Who is liable to pay Service Tax ? and be Penalised for Default ?

The occurrence of a “Taxable event” triggers the imposition of Tax.

It is the act of ‘import’ that triggers the levy of Customs Duty.
It is the act of ‘manufacture’ that triggers the levy of Excise Duty
It is the act of ‘Sale’ that triggers the levy of Sales Tax
It is the act of ‘providing service’ that triggers the levy of Service Tax.

The liability to pay Service Tax is upon the Service Provider, just
like the other Acts mentioned above. Against imports it is the Importer
who has to pay the Customs Duty, it is the Manufacturer who is
liable to pay the Excise Duty and similarly it is the Trader who has
to pay the Sales Tax to the government – whether they include the
said duties/ levies in their price charged to the customer or not.

Thus, in case the Service Provider does not stipulate that the Service
Tax would be charged separately, at the rate applicable, then the
Price charged for the ‘service provided’ will be deemed to be inclusive
of the Service Tax component and the Service provider would be liable
to pay the same proportionately. It has been clarified by the govt that
it is not necessary to show the Service Tax charged separately in the
Invoice. In case of default it would be liable to be penalized as per law.

With the services sector now constituting more than 50% of the GDP
it is but natural that the govt look towards it to raise taxes and not just
rely on the manufacturing, trading and agriculture sectors.