Types of service tax

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 11. Explain the different types of service tax

Service tax is an indirect tax that providers add to a service and collect from customers. In India, service tax was largely replaced by the Goods and Services Tax (GST) in 2017. Today, how a service is taxed depends on whether the transaction happens inside your home state or across borders. [1, 2, 3]



The Modern Service Tax (GST System)

Under the modern GST framework, service taxes are categorized by where the service is provided.
  • CGST (Central Goods and Services Tax): This tax is collected by the Central Government for services provided within your state (e.g., getting a haircut in Mumbai).
  • SGST (State Goods and Services Tax): This tax is collected by your state government for those same in-state services.
  • IGST (Integrated Goods and Services Tax): This tax applies when services cross state borders. It is collected by the Central Government and then shared with the destination state.
How Service Tax is Handled


Historically, service taxes were broken down by how the tax was paid or calculated.
  • Forward Charge: The standard method where the person providing the service adds the tax to your bill and pays it to the government.
  • Reverse Charge: The system is flipped. The person receiving the service pays the tax directly to the government instead of the service provider.
  • Abatement: A discount on your taxes. The government allowed certain services (like a packaged tour or goods transport) to pay tax on only a portion of the total bill. [4, 9, 10]
If you are a business owner or consumer today, these categories fall under the standard GST Rate Slabs of 0%, 5%, 12%, 18%, or 28%, depending on the specific service provided. [2, 3]



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