Rate of Service Tax

Service Tax came into force w.e.f. 01-07-1994. Then the rate of Service Tax was 5%. Since then rates have changed from time to time as follows:

01/07/1994 to 28/02/2003 5% ; E Cess 0% ; S&HE Cess 0% (Effective 5%)

01/03/2004 to 09/09/2004 8% ; E Cess 0% ; S&HE Cess 0% (Effective 8%)

10/09/2004 to 17/04/2006 10% :E Cess 2% : S&HE Cess 0% (Effective 10.2%)

18/04/2006 to 10/05/2007 12% ; E Cess 2% : S&HE Cess 0% (Effective 12.24%)

11/05/2007 to 23/02/2009 12% ;E Cess 2% : S&HE Cess 1% (Effective 12.36%)

24/02/2009 to 31/03/2012 10% ; E Cess 2% : S&HE Cess 1% (Effective 10.3%)

01/04/2012 to ........till date 12% ; E Cess 2% : S&HE Cess 1% (Effective 12.36%)

(With effect from 24/02/2009 though the rate of Service tax is 12%. However, by Notification No. 8/2009 dt 24/02/2009 the effective service tax had been reduced to 10%)
Section 66 of the Finance Act 1994 (Chapter V),

In addition to the basic rate of 10%, Education Cess at the rate of 2% and Secondary and Higher Secondary education Cess at the rate of 1% were levied on service tax rate in respect of all taxable services. Thus effective rate of Service Tax was 10.30%

With effect from 01/04/2012 vide Notification No. 2/2012-S.T., dated 17-3-2012, notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 8/2009-S.T., dated the 24th February, 2009 has been residend. Hence since 01/04/2012 the rate of service tax has been reverted back to 12%

Service Tax in some Special cases:

1. In case of an insurer, carrying on life insurance business, in relation to the risk cover in life insurance provided to a policy holder, shall have the option to pay an amount calculated at the rate of 1% on the gross amount of premium charged. This has not been changed since 10-09-2004 when it was first introduced (Service Tax Rules, 1994, Rule 6(7A) exceptions to the above mentioned rate of 1% for insurer,

Exception to this are:

(a) When the entire premium is paid by the policy holder and it is only towards risk cover in life insurance; or
(b) When 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. In case of the currency exchanged, rate of 0.25% has been introduced w.e.f. 16-05¬-2008 for the transaction of sale or purchase of foreign currency where no separate service charge is mentioned for the provision of such service. (Service Tax Rules, 1994, Rule 6(7B)

3. In relation to works contract service the assessee shall have the option to pay service tax at 4% of the gross amount charged for the works contract on service provided or to be provided. (Rule 3(1), Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007)

(For calculating the gross amount charged for the works contract, it shall not include Value Added Tax (VAT) or sales tax, paid on transfer of property in goods involved in the execution of the said works contract)