Service tax and education cess must be separate on an invoice

Written by Saloni Roy | Anirban Ganguly | Updated: Nov 16 2007, 05:20am hrs
Is it necessary to separately show the amount of service tax, education cess and higher education cess or can we just indicate the effective service tax rateinclusive of the various components, of 12.36% on an invoice raised for providing taxable services

Technically, the amount of service tax, education cess and higher education cess should be separately shown on the invoice of a service provider. This requirement has also been clarified in a recent circular on service tax by the service tax authorities, for purposes of cenvat credit availment. Therefore, it is preferable that the amount of service tax, education cess and secondary and higher education cess is separately shown on invoices.

If it is not possible for you to indicate the breakup of the service tax, education cess and secondary and higher education cess amounts separately on your invoices, then you can mention on your invoices that the rate reflects the effective service tax rate of 12.36% which is inclusive of education cess at 2% of service tax and secondary and higher education cess at 1% of service tax.

We are engaged in providing security agency services and are registered with the service tax authorities under the taxable service category of security agency services. We have been charging service tax and education cess along with secondary and higher education cess from our customers on the gross value recovered for the provision of such services. We regularly deposit service tax charged from our customers. We want to know that is there a separate accounting code for secondary and higher education cess.

Yes, the service tax authorities have recently notified a separate accounting code for secondary and higher education cess. The accounting code for this cess is 00440426. You need to separately mention the respective accounting codes for security agency services, education cess and secondary and higher education cess while depositing your monthly service tax liability.

We are a company engaged in providing consulting services. We are registered as management consultants and are depositing service tax. Recently, we provided advice to a SEZ unit. Please advice whether our services will be chargeable to service tax.

An SEZ unit is eligible for exemption from levy of service tax vide Notification 4, 2004ST provided that the services are consumed in the SEZ. Although the scope of the term consumed has not been clarified by the service tax authorities, as long as it can be established that services rendered by you are consumed within the SEZ unit, there would not be a service tax liability. Further, the SEZ Act, 2005 (SEZ Act) exempts taxable services provided to a SEZ developer or unit to carry on the authorised operations from levy of service tax. Hence, where the SEZ unit utilises the services provided by you for their authorised operations, the services should be exempt from service tax.

We have requested our auditorsa local chartered accountancy firm, apart from providing routine auditing services, to assist us in our ongoing income tax litigation. In this regard, our auditor recently represented us before the Income Tax Tribunal. Our auditors have charged service tax on the fees for representation assistance. We believe that service tax should not be charged on the representation services and have asked our auditors to review their invoice. Please could you confirm whether our view is correct

The auditing services provided by your auditors would be taxable under the category of chartered accountants services. However, the service tax law specifies that services provided by a practicing chartered accountant relating to representation of a client before a statutory authority in the course of legal proceedings shall be exempt from service tax. In this case, the practice followed by your auditor to charge service tax on the fees charged to you for representation assistance before the tribunal is incorrect.

We shall be setting up a four-star hotel where we propose to let out our banquet hall to corporate houses. Are we liable to charging service tax on letting out of our hall for official functions.

It has recently been clarified by the authorities that halls let out by hotels or restaurants for a consideration for organising social, official or business functions are covered within the scope of the taxable service category of mandap keeper. In light of the same, you might be liable to pay service tax on the amount received from corporates for the temporary letting out of halls for official functions.

Respondents are senior professionals at Ernst & Young. The replies do not constitute professional advice, but are based on interpretation of facts available in readers queries to the professionals. Neither Ernst & Young nor this publication are liable for any action taken on the basis of this information