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General Services

●     Professional Tax

  •  Professional Tax is the charged by State Governments in India. This was first levied in 1949.
  • Anyone earning an income from any profession, trade, calling or employment is required to pay this tax.  Different states have different rates and methods of collection.
  •  This tax is levied based on slab rates based on the income of the individual.
  •  Professional Tax is similar to Income Tax. The only difference is that Income Tax is levied by the Central Government and Professional Tax is levied by the State Government.
  •  The maximum amount of professional tax that can be levied by any state government is Rs.2500 only.
  •   Any amount paid as Professional Tax is allowed as a deduction under section 16 of the Income Tax Act.
  •   In case of salaried individuals and wage earners, professional tax is liable to be deducted by the employer from the salary or wages and the employer should deposit the same with the state government.
  •  In case of other classes of individuals, the tax is liable to be deposited by the individual.

●     Service Tax

  • Service Tax is a tax on services. It was introduced in India in 1994. The person who provides the service is responsible for paying the service tax to the government.
  • Service tax is an indirect tax. The service provider pays the tax and recovers the amount from the recipient of taxable service. Hence, the service provider has to add the service tax to the total invoice.
  • Service means any activity for consideration carried out by a person for another and includes a declared service. Activity could be active or passive and would also include forbearance to act.
  •   To be taxable, a service should be provided or agreed to be provided by a person to another in the taxable territory and should not be specified in the negative list.
  •   The present rate of service tax is 12..36%.
  •   Service tax is applicable to all service other than services listed in the Negative List of Services (services exempted from Service Tax) as may be notified by the Government of India.
  • If the service provided by a person does not fall within the scope of the exempted services, the service tax is payable on the value of the taxable service received.
  •  A Company/LLP/Partnership providing a taxable service has to obtain Service Tax Registrations when the annual turnover is more than Rs.9 lakhs in any financial year.
  •  A company has to pay service tax on or before 5th /6th day of the following month. An LLP/Partnership has to pay service tax on or before the 5th /6th day of the following month after each quarter.
  •  Form G.A.R.7 is to be used to make service tax payments. Service tax can also be paid online through the e-payment system.
  •  The service provider has to file half-yearly returns (Form ST-3) to the Service Tax Department on or before the 25th day of the following month after each half year i.e. 25th April and 25th October. The details should be given in the Form ST-3 separately.
  • Permanent Account Number or PAN is essential for service tax registration because the Service Tax Registration number is generated based on the PAN. The PAN-based Service Tax Registration number is a must for payment of service tax.

●     VAT

  • Value Added Tax (VAT) is a tax levied on sale of taxable goods and materials.
  •     This is a state specific registration. It applies to sales within the state and with other states.
  •   The seller has to pay VAT to the government.
  • The amount of VAT collected has to be paid to the respective state government on a monthly basis.
  •  Returns should also be filed on a monthly, quarterly, half-yearly and annual basis.
  • All companies and LLPs dealing with taxable goods and materials should have a VAT registration if the turnover of the company or LLP is above the limit prescribed under state VAT laws.
  •  VAT rate differs from product to product and from state to state. Generally, the VAT rates are 1% on gold, silver, precious metals, gems and precious stones, 4% on essential goods and primary raw materials, 12.5-20% or more on specified items under respective state VAT rules.
  •   All companies and LLPs dealing with taxable goods and materials should register under VAT if the turnover of the company/LLP from taxable goods is above the exempted limits as prescribed under the state VAT rules.
  •  VAT registration differs from state to state.
  • Generally, the applicant has to approach the local VAT office with specified application and required supporting documents. Certificate of Incorproration, company/LLP registration documents such as MOA, AOA, LLP Agreement, Company /LLP PAN, Rent Agreement for the premises, identity and address proof, photos of directors and partners/designated partners are the documents generally called for VAT registration.
  •  Generally, a refundable deposit of Rs.5,000-25,000 is insisted for VAT registration. Certain states insist on bank gurantees as well.

●     Shops and Establishments

  •  The Shops and Establishment Act is a state legislation act and each state has framed its own rules for the Act.
  •    The object of this Act is to provide statutory obligation and rights to employees and employers in the unauthorized sector of employment, i.e., shops and establishments.
  •  This Act is applicable to all persons employed in an establishment with or without wages, except the members of the employer’s family.
  •   The Act lays down rules regarding working hours per day and per week, opening and closing hours, hollidays, overtime work, employment of children and women, employment and termination of services and annual leave, maternity leave, casual leave and sick leave.