Worried About Charging Service Tax Without Registration? Seeking Advice on Next Steps

Hi Respected People, I am a housekeeping service provider and have been charging service tax to my clients. However, I have not registered for service tax. I am paying income tax and completing all necessary returns.

Concerns about Service Tax

My doubt is, even though I charge service tax to my clients, I am not remitting it to the tax department. Will the service tax department discover this, considering I am not registered for it? Will I face any problems in the future? Please help. (Paying service tax would mean no profit for me.)

Considering GST Registration

I am considering registering for GST. Is that the right course of action?

If any of your clients intend to take input credit on your submitted bill, then you will face the heat. Your activity is purely willful evasion of taxes and duties.

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Without your Service Tax Registration Number printed on your invoice, your vendors should not have made Service Tax payments to you. Service Tax claimed should have been remitted timely to the Service Tax Department. Please stop this practice forthwith. Whatever Service Tax claimed, please refund to your vendors immediately. By the way, is your annual turnover less than 10 lakhs?

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Instead of claiming Service tax, it is better to change it to Service charges for that effect and pay income tax on that income if you want to make a profit. Central excise people are ruthless; they go to any extent to strip you. Income tax people will have consideration but not central excise. Hence, follow what US Sharma and Srinath have advocated.

Service Tax Compliance in Housekeeping Services

It is a significant mistake by clients who approve and release payment for your service tax amount without proper verification. In a proper service invoice, the Service Tax Number must be mentioned. Before allowing the payment of service tax, your client should ask you to submit the Service Tax Registration Copy. I check and process more than 200 service-related invoices every month, and before allowing any government levy, we ask the vendor to submit the concerned registration copy.

Since you provide housekeeping services, it seems your client is not taking the service tax input (perhaps being an end user). For them, the service tax is part of the cost, hence they might not be taking it seriously.

However, what happened is in the past. As suggested by Mr. Ramjeedurai, change the term to "Service Charge." If your annual turnover is less than 10 lakhs, revise all previous invoices as well, duly mentioning "Service Charge." If you have a good relationship with your client contact person, share this information to avoid any industrial dispute. This will help you maintain a good client relationship.

Fellow members can shed more light on the matter.