Service tax is an indirect tax levied under the Finance Act, 1994, as amended from time to time, on specified services. At present, there are approximately 96 categories (including 15 new services introduced by Budget 2006) of services taxable under the service tax net. The provisions relating to Service Tax were brought into force with effect from 1 July 1994.

The value of service generally liable to service tax is the gross amount charged by the service provider for service rendered. Out of pocket expenses such as (travel, lodging, etc) paid on behalf of the client and recovered on actual basis (supported by documentary evidence) have been clarified for certain services as not being liable to service tax.

Generally, the liability to deposit service tax is on the service provider. However, in case service is provided by a person based (ie having a business/ fixed establishment from where service is provided/ permanent address/ place of residence) outside India and such service provider does not have an office in India, then the person liable to deposit service tax is the service recipient based in India.

Currently the service tax rate is 10.3%