17 November 2015
The Service tax rate is on gross value of services. But for certain services some % of concession is given by the Government which is called abatement. For example, the air conditioned restaurant receipts are liable to service tax rate of 14% from 01.06.2015 onwards. Earlier it was 12.36%.But they can claim abatement of 60% ie. the taxable portion of Air Conditioned restaurants are liable to Service tax on 40% of its gross receipts. For example, if hte gross receipts are Rs.100000/-, taxable portion for ST is Rs.40,000/-. Then coming to portion of ST is upto 31.05.2015= Service tax is 12.36% on Rs.40,000/- = 4944/-. From 1.6.2015 it is Rs.40,000/-*14%= 5600/- ( ie effective rate of 5.6%). Now comes Swachch Bharat cess @0.5%. Then the applicable rate is 14.5%. After abatement the ST rate for A.C Restaurants will be 5.8% ( after considering the abatement of 60%- ST rate of 14.5% on 40% value of Gross receipt), in the given example of Gross Receipts of Rs.100,000/- the ST with SW cess will be Rs.5,800/- instead of Rs.5,600/- from 15 th November onward.
As given in your example: ST on 5000 will be 700 + Swachch Bharat Cess of 25= 725
17 November 2015
SBC has to be calculated on the value of taxable service and not on ST. So ST + SBC in the given example comes to 700 + 25 = 725 and not 703.50.
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