Service Tax Form 3. Service Tax Form 3: Fill & Download for Free

Service charge: " Bill mein aata hun,samajh mein nahi"( I appear on bills, not in logic)Alright. Bad joke!But the inflated bills after a fun filled Friday evening at a restaurant has the potential to spoil your mood.A bill will have four components :The items you orderedService ChargeService TaxValue added Tax (VAT)The items you can order include food,drinks and/or packaged items like packaged drinking water, a bag of chips, a cigarette pack, etc. On this you are levied service charge, service tax and VAT.Service ChargeThis is for the services rendered to you.There are no explicit guidelines regarding service charge. This depends solely on the restaurant management. Typically,it is between 4% to 10%. This basically goes to the restaurant and should be,supposedly, distributed among the staff. Hence, the restaurants have converted service charge into a "mandatory tip"Catch: Unless this is communicated to you-displayed on menu,displayed on wall posters or displayed on any other pamphlet (Barbeque Nation tells you beforehand) you can question your bill. If this is included, you can also avoid giving tips. Also, this is supposed to be charged for the services they offer. Except food and liquor you ore not obligated to pay the service charge for other items.Service TaxService tax is the tax levied by the Government on the services rendered by restaurants. It is 12.36% on the 40% of the bill. The bill includes your food and drink and the service charge ( service tax should be 40% * 12.36% = 4.94% on the total bill)Catch : Service tax can only be charged if the restaurant is Air Conditioned.Value Added TaxThis tax is state specific and it varies form 5% to 20%. This is charged on goods or services upon which there is some value addition.Catch: Food prepared in restaurant kitchen.Make sure that you are not charged VAT on packaged food items or water bottles. The VAT rate is also different for alcoholic beverages and other food items. It is better if you take two separate bills for food and drinks.Restaurants have to charge service tax only on 40 per cent of the total food bill because 40 per cent is for the services provided and 60 per cent is treated as goods sold. As per this logic, VAT should be payable only on 60 per cent of the bill because service tax is already charged on 40 per cent of the food bill, but this is not the case as the VAT rules expressly state that VAT needs to be applied on the total food bill.(Image credits : Pinterest)

GST is levied on the supply of goods and services or both.GST is a consumption based tax and the tax revenue goes to the state where goods or services are consumedGST is levied on every transaction jointly by State as Well as Central Government.GST subsumes following taxes of State and Centre level(1)  Central Taxes subsumed in GST1. Central Excise Duty;2. Duties of Excise (Medicinal and Toilet Preparations);3. Additional Duties of Excise (Goods of Special Importance);4. Additional Duties of Excise (Textiles and Textile Products);5. Additional Duties of Customs (commonly known as CVD);6. Special Additional Duty of Customs(SAD);7. Service Tax;8. Cesses and surcharges insofar as they relate to supply of goods or services.(2)  State Taxes subsumed in GST1. State VAT;2. Central Sales Tax;3. Purchase Tax;4. Luxury Tax;5. Entry Tax (All forms);6. Entertainment Tax (except those levied by the local bodies);7. Taxes on advertisements;8. Taxes on lotteries, betting and gambling;9. State cesses and surcharges insofar as they relate to supply of goods or services.All transactions in GST shall be online with virtually no interaction between the taxpayer and tax collector. This should reduce tax evasion and corruption.GST rates and laws shall be decided by GST Council which is an Constitutional Body headed by Union Finance Minister having all State Finance Ministers as members.GST shall create one rate, one law and one market for India.

A lot.I’ll just give some brief highlights -1950: Constitution of India allows separate taxation powers to Central Government and State GovernmentsWe all know that in 1950, India adopted the Constitution, which gives separate taxation powers to the two governments keeping in mind the federal structure of the country. Accordingly -Central Government was given the power to tax incomes (income tax), manufacturing (excise duty) and imports into India (customs duty)State Government was given the power to tax sale of goods (then called ‘sales tax’), land revenue (stamp duty) and taxes on alcohol and agriculture produceLaws were formed by both governments, and the system was running fine for it’s time. Remember that there were some other minor taxes as well (stamp duties, octroi, entry tax etc.) which were levied by the State Government.1956: CST Act for inter-state movementsWhile state governments were charging ‘sales tax’ on sale within their own states, central government had the power to collect tax on inter-state sales. For this purpose, CST was levied and it started in 1956, but changed a lot over time, as we will see.1961: New Income Tax Act (which is now quite old)I was digging and found that Income Tax Act of 1922 was replaced by a ‘new’ Act of 1961 in order to ‘consolidate the clumsy provisions and simplify the law’. This is interesting because, today, the 1961 Act is undergoing the same problems. History repeats itself!1973: Insane tax rates were brought downIn those times, there were 11 tax slabs for people earning their incomes, with the highest rate being as high as a whopping 97.5%, wiping out almost all the income.[1] It looks like people of those times didn’t understand the concept of Laffer Curve showing ideal tax rates. Reforms were initiated, obviously.1975: HSN Codes adopted by CustomsThis was a significant move because it attempted to actually make a list of all the items in the world and systematically organise them into groups. This helped to gain a lot of clarity to taxation. This HSN system is still being used in Excise and even in GST. In fact, it is used world over to establish tax rates on goods.1986: MODVAT was introduced in ExciseI call this a path-breaking move because in some ways we are still following the MODVAT system. In fact, GST is based on the concept of MODVAT. In 1986, it was felt that if excise duty is paid on the raw material, then it would be double taxation to levy excise on full value of the finished product (because finished product includes raw material), hence a system was introduced to allow the manufacturers to reduce the input tax from their output tax.1991: Systematic tax slabs for income taxThe confusing multiple tax rates and tax brackets was discontinued in 1991, and under Manmohan Singh, we started the simplified system of 3 tax slabs (which we are using even today). At that time, the income tax slabs were fixed at 20%, 30% and 40%1994: Say hello to Service TaxService tax was one of the highest sources of income for the government (until GST discontinued it, let’s wait till we get there). In 1994, service tax was introduced on 3 services only (stock broking, telephones and general insurance). We will see how the journey of service tax evolved over time.1997: MAT was introduced under income-taxThe concept of MAT was one of the genius ideas that helped to streamline the tax collection from companies. MAT stands for minimum alternate tax, which shows the bare minimum amount that every company has to pay to the government (and if their tax liability is less than that, they can claim relief next year). Read this answer to know what is MAT and how it is helpful.2000: Special Economic Zones introducedSeveral areas around the country were identified as ‘special economic zones’ where no taxes would be levied. These areas would be treated almost as if they are not part of India. Hence if goods were sold to SEZ, it was treated as if they were exported. This was done to boost investments, and is still operational today.2004: Central Excise and Service Tax (almost) mergedIn terms of allowing the credit of service tax against excise and vice versa, this year marked a huge leap to integrate the tax on goods and services. Today, GST talks about a single tax on both goods and services. In 2004, people were not at all aware that such a thing could even exist. So this was a remarkable move.2005: ‘VAT’, the state-level tax reformWe are now finishing VAT as well, so this reform looks quite old now, even though it’s been ‘only’ 12 years. VAT was the replacement of sales tax. Sales tax was also levied on every stage, resulting into double tax (or cascading effect of taxes). VAT aimed to give benefit of input sales tax against output sales tax and pay the tax only on the ‘value-added’, hence the name.2009: First Discussion Paper on GSTThis was the first time when the concept of GST was documented properly. There were talks about GST since 2000 only, but we never paid a serious attention to it. The First Discussion Paper laid down the basic concepts of GST which India is adopting today.[2]2012: Negative List in Service TaxThis was a major boost for service tax. Up till that point in time, service tax was levied on ‘some’ specified services only. But in 2012, the system was reversed - meaning that taxes were levied on all services, except on some services which were exempt. This significantly increased the tax base for service tax.2017: Goods and Service TaxLooking back, it seems that GST was bound to happen. We were on a path to tax reforms from 1986 with the MODVAT concept, then slowly we merged excise and service tax, and introduced VAT in the states, and covered all services to finally culminate into a single tax for goods and services across the country.By adopting GST, we are discontinuing taxes like central excise, service tax, sales taxes, VAT, CST etc. which have been around for decades now. It is, thus, the biggest tax reform India has seen till now. Click here to know more about GST.To know more about Indian taxes, follow the Quora blog Earning our taxes. Or better still, follow me!Suggested Reading:Palkesh Asawa (पल्केश असावा)'s answer to What should every Indian know about the Indian tax system/rules?Palkesh Asawa (पल्केश असावा)'s answer to What is the difference between the current taxation and the new goods and services tax (GST) in India? What is the impact?Footnotes[1] A 50 year trend of Indian personal tax rates[2] http://www.cbec.gov.in/resources//htdocs-cbec/gst/1st-discn-paper-new.pdf