Payment of service tax

This query is : Resolved

shiva (Querist)
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09 November 2011 If a person has got him self registered on 16/11/2009 for service tax and his income in that year(2009-2010) is Rs. 12 lakhs , then on what amount should he pay the service tax ?

U S Sharma

U S Sharma (Expert)
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09 November 2011 12-10lacs=2 lacs

shiva

shiva (Querist)
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09 November 2011 the limit of Rs. 10 lakhs is only there in the year of registration and not in the future years ?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 August 2024 In the context of service tax, the limit of ₹10 lakhs is a crucial threshold for small service providers. Here's how it applies to your situation:

### **Understanding the Threshold Limit for Service Tax**

1. **Threshold Limit at the Time of Registration:**

- **For the Year of Registration (2009-2010):**
When a service provider first gets registered for service tax, the threshold limit of ₹10 lakhs applies to the financial year in which the registration is done. If the total income or turnover of the service provider in that year is less than ₹10 lakhs, they are not liable to pay service tax. If it exceeds ₹10 lakhs, service tax is applicable on the amount exceeding ₹10 lakhs.

- **In Your Case (Financial Year 2009-2010):**
Since the registration was on 16/11/2009 and the total income for the year was ₹12 lakhs, the service provider would be liable to pay service tax on the amount exceeding ₹10 lakhs. Therefore, service tax would be applicable on ₹2 lakhs (₹12 lakhs - ₹10 lakhs).

2. **Threshold Limit in Subsequent Years:**

- **For Future Years:**
The ₹10 lakh exemption limit is applicable only for the year of registration. For subsequent financial years, the threshold limit of ₹10 lakhs does not apply. The service provider is required to pay service tax on the entire taxable amount if it exceeds the threshold limit of ₹10 lakhs in future years.

- **Ongoing Liability:**
In future years, the service provider must pay service tax on the full amount of service income without the benefit of the ₹10 lakh exemption. For example, if the service provider's income in the next financial year is ₹15 lakhs, service tax would be applicable on the entire ₹15 lakhs, with no threshold limit.

### **Calculation of Service Tax for FY 2009-2010**

Given:
- **Total Income:** ₹12 lakhs
- **Registration Date:** 16/11/2009
- **Threshold Limit for Service Tax:** ₹10 lakhs

**Service Tax Calculation:**

1. **Income Exceeding the Threshold:** ₹12 lakhs - ₹10 lakhs = ₹2 lakhs
2. **Service Tax Rate:** Assuming the service tax rate is 12% (or as per the prevailing rate at that time).

- **Service Tax Amount:** ₹2,00,000 x 12% = ₹24,000

### **Summary:**

For the financial year 2009-2010, with a total income of ₹12 lakhs and registration on 16/11/2009, the service tax liability would be on ₹2 lakhs (amount exceeding the ₹10 lakh threshold), resulting in a service tax amount of ₹24,000.

For subsequent years, the entire service income is subject to service tax without any threshold limit.