Service tax Guide : This article is designed for the bloggers and freelancers in India. It would help such professionals to understand the concept and application of service tax on service provided by them. Professionals in India like Chartered Accountants, Doctors, Lawyers, Singers, Actors, etc. have already been paying service tax on their revenues. Likewise, Bloggers and Freelancers also come under the scope of service tax in India.
APPLICABILITY OF SERVICE TAX ON BLOGGERS & FREELANCERS
Service Tax is paid by the provider of service. Any person whose revenue from rendering any service (whether blog consultancy, affiliate sales, blog designing, SEO Services or any other service) during a financial year exceeds Rs.10 lakh is liable to make payment of service tax based on the tax rates prescribed by the government. The present rate of service tax is 15%. Any person in India providing any service and earning revenue of more than Rs.10 lakh p.a. is liable to make payment of service tax on such service rendered. Service tax is levied on bloggers and freelancers as well as they also provide a form of service.
APPLICABILITY OF SERVICE TAX ON FREELANCE INCOME FROM OUTSOURCED SOURCES
Most of the freelancers working online outsource their services from India to abroad. Such services are exempted from service tax. The government of India has exempted service tax from all services which are exported out of the country. However, certain laws and eligibility criteria are there which determine whether a particular service falls under the category of “Export of Service”.
EXEMPTION FROM SERVICE TAX
Service Tax is not imposed in the following cases :
1) If total revenue/turnover of the business is less than Rs.10 Lakhs. This exemption is called small scale Exemption.
2) The services which are exported out of India are also exempted from service tax. Several rules have been specified by the government for determining whether a service rendered is considered as export or not.
RATE OF SERVICE TAX
Service tax is charged @15% on revenue. The difference between revenue and income is made clear with the help of the following equation:-
Revenue – Expenses = Income
So, if the total revenue (excluding ad sales in a financial year exceeds Rs.10 lakh, one would be required to make payment of service tax to the government of India.
CHARGING OF SERVICE TAX TO THE CLIENT
Service tax is an indirect tax which is payable by the person rendering the service. The service provider can still charge the service tax from his/her clients which the former has to pay to the Indian government. Let us understand the process with an example.Suppose Mr. X renders some service to Mr. Y for Rs.50 lakh which is subject to service tax @ 15%. The service tax of Rs.7.5 lakh is to be paid by Mr. X to the Indian government. Mr. X can still charge this service tax of Rs.7.5 lakh from Mr. Y and then pay the same to the government of India. This is how the system of service tax works in the Indian economy. A person who provides any service charges the service tax on the same from the person receives such service. In case, a service provider doesn’t charge service tax from his/her clients, then such professional would be required to make a payment of this service tax amount from his/her own pocket.
REGISTRATION FOR SERVICE TAX
Registration for service tax becomes compulsory when the revenue( excluding ad sales) is more than Rs.9 lakh p.a. In order to register for service tax, a person has to apply for a service tax number, which is similar to PAN for filing income tax return.For the purpose of service tax registration, one has to visit the website of Central Excise and Sales Tax department and has to follow the simple automated process for service tax registration. Service tax number is issued to every person liable to pay Service Tax.
FILING OF SERVICE TAX RETURN AND PAYMENT OF SERVICE TAX
Service tax return is required to be filed two times in a year, the first time in October and the second time during April. Service tax return is a statement of the revenue earned from a different type of services. The government has prescribed numerous dates for the payment of service tax which depends on the type of registration (Individual/ Company).Service tax is liable to be paid only when the revenue (excluding ad sales) crosses Rs.10 lakh p.a.
This article will work as a service tax guide exclusively to the bloggers and freelancers in India who generates a revenue of over Rs.10 lakh per financial year. I hope that the article proves to be very helpful for the readers.