Service based businesses in India with a turnover of over Rs. 9 lakh in a financial year must have a service tax registration. This applies to nearly all service providers, barring a few that appear on the negative list, such as educational institutions, gymkhanas and cultural organisations. Service tax is managed by the central government, which means that registration and implementation is identical across India.
Why it is an Indirect Tax
A service tax registration is collected from customers, but paid to government by the vendor. This is why a service tax, just like value added tax, is an indirect tax. Currently, service tax is levied at 15, which includes a 0.5%Swachh Bharat Cess and a 0.5% Krishi Kalyan Cess.
When Service Tax is Necessary
A Service Tax Registration is necessary as soon as a business, consultant or even freelancer hits Rs. 9 lakh in revenue in a single financial year. Once this happens, a service tax registration must be applied for and collection must begin once revenues cross Rs. 10 lakh for the year.
Subsequently, service tax needs to be collected regardless of whether revenues are over Rs. 10 lakh in the year. Basically, once you start collecting service tax, you must continue to collect it while the registration is active.
How to get Service Tax Registration
Account Creation: Service tax registration begins online, on the ACES website. You must begin by registering yourself on the website with a username and password, and provide basic personal details, such as your name and address for communication as well as your current mobile number and email ID.
After submission of this registration form, you will be provided with a login ID and a temporary password (sent to you through email as well as SMS), which can be changed the next time you log into the account.
Submit ST 1: Once you create an account, you need to submit a form called ST 1. As soon as you login, you will be able to see the form under the tab Reg. Download the form, fill it up and submit it online, with the scanned copies of the required documents (ID proof of partners/directors/proprietor, PAN Card, AADHAR card or Voter ID card, address proof of applicant, bank details and, in case of a company or LLP, memorandum and articles of association or LLP Agreement).
Print Acknowledgement: As soon as you submit the application form online, an acknowledgement form is generated. Take a printout of this form, and attach it to the hard copies of all the scanned documents. This needs to be done within seven days of submission and is a mandatory procedure, without which the registration process is incomplete. The documents need to be sent to ‘Commissionerate, Division and Range’ in your area.
Verification Process: This next step is up to the authorities. After due verification of documents and a check-up of the relevant application forms, an electronic verification certificate is generated. This can be obtained on your account page of the relevant website. This electronic verification certificate is proof that you have registered your name for service tax payments. It will be sent through post or online, as specified by the applicant while filling the form.
Clarifications: In case there are any clarifications required about the documents submitted, the service tax authorities will send in a communication. However, in case the documents are not clear, or the address proof given or any documents submitted is not correct, the registration may be revoked.
Acceptance of ST 2: The whole process of service tax registration does not take more than two days after submission of your documents online. However, it is essential to send the hard copy of the documents for the registration to complete and to generate the acceptance certificate or the ST 2 (Service Tax registration certificate).
Tax Number: Once the 15 digit service tax number is allotted (from the service tax registration certificate), you can start paying your service tax and must also mention the 15 digit number in all financial transactions.
Kenneth Saldanha is Head of Communications at Vakilsearch.com, India's largest facilitator of legal services online.
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