Service Tax in India is governed by Finance Act 1994. Section 66B of Finance Act, is the charging section which provides for levy of service tax. It provides that Service tax shall be levied at the 14.5% on the value of all services, which are provided or agreed to be provided in taxable territory and such services are not specified in the negative list. Following will help you to claim service tax exemption and to know the eligibility for service tax exemption.
Small service providers are kept away from the ambit of service tax by small service provider Notification No. 33/2012 dated 20.06.2012. So let us find out how you can claim the benefit of small service provider exemption notification.
Who is a small service provider as per service tax?
Any service provider who provides taxable service of the total value of Rs. Ten Lac or less in the previous financial year is eligible to claim exemption of small service provider in the current financial year. Hence if in the last immediate preceding year the total value of taxable service does not exceed Rs. Ten Lac, then you can claim small service provider exemption in current year.
Example – Suppose Mr. Rohit has provided taxable services during financial year 2014-15 from its Noida branch of Rs. 5.5 Lac and of Rs. 4.5 Lac from Ghaziabad branch, then since total aggregate value = Rs. 10 Lac, hence, he is eligible for this exemption for the year 2015-16.
If he has provided total services of Rs. 13 Lac (Noida branch = Rs. 7 Lac & Ghaziabad branch = Rs. 6 Lac) then, he would not be eligible to claim this exemption in the current financial year 2015-16.
What is the amount of Exemption under small service provider exemption Notification?
Small service provider can claim 100% exemption from service tax of total value of taxable services provided upto Rs. 10 Lac during the current financial year.
If the total services provided during the financial year are exceeds Rs. 10 Lac then such excess over Rs.10 Lac shall be chargeable to service tax.
The sum total of value of services charged in the first consecutive invoices issued or required to be issued during a financial year shall be considered. The total value of services doesn’t include such services which are exempt from service tax.
In the above example, If Mr. Rohit provided services of Rs. 9 Lac during the financial year 2015-16, he can claim exemption for the total value of Rs. Ten Lac. Therefore he would not be liable to pay any service tax in 2015-16.
If he provided services of Rs. 11 Lac during the financial year 2015-16. Then he would be liable to pay service tax on services above Rs. Ten Lac i.e. Rs. 1 Lac.
If this is the first year of incorporation of business, then preceding year conditions need not to be fulfilled.
For Example Mr. Sachin started his business in year 2014-15 and his gross receipts from taxable services is Rs. 8 Lac, then he can claim small service provider exemption . Accordingly his total gross receipt of Rs. 8 Lac will be exempt from Tax.
If in the next year 2015-16 his gross receipt from taxable services is 15 Lac, then we need look at preceding year. In the preceding year his gross receipt from taxable services is less than Rs. 10 Lac hence he is eligible to claim small service provider exemption of Rs. 10 in current year. Accordingly Rs. 5 Lac will be taxable in current year.
The value of services includes/ excludes following while computing the exemption limit:
- Services specified in negative list are not to be included in total value of services since they are non taxable services.
- Exempt services are not to be included in total value of services. Exempt services are specifically excluded from the meaning of “Aggregate Value of Services”.
- Services provided in non taxable territory are not included since they are not taxable as per section 66B.
- If any service is eligible for abatement, then the amount after abatement would be considered for computing the total value of services.
- Services which are provided outside Taxable territory are not to be included in total value of services since they are non taxable as per section 66B.
- In case of declared services only service portion will be considered.
- If any activity does not amount to service then that activity is not to be included in total value of services.
- If goods are sold along with services and materials supplied by recipient of service, value of such goods and materials are not to be included in total value of services. However materials consumed for providing services are part of service. Materials sold along with service are excluded.
Conditions to be fulfilled: This exemption shall apply if the following conditions are fulfilled:
- This exemption is optional, a service provider has the option not to avail the exemption and pay service tax. If he opt pay service tax once in a financial year, then he will not be allowed to withdrawn the option in the remaining part of the financial year.
- The service provider shall not avail the CENVAT credit of service tax paid on input services, used for providing the taxable services for which exemption is availed of.
- The service provider shall not avail the CENVAT credit on capital goods received during the period in which service provider avails exemption.
- The service provider shall avail the CENVAT credit only on such inputs or input services received on or after the date on which the service provider starts paying service tax, and used for the provision of taxable services for which service tax is payable.
- The provider of taxable service who starts availing this exemption shall be required to pay an amount equivalent to the CENVAT credit taken by him in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing this exemption and the balance of CENVAT credit lying unutilized in the account of the taxable service provider shall not be utilized and shall lapse on the day such service provider starts availing this exemption.
- Where service provider provides one or more taxable services from one or more premises, then this exemption shall apply total of all services provided from all premises and not separately for each services and each premises.
Exemption shall not apply in the following cases-
- This exemption shall not apply to branded services i.e. services provided by a person under a brand name whether registered or not, of another person.
- Where service provider is not liable to pay service tax, in cases where service recipient is liable to pay service tax (reverse charge mechanism).