A company has let out a portion of their office from June 2005, and was paying service tax on rent from June 2007 i.e. from the date of applicability of the service tax on renting of immovable property.
In Fy 2007- 08 the rent receipt was Rs 10,80,000/- and it paid service tax accordingly.
In Fy 2008 - 09 the rent receipt from April 2008 to July 2008 was Rs. 90,000/- per month and from Aug 2008 to March 2009 the rent was Rs 60,000/- per month . (The reduction in rent collection was because at the time of renewal of Rent Agreement the company has reduced the area let out by taking back some portion for its own use)
The company had paid service tax up to July 2008 and stopped collecting and paying the service tax from Aug 2008 as the total rent for the period Fy 2008 - 09 comes to only Rs 8,40,000/- which is below the exemption limit of Rs 10,00,000/-
Now the service tax department is saying once a company crosses the exemption limit of Rs 10,00,000/- in any financial year (in this case it crossed the limit in Fy 2007 -08 and but below the limit from Fy 2008 -09) the company cannot again avail the exemption in any subsequent years as per the service tax notification no 6/2005 dated 01.03.2005.
Kindly clarify whether the company has to pay service tax for Fy 2008 - 09 and Fy 2009- 10 (In Fy 2008 -09 the total rent receipt is Rs 8,40,000/- and in Fy 2009 - 10 it will be Rs 7,20,000/-)
04 March 2010
The SSI exemption referred to in the query is optional. A service provider is required to excise the option at the beginning of the Financial Year. Once the option is exercised either to avail or not to avail the exemption, the option can not be changed during the year.
A service provider shall be eligible for the exemption, if the gross receipt in the previous year does not exceed the threshhold limit.
Based on the above, the assessee is not eligible for exemption for the FY 2008-09. reason being, in 07-08, the Gross Receipt was more than 10L and the option can not be exercised mid way.
For FY 2009-10, exemption is available. Reason being, the gross receipt during 08-09 does not exceed Rs. 10L and the option was exercised since the beginning of the year.
The contetion of the department that once an assessee does not avail or is not eligible for the exemption, the assessee shall not be eligible in future is not correct.
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