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Service Tax Calculation Formula & Service Tax Rate in India

Indian govt has levied service charge on almost all the services barring a few services. The calculation of service tax post budget in year 2012 wef 01 Apr 2012 is as following:

The items of service charges in your Statement of Accounts are inclusive of Service Tax @ 12% and Education Cess @2% and Higher Secondary education cess @ 1% on Service Tax. The effective rate of tax is 12.36% and is applied on all service charges levied by the bank for Services rendered.

Now to calculate the service tax use the below service tax formula:
Total Amount on which Service Tax to be Paid @12.6%= Total Gross Receipts/112.6x100
Say if your gross receipt is say Rs 10 Lakh
Net amount on which service tax needs to be paid = 10,00000/112.6=8880.99x100=Rs 8,88099
Thus you need to pay service tax at the rate of 12.6% on the amount of Rs 8,88099 which works to Rs 1,11900 (approx)

The service tax payment is a mandatory requirement and pay it by due date else you may find paying interest @ 18% for the full month even if your payment is late by a day. Moreover if you decide not to pay the service tax by due date and pay at a later date without paying interest than you have a shock as whenever IT authorities ask for interest component they will ask it from your due date to the date till query raised.

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