(IND) Understanding Service Tax

This chapter provides overviews of:

• Service tax.

• Process flow for service tax.

• Software solution for service tax in the O2C cycle.

• Software solution for service tax in the P2P cycle.

• Setup requirements for service tax in the O2C cycle.

• Setup requirements for service tax in the P2P cycle.

See Also

(IND) Setting Up Country-Specific Functionality for India

(IND) Working with Service Tax

Overview of Service Tax

Service tax is a central government tax that customers are charged on the services provided to them. Service providers are responsible for issuing invoices and charging service taxes to their customers. The service provider is required to deposit the tax amount to the tax authority after collecting the tax amount from the customer. The service tax payment must be submitted with the TR-6 Challan form to the designated branches. An additional surcharge called an education cess is also included in the service tax amount that is charged to the customer.

The service tax credit can be claimed when the registered customer pays the taxes and taxable services to the service provider. The service tax for a particular period is payable on the value of the taxable service received only for that period and not on the gross amount charged. The service provider must issue a revised bill to the customer for the services received. For individual proprietor or partnership firm, the service tax must be paid on a quarterly basis. The payment should be made by the 25th day of the month following the quarter. For other entities such as companies, the service tax should be paid on a monthly basis before the 25th day of the following month. If the payment of service tax is delayed, the customer must also pay the penalty fees in addition to the tax amount.

The service provider must follow these legal provisions for the service tax:

• Register only the centralized billing location if services are provided by more than one location.

• Obtain registration from the appropriate tax authority for each location or office if there is no centralized billing location.

• Submit a single application for registration to the tax authority that includes all the taxable services if more than one service is provided by the same location.

The service tax returns must be filed in the Form ST-3 or ST-3A on a semi-annual basis to the tax authorities. The returns must be filed within 25 days of the semi-annual closing period with TR-6 Challan. The service provider must file a nil return if no service is provided during six months.

Process Flow for Service Tax

This process flow shows the steps that a service provider performs to process, generate, calculate, and remit service tax in the O2C cycle:

Service tax process flow for O2C cycle

This process flow shows the steps that the manufacturer performs in the P2P cycle:

Service tax process flow for P2P cycle

Software Solution for Service Tax in the O2C Cycle

To meet the service tax requirements specified by the tax authorities in the O2C cycle, the JD Edwards Enterprise One programs enable you to:

1. Create a sales order for the taxable services.

2. Calculate the service tax and print the invoice.

3. Enter cash receipts based on the payment received from the customers.

4. Generate the service tax reclassification reports.

5. Create a voucher for the service tax payable to the tax authorities.

6. Generate the TR-6 Challan report on a monthly basis and the Form ST-3 on a semi-annual basis.

7. Offset the service tax liability with credit availed from input services.

   Note. If the manufacturer is also a service provider, the service tax can be offset from input raw material and input capital goods.

8. Create a voucher for the service tax payable to the tax authorities

9. Generate the TR-6 Challan report on a monthly basis and the Form ST-3 on a semi-annual basis.

Software Solution for Service Tax in the P2P Cycle

To meet the service tax requirements specified by the tax authorities in the P2P cycle, the JD Edwards Enterprise One programs enable you to:

1. Create a purchase order and receive the invoice from the service provider.

2. Generate the service tax related information for full and partial payments.

3. Issue payment to the service provider.

4. Generate the service tax reclassification reports.

Setup Requirements for Service Tax in the O2C Cycle

This table lists the service tax setup requirements for the O2C cycle in India:

Setup Requirements for Service Tax in the P2P Cycle

This table lists the service tax setup requirements for the P2P cycle in India: