B Com Exam > B Com Notes > Indirect Tax Laws > Computation of Service Tax - Indirect Tax Laws
Computation of Service Tax - Indirect Tax Laws | Indirect Tax Laws - B Com PDF Download
Service tax calculation is easy and simple to understand. Service tax is levied at a fixed rate. This rate is applied on the gross value of taxable services and the result is called output service tax. The output service tax is then adjusted with the input service tax credit and if there is any positive balance then same is paid to the government otherwise negative balance carried forward to next period.
Let us understand the service tax calculation in detail.
Determine the output service tax payable
As mentioned earlier service tax rate is levied on the taxable value of services. For example, a doctor provides services of Rs. 50,000, then he will have to collect service tax @ 14.5% on Rs. 50,000/- i.e Rs. 7250/-.
He will raise the bill as given below:
| Particulars | Amount in Rs. |
| Doctor’s Fee | 50,000 |
| Service tax @14.5% | 7,250 |
| Total | 57,250 |
In the above case the Doctor knew in advance that how much he needed to charge as service tax and accordingly he added in the bill and collected from the client.
But there may be a case when the Doctor recovered only the Fees from the customer and forget to charge service tax. In this case it will be assumed that the total amount collected includes service tax portion also.
The formula to exclude the service tax portion is given below:
Hence the service tax portion will be calculated as given below:
50,000/114.5 X 14.5 = Rs. 6,332/-
So, Rs. 6,332 will be service tax amount and Balance Rs. 43,668 will be doctor’s fee.
If you will calculate the 14.5% of 43,668 you will get Rs. 6,332/-
Read:
New Current Service tax rates
Determine the input service tax payable
It is quite easy to calculate. You need to sum up all input service tax paid by you on input services used for providing taxable services.
Remember that no input credit is available for Swatch Bharat Cess. So the output Swatch Bharat Cess @0.5% need to paid in full.
Balance Tax payable or credit carried forward
The balance amount will be calculated as given below:
| Output service tax payable | XXXX |
| Less: Input service tax available | XXXX |
| Balance Service tax payable, if positive otherwise carried forward to adjust with next month balance. | XXXX |
You can also claim service tax exemption of Rs. 10 Lac.
Read:
Small service provider exemptions
Please comment for any query on service tax calculations.
The document Computation of Service Tax - Indirect Tax Laws | Indirect Tax Laws - B Com is a part of the B Com Course Indirect Tax Laws.
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FAQs on Computation of Service Tax - Indirect Tax Laws - Indirect Tax Laws - B Com
| 1. What is service tax and how is it computed? |  |
Ans. Service tax is an indirect tax levied by the government on certain services provided by service providers. It is computed based on the value of taxable services provided by the service provider. The service tax rate is determined by the government and is applied to the taxable value of the services provided.
| 2. What are the different methods of computing service tax? | |
Ans. There are two methods for computing service tax: the specific rate method and the ad valorem method.
- Specific rate method: Under this method, a fixed amount of service tax is levied on specific services, regardless of the value of the service provided. For example, a fixed amount of service tax may be levied on the issuance of a passport.
- Ad valorem method: This method is based on the value of the taxable services provided. The service tax rate is applied to the taxable value of the services, which is generally the gross amount charged by the service provider for the services rendered.
| 3. Are there any exemptions or abatements available for service tax computation? | |
Ans. Yes, there are certain exemptions and abatements available for service tax computation. Exemptions refer to services that are completely exempt from service tax and do not require any payment. Abatements, on the other hand, refer to a reduction in the taxable value of services on which service tax is calculated. This means that only a portion of the total value of the services is subject to service tax.
| 4. How is service tax computed for composite services? | |
Ans. Composite services refer to services that are a combination of multiple taxable and non-taxable components. In such cases, service tax is computed by segregating the taxable and non-taxable components of the service. The service tax is then calculated only on the value of the taxable components of the composite service.
| 5. What are the penalties for non-compliance in service tax computation? | |
Ans. Non-compliance with service tax computation can lead to penalties imposed by the government. The penalties may include a monetary fine, interest on the unpaid tax amount, and even imprisonment in certain cases of severe non-compliance. It is important for service providers to accurately compute and pay their service tax liabilities to avoid such penalties.
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