Service Tax Vs.

Excise Tax
Indirect Tax
2011
Group 3
6/2/2011

2
Service Tax Vs. Excise Tax
Group Members List :

Roll Numbers Names
13
Jinit Jain
14
Riyam Jain
18
Zeba kachwala
35
Jigar jain
45
Jugal shah
46
Nisha shah
49
Saloni shah








3
Service Tax Vs. Excise Tax
Acknowledgement
We, the students of SY-BAF, would like to thank our Professor Ms. Geeta
Sachdev for giving us an opportunity to work on the topic Service Tax Vs.
Excise Tax. It was a pleasure working on this topic. It also helped us in
improving our co-ordinating skills by working as a group together. We got
to know the topic in detail and will be helpful since it covers a part of our
syllabus as well.

Thank you!










4
Service Tax Vs. Excise Tax
IndeX
Sr. No. Topics Page No.
1.
Indirect Taxes 5
2.
Service Tax
Introduction
Features
Exemptions
Service Tax Rates


7-10
3.
Excise Tax
Introduction
Types
Features
Exemptions
Rates


11-14
4.
Distinguish between Service Tax and
Excise Tax
15-16
5.
Similarities between Service Tax and
Excise Tax
17
6.
Conclusion 18







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Service Tax Vs. Excise Tax
INDIRECT TAXES
Indirect Taxes refers to those taxes which are levied on goods and services rather
than on persons or organizations.
The various types of Indirect Taxes are :-
1. Sales Tax
2. Excise Duty
3. Customs Duty
4. Service Tax
5. Entertainment Tax
6. Entry Tax
However, we will study only about Service Tax and Excise Tax and their
various differences in our project.




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Service Tax Vs. Excise Tax
SERVICE TAX
INTRODUCTION
Service Tax was first brought into force with effect from 1 July 1994. All service
providers in India, except those in the state of Jammu and Kashmir, are required to
pay a Service Tax in India. Initially only three services were brought under the net
of service tax and the tax rate was 5%. Gradually more services came under the
ambit of Service Tax. The rate of tax was increased from 5% to 8% w.e.f 14 May
2003. From 10 September 2004 the rate of Service Tax was enhanced to 10% from
8%. Besides this 2% education cess on the amount of Service Tax was also
introduced. In the Union Budget of India for the year 2006-2007, service tax was
increased from 10% to 12%. On February 24, 2009 in order to give relief to the
industry reeling under the impact of economic recession, the rate of Service Tax
was reduced from 12% to 10%.
Service Tax is a form of indirect tax imposed on specified services called "taxable
services". Service tax cannot be levied on any service which is not included in the
list of taxable services.
The Finance Minister of India, Pranab Mukherjee in his Budget speech has
indicated the government's intent of merging all taxes like Service Tax, Excise and
VAT into a common Goods and Service Tax by the year 2011. To achieve this
objective, the rate of Central Excise and Service Tax will be progressively altered
and brought to a common rate. In budget presented for 2008-2009 It was
announced that all Small service providers whose turnover does not exceed Rs 10
lacs need not pay service tax.
Currently there are 118 services covered under Service Tax.





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Service Tax Vs. Excise Tax
Features of service tax
Scope: It is leviable on taxable services provided or to be provided by a
service provider. The services to be provided in future are taxed only if
payment in its respect is received in advance.

Rate: It is leviable @ 10% of the value of taxable services. Education Cess @
2% and Secondary and Higher Education Cess @ 1 % are chargeable on the
amount of service tax, thus, making the effective rate of service tax at 12.36%
of the value of taxable service


Taxable services: Service tax is leviable only on the taxable services.
Taxable services mean the services taxable under section 65(105) of the
Finance Act, 1994.

Value: For the levy of the service tax, the value shall be computed in
accordance with section 67 read with Service Tax (Determination of Value)
Rules, 2006.


Free services not taxable : No service tax is leviable upon the services
provided free of cost.


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Service Tax Vs. Excise Tax
Payment of service tax : The person providing the service (i.e. the service
provider) has to pay service tax in such manner and within such period as is
prescribed in the Service Tax Rules, 1994. The service tax is to be paid only on
the receipt of payment towards the value of taxable services.

Procedures: Provisions have been made for registration, assessment including
self assessment, rectifications, revisions, appeals and penalties on the service
provider.

CENVAT credit: The credit of service tax and excise duty across goods and
services is allowable in accordance with the CENVAT Credit Rules, 2004.

Services provided by an unincorporated association/body to
its members also taxable:
[Explanation to Sec. 65] : Taxable service includes any taxable service
provided or to be provided by any unincorporated association or body of
persons to a member thereof, for cash, deferred payment or any other valuable
consideration. Hence, the services (falling under any category of taxable service)
provided or to be provided by any unincorporated association/body to member
thereof shall be liable to service tax.


Performance of statutory activities/duties, not service: An
activity performed by a sovereign /public authority under provisions of law
does not constitute provision of taxable service to a person and, therefore, no
service tax is leviable on such entities.



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Service Tax Vs. Excise Tax
Import/Export of services: While import of services is chargeable to tax
u/s 66A, the export of services has been made exempt from tax. Import/export
provisions are discussed separately.









10
Service Tax Vs. Excise Tax
EXEMPTIONS
The following exemptions are applicable to all services:-
Exemption to UNO or International Organization.
Special Economic Zones.
Cost of goods and materials (barring few exceptions like beauty parlour).
Export of services.
Payment received in non-repartriable freely convertible foreign exchange.
Services rendered abroad.
Software engineering enjoys a complete exemption from service tax.
Services rendered free of charge.

SERVICE TAX RATES

Period Basic rate
01/04/1994 to 13/05/2003 5%
14/05/03 to 9/09/2004 8%
10/09/2004 to 17/04/2006 10%
18/04/2006 to 23/02/2009 12%
24/02/2009 to date 10%






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Service Tax Vs. Excise Tax
EXCISE TAX
INTRODUCTION
Excise Tax is more commonly known as Excise Duty and is one of the most well-
known forms of taxation in India. Excise duty is a tax on manufacture or
production of goods. Any manufacturer of excisable products is liable to pay this
tax and is levied on a wide variety of commodities manufactured in India.
For the Indian central government this duty is an important source of revenue. The
Excise Tax is required to be paid before the goods leave the factory, as a result of
which the small-scale industries do not pay Excise Tax up to the specified value of
goods cleared from the factory. The state governments are liable to levy excise
duty on a few commodities including liquor, provided the central government fails
to do so. At times when the manufactured goods are exported excise drawback is
available.



12
Service Tax Vs. Excise Tax
TYPES OF EXCISE TAXES :-
In India, the three types of Central Excise Taxes being collected include the Basic
Excise Duty, Additional Duty of Excise, and Special Excise Duty.

The Basic Excise Duty is charged under the Section 3 of the Central Excises and
Salt Act, 1944. According to this all excisable goods other than salt produced or
manufactured in India, has to pay the rates given in the schedule to the Central
Excise Tariff Act, 1985.

As per the Section 3 of the Additional duties of Excise Act, 1957 it is authorized
that only the goods described in the Schedule to this Act are liable for Excise Tax
payments. Generally these are imposed under different categories like medicinal
and toilet preparations, sugar and other industries development.

The Special Excise Duty following the Section 37 of the Finance Act, 1978 was
imposed on all excisable goods that are also subjected to Basic excise Duty under
the Central Excises and Salt Act, 1944. However, the Finance Act provisions
regarding the said fiscal year specify the levy and collection of the Special Excise
Duty.
Who is liable to pay Excise Duty?
Every manufacturer is liable to pay excise duty.

Warehouse keeper is liable to pay excise duty if goods are cleared from factory
without payment of duty.

In case of molasses the purchaser is liable to pay excise duty.




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Service Tax Vs. Excise Tax
FEATURES OF EXCISE TAX
It is an indirect tax.

Central excise duty is levied on all excisable goods produced or
manufactured in India (except goods produced or manufactured in special
economic zone).

Excisable goods are specified in Central Excise Tariff Act, 1985.

Such duty is levied and collected uniformly throughout India in accordance
with the provisions of a specific Act known as Central Excise Act, 1944.

Taxable event of Central excise is manufacture or production i.e. charge is
fixed at the time of occurrence of manufacture or production.

Though taxable event is manufacture or production, duty is payable on the
date of removal i.e. clearance from factory.

Excise duty is payable by the manufacturer or producer of excisable goods
in certain cases.



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Service Tax Vs. Excise Tax
EXEMPTIONS
The following are the exemptions under Excise Tax :-
Special Economic Zones.
EOUs, Units in EPZs, STPs, or EHTPs.
Exemption to export goods for repairs, etc.
Expemption to excisable goods sent for trade fair, exhibition, etc.
Exemption related to Goods manufactured in specific areas such as North-
Eastern States, State of Jammu and Kashmir, Kutch and State of Uttaranchal
and Himachal Pradesh.
Exemption to goods captively consumed.
Exemption to goods manufactured in government factories and supplies to
defence.
Exemption to technical, educational and research institutes.
Exemption to certain goods for rehabilitation work.
Exemption to goods produced without aid of power and for units in rural areas
Job Work Notifications.
RATES
Excise duty on most commodities ranges between 0 to 16%. Only on seven items
duty is imposed at 32%, viz., motor cars, tyres, aerated soft drinks, air
conditioners, polyesters filament yarn, pan masala and chewing tobacco. Duty is
charged at 30% on petrol with additional excise duty at Rs. 7 per litre. The said
rates are subject to exemptions and deductions thereon as may be notified from
time to time. Central VAT (CENVAT) is applicable to practically all manufactured
goods, so as to avoid cascading effect on duty. Small Scale Sector is exempted
from payment of excise duty from annual production upto Rs.10 million.






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Service Tax Vs. Excise Tax
Distinguish between service tax and
excise tax

Service tax Excise tax
1. Definition
Service tax is Tax imposed
on service providers in India
except for the State of
Jammu and Kashmir.


There is no fixed definition for
Excise tax. As per dictionary,
it is a tax levied on goods and
commodities produced or sold
within the country.

2. Governing act
Introduced for the first time
under Finance Act, on 1
st

June 1994.
Provisions governed by
Central Excise Act, 1944.

3. Applicability

It is charged on services. It is charged or levied on
products only on
manufacturers and not buyers.

4. Commonly known
as
It is commonly known as
the tax of the future.
It is commonly known as
Excise Duty or Inland
Tax.

5. Source of
revenue
Does not give as much
revenue to the government
as Excise Tax.
Biggest Source of Revenue for
the government.

6. Rate
Current rate is 10.3% Excise tax on most
commodities is between 0% to
16%. Only on seven items it is
imposed at 32%.

7. Contribution to
GDP
Largest contributor to GDP Average contribution to GDP.


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Service Tax Vs. Excise Tax
8. Person liable to
pay
Service provider is liable to
pay Service tax.
Manufacturer of producer of
goods is liable to pay Excise
tax.

9. Government
involved
It is charged by central and
state government.
It is charged by the central
government only.

10. Parties
involved
2 parties i.e. service provider
and service client.

Only 1 party involved i.e.
manufacturer.
11. When is it
payable
It is payable only on receipt
of value of taxable service
from customer/client
BEFORE, DURING OR
AFTER rendering the
service.

It is payable or chargeable
only at the time of production
of goods and not on sale.
12. Evasion
Evasion of service tax is not
as difficult as it is in Excise
Tax.

Evasion of Excise tax is very
difficult or nearly impossible.
13. Number
There are 118 taxable
services.
There is no specific number of
taxable goods. All goods
manufactured are taxable.

14. Exemption limit
Current exemption limit is
RS 10 Lac governed by
Finance Act, 2008.

There is no such exemption
limit under Excise Tax.
15. Types
There are no different types
of service taxes.
Three types of Central Excise
Taxes i.e. Basic Excise Duty,
Additional Duty of Excise,
and Special Excise Duty.

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Service Tax Vs. Excise Tax
SIMILARITIES
The similarities between Service Tax and Excise Tax are as follows :-
Service Tax and Excise Tax are Indirect Taxes.

Service Tax and Excise Tax are leviable only in India except for the state of
Jammu and Kashmir.

Service Tax and Excise Tax do not include import of goods or services.

Service Tax and Excise Tax are sources of revenue for the government.

Being Indirect Taxes, Service Tax and Excise Tax are difficult to evade.



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Service Tax Vs. Excise Tax
Conclusion
Thus we can conclude that,
Service Tax and Excise Tax are both Indirect Taxes and are leviable only in India.
Service Tax was first brought into force with effect from 1 July 1994, and it is
charged only on taxable services. Initially only three services were there but now
there are 118 services. The current rate of Service Tax is 10.3 % and it is the
largest contributor to the GDP. Service Tax is payable by the Service provider. It is
an important source of revenue for the government. We can also say that there are
various exemptions in Service Tax.
On the other hand, Excise duty is a tax on manufacture or production of goods.
Any manufacturer of excisable products is liable to pay this tax and is levied on a
wide variety of commodities manufactured in India. The current rate of Excise is
between 0% to 16% for most commodities except for seven commodities which
have a rate of 32%. Excise Tax is paid by the manufacturer on goods or
commodities manufactured by him. Also, there are various exemptions under
Excise Tax.
We also noticed that there are various differences between Service Tax and Excise
Tax like rate, applicability, governing act, parties involved, source of revenue, etc.
Thus we can say that both Service Tax and Excise Tax are important in their own
way and help the government equally in earning revenue by way of taxes.


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Service Tax Vs. Excise Tax
Bibliography:

K.C College Library
www.google.com
www.wikipedia.com
Direct and Indirect Taxes I - Ainapure