Lower Rate of Service Tax for Contractors, Restaurants and Catering Service Providers, Life Insurers, etc.

Although the present service tax rate for all taxable services is 12.36%, the Ministry of Finance has provided for an alternative optional scheme for few service providers, who can choose an alternate tax rate instead of 12.36%, here in this article we will discuss all of such services which have an option for choosing the alternate tax rate.

 

The services which are covered under this scheme are:

  1. Air Travel Agents
  2. Life Insurance Business
  3. Work Contract Services
  4. Money Changing Services
  5. Restaurant or Outdoor Catering Services
  6. Distributor or Selling Agents of Lottery Services

 

 

1. Air Travel Agents:

air-travel-agencts-service-tax

The Air Travel Agents can choose the tax payable as either 12.36% or the following compounded rates at their option:

 For Domestic Bookings  0.618% X (Basic Fare*)
 For International Bookings  1.2% X (Basic Fare*)

 *Basic Fare here is the Amount on which commission is paid or payable by the airlines to the Air Travel Agent

2. Life Insurance Business:

 

The Insurer carrying on the life insurance business has the option to pay service tax at the rates mentioned below instead of 12.36%

life insurance agents

Premium Charged for   Service Tax Rate
 First Year of the Premium Charged  3.09%
 Subsequent Years  1.55%

Important Note:

The Above option is not available where:

1. The entire premium paid by the policyholder is only towards risk cover in life insurance OR

2. The part of the premium payable towards risk cover in life insurance is shown separately in any of the documents issued by the insurer.

 

 

3. Works Contract Services: 

 

Works-Contract

 Type of Work Contract  Taxable Value on which Normal Service Tax Rate is Applicable
 For Original Works  40% of the total amount charged for the works contract
 For Maintenance or repair or reconditioning or restoration or servicing of any goods  70% of the total amount charged for the works contract
 For other works not covered above  60% of the total amount charged for the works contract

Let us see an illustration for work contract service:

Let us assume it is a original works contract which means 40% of total amount charged for works contract will be taxable value, assume total amount charged is Rs. 5,00,000/-

Then the taxable value comes to Rs. 5,00,000 X 40% = 2,00,000/-

Service Tax on Taxable Value is Rs. 2,00,000/- X 12.36% =  Rs. 24,720/- is the Service Tax Amount on Rs. 5,00,000 under this optional scheme

4. Money Changing Service:

For persons who buy or sell foreign currency:money exchange brokers

 Gross Amount Exchanged  Service Tax Rate
 Re. 1/- To Rs. 1,00,000/-  0.12% of the Amount Charged (or) Rs. 30/- [Whichever is higher]
 Rs. 1,00,001 To Rs. 9,99,999/- Rs. 120/- + 0.06% of the amount exceeding Rs.1,00,000 /-
 Rs. 10,00,000/- or Mores Rs. 660/- + 0.012% of the amount exceeding Rs. 10,00,000/-A Maximum of Rs. 6000/-

Note: Once this optional scheme is exercised for a first few months of a financial year, the same cannot be withdrawn for the remaining months of the same financial year.

 

 

5. Restaurant or Outdoor Catering Services:

 

restaurants-service-tax

 

Service involved in the supply of food or any other article(s) of human consumption or any drink at a  Service Tax Calculated On
 Restaurant  40% of the Bill Amount
 Outdoor Catering Service  60% of the Bill Amount

 

 

6. Distributor or Selling Agents of Lottery Services:

This is applicable for the distributors or selling agents providing services like

  • promotion,
  • marketing,
  • organizing or
  • in any other manner assisting in organizing lottery shall have option to pay towards discharge of service liability as per the following slab rates:
 Conditions Service Tax
If the lottery scheme is one where the guaranteed prize payout is more than 80% Rs. 7000/- on every Rs. 10,00,000/- (or part of Rs. 10,00,000) of aggregate value of tickets sold
If the lottery scheme is one where the guaranteed prize payout is less than 80% Rs. 11,000/- on every Rs. 10,00,000/- (or part of Rs. 10,00,000) of aggregate value of tickets sold

 

 

Dilip Kumar

+Dilip Kumar (Author and Editor of The Tax Info) is a CA Student from Hyderabad, Loves Blogging on Tax related matter.

You can Subscribe for his updates on Facebook & Google+

 

One thought on “Lower Rate of Service Tax for Contractors, Restaurants and Catering Service Providers, Life Insurers, etc.

  • July 6, 2015 at 6:16 pm
    Permalink

    Dear Sir,

    Let us know about New service Tax rule w.e.f.01.06.2015 new Govt GR regarding slab of service tax
    14% with category diff services applicable rate.

    Reply

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