28 August 2009
Q.1 If I am not sure about my professional fees receipt that it will cross 10lacs or not? So should I charge SERVICE TAX from day 1 or not. & if I pay service tax and at year end my professional fees receipt does not exceed 10 lacs. Then shall I get refund of the service tax I paid?
Q.2 If for example my professional fees receipt is 13 lacs for year so should I have to pay service tax for full 13 lacs or the balance i.e 13 lacs – 10 lacs i.e only on 3 lacs. As there is rule no service tax upto 10 lacs.
28 August 2009
You have to apply for the service tax registration no if you feel that your fees is likely to exceed the limit of 10 lacs.
Once you got the ST Number then you had to charge service tax on all your invoices irrespective of fact that the limit of 10 lacs excceds or not during the year.
The ST is applicable on entire 13 lacs in your example above.
According to me the Notification No.6/2005 dated 1.3.05 (parent notification on basic exemption), specifies exemption would be available on the taxable services if the value of such taxable services DOES NOT EXCEED the limit. The intention of the legislature to provide relief to the small service providers and this value is final. On exceeding the basic limit, you would not become liable from the first rupee. You are liable only from the rupee beyond the basic exemption limit. This problem would be faced only during the first year of operation or first such instance. To avail the basic exemption, there are certain conditions to be fulfilled.
Secondly, service tax is a indirect taxation. The tax is charged on the service recipient and upon full realization, the liability is discharged. Hence, when there is a basic exemption limit available and you do not anticipate to cross the same, you are not expected to charge from the first Rupee the service tax. How it is practically possible to go to your previous clients and collect from them only the service tax. This is ruled out.
Finally, availing the basic exemption is only optional. Service is a destination based taxation scheme (i.e. VAT in nature) and hence, the service recipients to whom you are providing the service tax would be eligible to avail CENVAT credit on the service tax charged by you. Hence, if you reasonably anticipate your turnover to cross Rs.9.00 lakhs in this FY (mandatory registration limit), you may start charging from the first rupee onwards.
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