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Service tax is an indirect tax levied on a wide array of services specified by the Central Government under the Finance Act, 1994. The service provider (a restaurant or tour operator, for example) pays the tax and recovers the amount from its customers. To pay this tax, the service provider must be registered with the Central Government if the preceding fiscal year's turnover is over Rs. 9 lakh. However, collection must start, at the rate of 14%, only when the turnover of the business exceeds Rs. 10 lakh. Service Tax is to be paid to government via designated branches once every quarter by LLPs, partnerships and sole proprietors and once every month by all other entities.

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