuation RulesNote: No method has been prescribed so far. Therefore, the valueshall be as per above methods only.

Where there is no consideration i.e.Free Services

NIL

Money includes any currency, cheque, promissory note, letter of credit, draft, pay order, traveler’scheque, money order, postal remittance and other similar instruments but does not include currencythat held for its numismatic value.

Gross amount charged include payment by cheque, credit card, deduction from account and any form ofpayment by issue of credit notes or debit notes and book adjustment.

Service Tax is payable irrespective of whether charged or realized separately or not Section 68 of the Finance Act, 1994 casts the liability to pay service tax upon the service provider or

upon the person liable to pay service tax as per rule 2(1)(d) of the Service Tax Rules, 1994. This liability isnot contingent upon the service provider realizing or charging the service tax at the prevailing rate.

The statutory liability does not get extinguished if the service provider fails to realize or charge theservice tax from the service receiver.

Where a service provider does not charge service tax on a taxable service or the amount charged isinclusive of service tax payable, the value of taxable service shall be calculated as follows:-Taxable value of service = Gross Amount charged x 100

100 + Rate of service tax

ExampleIf a service provider raises a bill for Rs. 10,000/- and service tax is not charged in the invoice, the value oftaxable service shall be calculated as follows:-Value of taxable service = 10,000 x 100/110.3 = 9066.18Service Tax payable thereon @ 10.3% = 9066.18 X 10.3% = Rs. 934 (rounded off).

Exclusions in Valuation of Services

(i) Sale of Goods Notification 12/2003 dated 20.6.2003


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The value of sale of goods distinct and separate from the services provided is to be excluded. However,there should be documentary proof specifically indicating the value of said goods and materials. Also,Cenvat input credit should not have been availed for such goods or materials.

In certain cases, supply of goods is integral to the rendering of services. The sale consideration for suchsupply of goods cannot be dissected from the service element and the same shall be exposed to liabilityfor service tax.

In case of commercial training and coaching institutes, deduction will be not be available for any studymaterial or written text provided by the institute.

(ii) Reimbursement of Expenses by ‘Pure Agents’ Notification 19/2005 dated 7.6.2005 Reimbursement of expenses by persons acting as ‘Pure Agent’ for service receiver is excluded. ‘Pure Agent’ is a person who has an agreement with service receiver to procure goods or services or

incurs expenses on behalf of the service receiver. The salient features of a pure agent are:-1. He has no title over the goods/services of the principal.2. He cannot use them for his purpose.3. He gets from the service receiver only the actual cost of such purchases.

For example, a building contractor may buy certain building material on behalf of the builder company,passes on the actual cost to the company, possesses no title over the materials and leaves the balancematerials at their site. In such cases, the value of taxable services of building contractor shall be exclusiveof cost of materials.


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Payment of Service TaxPayment of Service Tax – Section 68 Section 68 of the Finance Act, 1994 casts the liability to pay service tax upon the service provider or

upon the person liable to pay service tax as per rule 2(1)(d) of the Service Tax Rules, 1994. Irrespective of method of accounting followed by the assessee, service tax is payable to the credit of

Government only on the receipt of payment towards the value of taxable services. Service tax is payable only on the amounts actually received. Service tax is payable even on advance payments received for services yet to be rendered. For the service tax to be leviable, on the date on which the service was rendered, it should be exigible to

the levy. If any advance is received for a non-taxable service but which becomes taxable during the course of

provision of service, the advance shall be required to be apportioned accordingly. If advance is received for taxable services but later on no services are provided, the service tax paid shall

be liable to be refunded. Service tax is payable on amount received in installments or on part payments received in respect of

continuous supply of services.ExampleA chartered accountant raises a bill for auditing services on 15th March, 2010 for Rs. 55,150 (including servicetax of Rs. 5,150/-) and the client pays this bill in May, 2010, the liability to pay service tax to the Governmentwould arise only in May, 2010.

Provisional Payment of Service Tax In case the assessee cannot correctly estimate the amount of service tax payable on any services, he can

apply in writing to Assistant/Deputy Commissioner of Central Excise for provisional payment of servicetax along with a memorandum and undertaking in Form No. ST-3A.

On receipt of Form ST-3A, the Assistant/Deputy Commissioner may allow payment of service tax onprovisional basis on such value of the taxable service as may be specified by the service provider.

Free Services If the services have been provided without consideration (i.e. Free services) then service tax is not

payable. However, distinction is to be made between ‘free services’ and ‘services where consideration is

unascertainable’. While the former is not chargeable to service tax, Section 67 and valuation rulesprovide for taxation on the latter.

Also, the services provided must be free and cost is not recovered through other means. Similarly, if the consideration of services provided is received from any other person (other than the

services receiver), the value of service shall be taxable. For example, free service of motor vehicleprovided by the dealers to its customers, but reimbursement given by motor-vehicle manufacturingcompanies.


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Registration for Service TaxPersons required to Register – Section 69 Every person who is liable to pay service tax will have to get them registered. Therefore the following

category of persons must obtain service tax registration:-(i) Service providers of taxable services(ii) Specified person as per Section 68 read with Rule 2(1)(d) – Reverse charge categories

Additionally Section 69(2) empowers Central Government to specify other persons or class of personswho shall be required to register them with Central Excise. Central Govt. has notified the followingpersons to make application for registrations:-

(i) An input service distributor(ii) Small Service Provider – Service provider of taxable service whose aggregate value of taxable

service in a financial year exceeds Rs. 9 lakh

Who is a Input Service Distributor – Rule 2(m) of Cenvat Credit RulesAn ‘Input Service Distributor’ means an office of:

(i) Manufacturer or(ii) Producer of final products or(iii) Provider of output service

which receives tax paid invoices (under Rule 4A of Service Tax Rules, 1994) towards purchases of inputservices and issues invoice, bill or challans for the purpose of distributing the credit of service tax paid on thesaid services to such manufacturer or producer or provider.

Procedure for Registration

Application for Registration An application for registration has to be made to designated Superintendent of Central Excise

accompanied along with the following documents:-1. Application in Form ST-1 in triplicate duly signed2. Attested Copy of the PAN Card3. Proof of Address of the premises which is required to be registered4. Copy of the Document governing the constitution of the organization (Partnership deed in case of a

partnership firm, Memorandum of Association in case of a company, Trust Deed in case of a trusts orassociations)

5. Authority Letters in favor of the person who is to collect the registration certificate on the Letterhead of the organization applying for registration.

6. Power of Attorney in case the documents are signed by an authorized representative The application has to be made within a period of 30 days from the date of:-

(i) In case of person liable to pay service tax - When the relevant service becomes taxable(ii) In case of input service distributor – Commencement of business(iii) In case of small service provider – When the aggregate value of taxable services exceed Rs. 9 lakh.

The registration shall be granted within 7 days of receipt of application in Form ST-2. In case of taxable services provided by multiple Proprietorship Firms under different names, the

applicant shall register individually for each of such proprietary Firm.


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Return and AssessmentSelf Assessment – Section 70 Every person liable to pay service tax shall himself assess and pay the tax. This process is known as Self

Assessment. Filing of service tax return for registered assessees is mandatory, even if there is no service provided. In

such case, he shall file a ‘NIL’ return by the due date.

Provisional Assessment In case the assessee cannot correctly estimate the amount of service tax payable for any month or

quarter, he can apply in writing to Assistant/Deputy Commissioner of Central Excise for provisionalpayment of service tax along with a memorandum and undertaking in Form No. ST-3A.


Form of Return and Due dates Further, the service provider is required to file a return (in triplicate) to Superintendent of Central Excise

on half yearly basis in Form ST-3 (Form ST – 3A for provisional assessment). The half yearly due datesare:-

(a) 25th October for the half year ending 30th September; and(b) 25th April for the half year ending 31st March.

E-filing of returns is also permissible using the 15-digit Service Tax Payer Code. The return can be filed by registered post provided the assessee should ensure that it reaches the

Divisional Office on or before the due date. If the due date is a public holiday then the return should be filed on the next working day.

Contents of Return The Return of Service Tax contains details such as:-

(i) amount received towards taxable service(ii) amount received in advance towards taxable service to be provided(iii) amount billed for exempted services and services exported without payment of tax(iv) amount billed for services on which tax is to be paid(v) abatement claimed - value(vi) notification number of abatement and exemption(vii) service tax payable(viii) education cess payable(ix) TR-6 challan date and number(x) credit details for service tax provider/recipient

Enclosures to Return The following documents are required to be enclosed with the Return of Service tax:-

(i) Copies of TR-6 or GAR-7 challans in respect of payments of service tax(ii) Copy of Memorandum in Form ST-3A in case of provisional assessment(iii) In case of first return – List of all accounts maintained by assessee including memoranda

received from branch offices.


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Taxable ServicesTaxable ServicesOnly the following services which are provided in Section 65(105) are liable to service tax.

Value of Taxable Service Section 67 of Finance Act, 1994 provides that value of any taxable service shall be the gross amount

charged by the service provider for such service rendered by him. Out of pocket expenses can be deducted from the gross value of taxable service only if the following

conditions are fulfilled:-(i) Expenditure is incurred first by service provider;(ii) Expenditure is incurred on behalf of client or customer;(iii) Expenditure (and nothing more) is reimbursed by service receiver;(iv) Documentary evidence is maintained in support of such actual reimbursement.

The service tax element should be shown separately on the invoice/bill/challans issued by the serviceprovider clearly separating the service tax, education cess and secondary and higher education cess.

Taxable Services covered in Syllabus of IPCC for May/Nov 2011 Exams1. Legal consultancy services2. Commercial training or coaching services3. Information technology software services4. Cargo handling services5. Customs House Agent’s services6. Practicing Chartered Accountant’s services7. Consulting Engineer’s services8. Manpower recruitment or supply agency’s services

1. Legal consultancy service Legal consultancy service means the service provided or to be provided

to a business entity by any business entity in relation to advice, consultancy or assistance in any branch of law in any manner.

However, any service provided by way of appearance before any court, tribunal or authority, shall notamount to taxable service.

‘Business Entity’ includes an association of persons, body of individuals, company or firm, but does notinclude an individual.

Only service provided by a business entity to another business entity is covered by service tax.Therefore, services provided by an individual advocate to any person; or a corporate legal firm to anindividual will not be taxable.

2. Commercial Training or Coaching Any service provided or to be provided

to any person,


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by a ‘commercial training or coaching centre’ in relation to commercial training or coachingis a taxable service.

‘Commercial training or Coaching centre’ means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lessons on any

subject or field other than sports, with or without issuance of a certificate and includes coaching or tutorial classes but does not include:-

(i) Preschool coaching and training centre; or(ii) Any institution or establishment which issues any certificate or diploma or degree or any

educational qualification recognized by law for the time being in force. Commercial training or coaching centre shall include any centre or institute by whatever name called,

where training or coaching is imparted for consideration, whether or not such centre or institute isregistered as a trust or a society or similar other organization under any law for the time being in forceand carrying on its activity with or without profit motive.

Any study material or written text provided by institute as an integral part of its training or coachingservices will not be allowed as deduction. However if sale of standard text books priced separately is notsubject of service tax.

Coaching provided by commercial institutions for competitive examinations, diploma or degree offoreign universities are covered under service tax irrespective of whether services are providedpersonally or through post or online/internet.

Following institutes are not subject to service tax:-(i) All recognized or affiliated colleges, universities, boards, autonomous institutions providing

recognized degrees/certificates(ii) Professional institutions such as ICAI, ICSI, ICWAI(iii) Vocational training institutes(iv) Recreational training relating to activities such as dance, singing, martial arts or hobbies(v) Individuals providing coaching services at the premises of the receiver

Definition of Vocational Training Institute[As amended by Notification No. 3/2010-ST dated 27.02.2010]“Vocational training institute” means an Industrial Training Institute (ITI) / Industrial Training Centre (ITC)affiliated to the National Council for Vocational Training, offering courses in designated trades as notifiedunder the Apprentices Act, 1961.

Notes(1) The ITI and ITC have equivalent recognition and the certificates/diploma's granted by them have

the same recognition. The only difference between ITC and ITI is that ITI are the institutes ownedby the Government while the ITC are the institutes owned by the private parties.

(2) List figuring under Schedule I of the Apprentices Act, 1961 covers engineering as well as non-engineering trades. Few of the designated trades covered are:- cutting and tailoring trades beautician trades agricultural trades electrical trades glass and ceramic trades heat engine trades hi-tech trades


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Questions from Previous ExaminationsConcept and General Principles of Service Tax

1. Is an unincorporated association, formed after 1st June, 2009, liable to pay any service tax? (2Marks) (May, 2007)

2. Briefly explain the nature of service tax. (2 marks) (May, 2008)3. Explain as to how and when the amendments made in Finance Bill, in respect service tax matters

come into force? (2 Marks) (Nov, 2008)4. What are the sources of service tax law? (3 Marks) (June, 2009)5. Which Act and Rule govern the levy of service tax in India? (3 Marks) (Nov, 2009)6. Is service tax payable in respect of services provided in the Indian territorial waters? (2 Marks)(May,

2010)7. Is service tax leviable on fee collected by public authorities while performing statutory functions

under the provisions of law? (2 Marks)(May, 2010)8. A Company located in the State of Jammu & Kashmir rendered service in Delhi. Is the service

provided by the Company liable for Service tax? (2 Marks)(May, 2010)

Charge of Service Tax1. Will the payment to a hotelier of Rs.10,000 on behalf of an architect by a service receiver be

included in the value of taxable services? (2 Marks) (May, 2007)2. Who is liable to pay service tax in relation to services provided by a goods transport agency? (3

Marks) (Nov, 2007)3. Briefly explain about the charge of service tax. (3 Marks) (May, 2008)4. Whether life insurer carrying on life insurance business has option to calculate service tax at

different rate? (2 Marks) (Nov, 2008)5. Whether export service provided by a service provider is excluded for the purpose of payment of

service tax? (3 Marks) (Nov, 2009)6. Does a service provider have an option to pay Service tax at a rate different from the general rate

applicable on gross value of taxable services, in the case of purchase and sale of foreign currency? (3Marks) (May, 2010)

Valuation of Taxable Service1. Can it be said that if the taxable service is not capable of ascertainment, the same cannot form part

of value of taxable services? (3 Marks) (May, 2007)2. How is the value of taxable services determined when the consideration against taxable services is

received in other than monetary terms? (3 Marks) (June, 2009)3. Ms. Priya rendered a taxable service to a client. A bill for Rs. 40,000 was raised on 29.4.2009; Rs.

15,000 was received from the client on 1.5.2009 and the balance on 23.5.2009. No service tax wasseparately charged in the bill. The questions are:(a) Is Ms. Priya liable to pay service tax, even though the same has not been charged by her?(b) In case she is liable, what is the value of taxable service and the service tax payable? (2+4 Marks)

(May, 2008)[Answer – Value of taxable service Rs. 36,265, Service Tax payable Rs. 3,735]

4. J.C. Professionals, a partnership firm, gives the following particulars relating to the services providedto various clients by them for the half-year ended as on 30.09.09:(i) Total bills raised for Rs. 8,75,000 out of which bill for Rs. 75,000 was raised on an approved

International Organisation and payments of bills for Rs. 1,00,000 were not received till 30.09.09.


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(ii) Amount of Rs. 50,000 was received as an advance from XYZ Ltd. on 25.09.09 to whom theservices were to be provided in October,2009.

You are required to work out the:(a) taxable value of services(b) amount of service tax payable. (3 Marks) (Nov, 2007)[Answer – Value of taxable service Rs. 7,50,000, Service Tax payable Rs. 77,250]

5. Mr. X, a service provider who pays service tax regularly, was of the opinion that a particular servicewas not liable for service tax. He, therefore, did not charge service tax in his bill. He received the billamount without service tax. How will service tax liability of Mr. X be determined in such case? (2Marks) (June, 2009)

6. Ms. Priyanka, a proprietress of Royal Security Agency received Rs.1,00,000 by an account payeecheque as advance while signing a contract for providing taxable service. She received Rs.5,00,000by credit card while providing the service and another Rs.5,00,000 by a pay order after completion ofservice on January 31, 2010. All three transactions took place during financial year 2009-10. Sheseeks your advice about her liability towards value of taxable service and the service tax payable byher. (5 Marks) (Nov, 2009)[Answer – Value of taxable service Rs. 11,00,000, Service Tax payable Rs. 1,13,300]

7. State with reason in brief whether the following statement is true or false with reference to theprovisions of service tax:Mr. Salim, an architect has received the fees of Rs.4,48,500 after the deduction of income-tax ofRs.51,500. Service tax will be payable on Rs.4,48,500. (2 Marks) (Nov, 2009)[Answer – False, Service tax will be payable on Rs. 5 lakh]

8. Virat Kohli & Co., a partnership firm, is providing taxable legal consultancy services for the secondconsecutive assessment year. The firm furnishes the following information relating to the servicesrendered, bills raised, amounts received relating to this service for the year ended 31st March, 2010.Particulars Amount – Rs.(i) Free services rendered to poor people (Value of the services computed on

comparative basis)40,000

(ii) Advances received from clients for which no taxable service has been renderedso far

5,00,000

(iii) Services billed to clients Gross amount (Service tax has been charged separatelyin all the bills; the firm follows mercantile system of accounting)

12,00,000

(iv) The firm has received the following amounts during the year :Relating to taxable services rendered in March, 2009 (excluding service tax atapplicable rates and TDS under section 194-J of the IT Act, 1961 to the tune ofRs. 45,320)Relating to taxable services rendered in current year 2009(excluding Service taxat applicable rates and TDS under section 194-J of the IT Act, 1961 to the tuneof Rs. 1,20,000)(*includes Rs. 50,000 for appearance fee before Labour Court received fromanother firm)

5,44,680

9,80,000*

Service tax has been received separately for applicable items in (iv) above.You are requested to compute the value of taxable services for the year ended 31st March, 2010 andservice tax payable, briefly explaining the treatment of each such item above. (8 Marks) (May, 2010)[Answer - Value of taxable service Rs. 15,50,000, Service Tax payable Rs. 1,59,650]

Payment of Service Tax1. Should service tax be paid even if not collected from the client or service receiver? (2 Marks) (May,

2007, Nov, 2009)


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5,00,000


12,00,000


5,44,680

9,80,000*



2007, Nov, 2009)


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5,00,000


12,00,000


5,44,680

9,80,000*



2007, Nov, 2009)





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2. Where a service provider maintains books of accounts on mercantile basis relating to taxableservices provided by him, will service tax be payable on accrual basis? (2 Marks) (Nov, 2007)

3. Is a service provider allowed to pay service tax on a provisional basis? (2 Marks) (Nov, 2007)4. A particular service has been brought into the service tax net with effect from 1.6.2009. Mr. Vignesh

has provided this service on 20.5.2009; the payment for the same was received on 10.6.2009. Isservice tax payable on the same? (2 Marks) (May, 2008)

5. Mr. Saravanan has collected a sum of Rs. 15,000 as service tax from a client mistakenly, even thoughno service tax is chargeable for such service. Should the amount so collected be remitted to thecredit of the Central Government? (2 Marks) (May, 2008)

6. Who is liable to pay e-payment of service tax? (2 Marks) (Nov, 2008)7. How can the excess payment of service tax be adjusted? (2 Marks) (June, 2009)8. An assessee who has collected service tax from a client is unable to perform the service. Briefly

explain the situations in which and the conditions subject to which he can adjust the service taxrelating to above, against his forthcoming service tax liability. (3 Marks) (May, 2007)

9. Mr. Vasudevan has rendered freely, a service to a client which is taxable, but has not charged orreceived any fee from the client. Is service tax payable on such free service? (3 Marks) (May, 2008)

10. What are the due dates for payment of service tax? (3 Marks) (Nov, 2007) (Nov, 2008)11. Ajay Ltd. has agreed to render services to Mr. Guru. The following are the chronological events:

Particulars Amount – Rs.Contract for services entered into on 31.8.2009Advance received in September, 2009 towards all services 60,000Total value of services, billed in February, 2010 2,10,000Above includes non-taxable services of 70,000Balance amount is received in March, 2010When does the liability to pay service tax arise and for what amount? Contract contains clear detailsof services; consideration and service tax are charged separately, as mutually agreed upon. (6 Marks)(May, 2007)[Answer – Service Tax payable on 5th October, 2009 Rs. 4,120, on 31st March, 2010 – Rs. 10,300]

12. Mr. Y, a consulting engineer raised a bill of Rs. 2,24,720 (including service tax) on his client forconsulting services rendered by him in June, 2009. A partial payment of Rs. 1,68,540 was received byMr. Y in March, 2010. Compute the service tax amount payable by Mr. Y and the due date by whichservice tax can be deposited. (3 Marks) (Nov, 2008)[Answer – Service Tax payable on or before 31st March, 2010 – Rs. 15,739]

13. What is the due date for payment in case of e-payment of service tax? (3 Marks)(Nov, 2009)14. Is Service tax payable on free-service? (2 Marks) (May, 2010)15. State the due dates for payment of Service tax in the case of an individual rendering taxable service.

(2 Marks) (May, 2010)16. Mr. Raj rendered taxable service in February, 2010. The amount was however realized on 18.4.2010.

What is the due date for payment of Service tax? (2 Marks) (May, 2010)17. X & Co. received the following amounts:-

Date Nature of Receipt Amount – Rs. Timing of providing service20.4.2009 For service 1,00,000 Services were rendered in July, 200930.6.2009 Advance for service 5,00,000 Services were rendered in July & Aug,20095.8.2009 For service 50,000 Services were rendered in March, 200910.9.2009 Advance for service 3,50,000 A sum of Rs.50,000 was refunded in April,

2010 after termination of agreement. Forthe balance amount, service was providedin September, 2009.


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This is a sample document only. You can purchase full notes athttp://coursemateonline.com

This is a sample document only. You can purchase full notes at http://coursemateonline.comThis is a sample document only. You can purchase full notes at http://coursemateonline.com. This is asample document only. You can purchase full notes at http://coursemateonline.com. This is a sampledocument only. You can purchase full notes at http://coursemateonline.com. This is a sample documentonly. You can purchase full notes at http://coursemateonline.com. This is a sample document only. You canpurchase full notes at http://coursemateonline.com. This is a sample document only. You can purchase fullnotes at http://coursemateonline.com. This is a sample document only. You can purchase full notes athttp://coursemateonline.com. This is a sample document only. You can purchase full notes athttp://coursemateonline.com.




This is a sample document only. You can purchase full notes at http://coursemateonline.comThis is a sample document only. You can purchase full notes at http://coursemateonline.com. This is asample document only. You can purchase full notes at http://coursemateonline.com. This is a sampledocument only. You can purchase full notes at http://coursemateonline.com. This is a sample documentonly. You can purchase full notes at http://coursemateonline.com. This is a sample document only. You can


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