If you are a person providing the taxable service, then on receipt of service charges (Fees) you are responsible for paying the Service Tax to the Government.
As per the definition given by the Act, the following shall be considered as persons:
a Hindu undivided family,
a limited liability partnership,
an association or body of individuals, whether incorporated or not,
a local authority, or,
every artificial juridical person, not falling within any of the preceding sub-clauses.
Sometimes Government and local authorities also liable to pay tax where similar or substitutable services are provided by private entities.
The main reasons are,
to provide a level playing field to private entities in these areas as exemption to Government in such activities would lead to competitive inequities; and
to avoid break in Cenvat chain as the support services provided by Government are normally in the nature of intermediary services.
But, most of the services provided by the Government or local authorities are in the negative list.
Earlier service tax was levied in India on specified taxable services only. In budget 2012 a new system of taxation of services popularly known as Negative List is announced.
As per the new system all services, except those specified in the negative list, will be subject to taxation.
Service is defined as:
carried out by a person for another
and includes a declared service.
The said definition further provides that service does not include –
any activity that constitutes only a transfer in title of goods or immovable property by way of sale, gift or in any other manner,
a transfer, delivery or supply of goods which is deemed to be a sale of goods,
a transaction only in money or actionable claim,
a service provided by an employee to an employer in the course of the employment,
fees payable to a court or a tribunal set up under a law for the time being in force.
Service is taxable only if an activity is carried out for a consideration.
It means, any activity carried out without any consideration like donations, gifts or free charities are not taxable.
But any activity carried out by a charity for consideration would be a service and it is taxable.
Any donations you made to a charitable organization are not consideration unless charity is obligated to provide something in return to you.
Monetary consideration means any consideration you receive in the form of money. Money includes not only cash but also,
bill of exchange,
letter of credit,
postal or electronic remittance, or
any such similar instrument.
Non-monetary consideration means compensation in kind as given below:
Supply of goods and services in return for provision of service,
Refraining or forbearing to do an act in return for provision of service,,
Tolerating an act or a situation in return for provision of a service,
Doing or agreeing to do an act in return for provision of service.
The value of non-monetary consideration is taken as equivalent money value of such consideration.
If equivalent money value is not ascertainable, then it is determined,
On the basis of gross amount charged for similar service provided to other person in the ordinary course of trade;
Where value cannot be so determined, the equivalent money value of such consideration, not less than the cost of provision of service.