The tax levied by the government on the paid services is known as Service Tax. It is an indirect tax as service providers charge it from their clients. It came into existence in 1994. The current service tax rate is 14.5% (which includes the Swachh Bharat Cess of 0.5%). In the Union Budget 2016-2017, the government has introduced Krishi Kalyan Cess of 0.5% which will be applicable from June 1, 2016 – taking the overall Service Tax rate to 15%. It is expected that these gradual hikes are a step-by-step move of the government to introduce the proposed GST (Goods and Services Tax) which is expected to be around 17-18%. Small scale service providers who provide taxable services worth less than Rs.10 lakhs in a year are exempted from paying the service tax but if your income exceeds Rs 9 lakhs in a year, you should go for Service Tax Registration to avoid any penalty.
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