As per the latest update to the Service Tax act for dry cleaning industry, dry cleaners are subject to charge service tax on all the services they offer. As per the previous service tax calculation rule, transactions limited to dry cleaning service only were applicable to tax and other services like wet cleaning, ironing, darning etc were exempted. With this recent update, now dry cleaners have to charge service tax on all the services they offer.
By definition Service tax is a tax which is computed on the value of service provided by the service provider and the service tax calculation are as follows:
| Taxes | Rate of Tax |
| Service Tax | 14 % of the value of services |
| Krishi Kalyan Cess | 0.5 % of the value of service |
| Swachh Bharat Cess | 0.5% of the value of service |
Let us take an example to understand how the total tax is calculated. Suppose a customer gives you a cloth for wet cleaning and pressing and the charges for the same are Rs 100 before tax. Tax calculation will be done as per the following:
|
Item |
Amount |
| Value of service provided | 100 |
| Service Tax: 14% of value of 100 = 14 | 114 |
| Krishi Kalyan Cess: 0.5 % of value of 100 = 0.5 | 114.5 |
| Swachh Bharat Cess: 0.5 % of value of 100 = 0.5 | 115 |
| Net Effective Rate | 15% |
Going by the same example for a service worth Rs 100, final amount after tax would be calculated as following: 100 + 15% (100 * 15%) = 115.
In case you are still unclear about this or have some questions, feel free to connect with us.
