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Query on Service Tax Dues and Payment

Bibhuti Bhusan Das (Financial Analyst) (144 Points)

24 March 2011

Dear All,

Pls anybody help me resolve following issues.

Query-1,

If a person have total turnover from consultancy services10,50,000/- in the financial year 2009-10 then what will be his service tax due. Assume that, he has taken service tax registration on 01.04.2009.

Query -2,

In the financial year 10-11 his total turnover is6,50,000/- , then what will be his service tax liability ?

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20 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 24 March 2011

1) taxable turnover 50000, service tax payable 10.3%

2) NIL upto 10 Lacs

its belived that the assesee has not availed input credit benefit of services/ capital goods.

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Pinky Agarwal (Chartered Accountant) (426 Points)
Replied 24 March 2011

For the purpose of determining eligibilty in current year, what is relevant is that ' aggregate value of taxable service rendered' in previous financial year should not exceed Rs. 10lakh.

So, in the second case as your previous year turnover exceeds Rs. 10lakh. So, exemption will not be available and service tax is required to be paid on whole amount.

plss correct if i m wrong...

CA Saiyum khan (Practicing CA) (685 Points)
Replied 24 March 2011

@ PInky Agarwal

If previous year turnover has not exceeded the threshhold limit then the exmption would be available even in the current year up to Rs.10 lacs.

Hence Mr. US Sharma is right.

Pinky Agarwal (Chartered Accountant) (426 Points)
Replied 24 March 2011

Originally posted by : saiyumkhan
	@ PInky Agarwal If previous year turnover has not exceeded the threshhold limit then the exmption would be available even in the current year up to Rs.10 lacs. Hence Mr. US Sharma is right.

Yes sir i agree wid u.. But in this case previous year turnover is Rs. 1050000 that is more then the threshold limit. So, exemption in current year should not be available..

Plss explain if i m wrong...

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 24 March 2011

Originally posted by : Pinky Agarwal
	For the purpose of determining eligibilty in current year, what is relevant is that ' aggregate value of taxable service rendered' in previous financial year should not exceed Rs. 10lakh. So, in the second case as your previous year turnover exceeds Rs. 10lakh. So, exemption will not be available and service tax is required to be paid on whole amount. plss correct if i m wrong...

without input credit , threshold limit of 10L is available every year.

if input credit is availed, no such limit is allowed in coming years.

usually assessee use to avail the input credit on completion of 10 lacs in 1st year and try to carry forward the accumulated credit to next year, thats the reason for lapse of his 10L exemption in next year,

if the assesee makes the service tax input credit ZERO on 01-april of next year, he can enjoy the 10Lacs without any trouble.

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U S Sharma (glidor@gmail.com) (21056 Points)
Replied 24 March 2011

Notification New Delhi, dated 1

March, 2005.

No. 6/2005-Service Tax 10 Phalguna, 1926 (Saka)

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the

Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Finance Act), the Central

Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts

taxable services of aggregate value not exceeding four lakh rupees in any financial year from the

whole of the service tax leviable thereon under section 66 of the said Finance Act:

Provided that nothing contained in this notification shall apply to,-

(i) taxable services provided by a person under a brand name or trade name, whether

registered or not, of another person; or

(ii) such value of taxable services in respect of which service tax shall be paid by

such person and in such manner as specified under sub-section (2) of section 68

of the said Finance Act read with Service Tax Rules,1994.

2. The exemption contained in this notification shall apply subject to the following

conditions, namely:-

(i) the provider of taxable service has the option not to avail the exemption contained in this

notification and pay service tax on the taxable services provided by him and such option,

once exercised in a financial year, shall not be withdrawn during the remaining part of

such financial year;

(ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on

any input services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein

after referred to as the said rules), used for providing the said taxable service, for which

exemption from payment of service tax under this notification is availed of;

(iii) the provider of taxable service shall not avail the CENVAT credit under rule 3 of the said

rules, on capital goods received in the premises of provider of such taxable service during

the period in which the service provider avails exemption from payment of service tax

under this notification;

(iv) the provider of taxable service 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;

(v) the provider of taxable service who starts availing exemption under this notification shall

be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in

respect of such inputs lying in stock or in process on the date on which the provider of

taxable service starts availing exemption under this notification;

(vi) the balance of CENVAT credit lying unutilised in the account of the taxable service

provider after deducting the amount referred to in sub-paragraph (v), if any, shall not be

utilised in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse

on the day such service provider starts availing the exemption under this notification;

(vii) where a taxable service provider provides one or more taxable services from one

or more premises, the exemption under this notification shall apply to the aggregate value

of all such taxable services and from all such premises and not separately for each

premises or each services; and

(viii) the aggregate value of taxable services rendered by a provider of taxable service from

one or more premises, does not exceed rupees four lakhs in the preceding financial year. 2

3. For the purposes of determining aggregate value not exceeding four lakh rupees, to avail

exemption under this notification, in relation to taxable service provided by a goods transport

agency, the payment received towards the gross amount charged by such goods transport agency

under section 67 for which the person liable for paying service tax is as specified under subsection (2) of section 68 of the said Finance Act read with Service Tax Rules, 1994, shall not be

taken into account.

Explanation.- For the purposes of this notification,-

(A) “brand name” or “trade name” means a brand name or a trade name, whether

registered or not, that is to say, a name or a mark, such as symbol, monogram, logo,

label, signature, or invented word or writing which is used in relation to such

specified services for the purpose of indicating, or so as to indicate a connection in

the course of trade between such specified services and some person using such name

or mark with or without any indication of the identity of that person;

(B) “aggregate value not exceeding four lakh rupees” means the sum total of first

consecutive payments received during a financial year towards the gross amount, as

prescribed under section 67 of the said Finance Act, charged by the service provider

towards taxable services till the aggregate amount of such payments is equal to four

lakh rupees but does not include payments received towards such gross amount

which are exempt from whole of service tax leviable thereon under section 66 of the

said Finance Act under any other notification.

4. This notification shall come into force on the 1st day of April, 2005.

[F. No. 334/1/2005-TRU]

(V. Sivasubramanian)

Deputy Secretary to the Government of India

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 24 March 2011

Notification New Delhi, the 1st March, 2008

No. 8/2008-Service Tax 11 Phalguna, 1929 (Saka)

G.S.R. (E).–In exercise of the powers conferred by sub-section (1) of section 93 of the

Finance Act, 1994 (32 of 1994), the Central Government, on being satisfied that it is necessary in

the public interest so to do, hereby makes the following further amendment in the notification of

the Government of India in the Ministry of Finance (Department of Revenue), No. 6/2005-

Service Tax, dated the 1st March, 2005 which was published in the Gazette of India,

Extraordinary, vide number G.S.R. 140(E) of the same date, namely:-

In the said notification, for the words “eight lakh rupees”, wherever they occur, the words “ten

lakh rupees” shall be substituted.

2. This notification shall come into force on the 1st day of April, 2008.

(Unmesh Wagh)

Under Secretary to the Government of India

[F. No. 334/1/2008-TRU]

Note:– The principal notification No. 6/2005-Service Tax, dated the 1st March, 2005 was

published in the Gazette of India, Extraordinary, vide number G.S.R. 140(E), dated the 1st

March, 2005 and was last amended vide notification No. 4/2007-Service Tax, dated the 1st

March, 2007 vide number G.S.R. 158(E), dated the 1st March, 2007.

Pinky Agarwal (Chartered Accountant) (426 Points)
Replied 24 March 2011

@ U S Sharma Sir, sorry i have not understand what do you want to say....

As per my understanding you hav assumed in your ans that cenvat credit is not taken and in the case where cenvat credit is not taken exemption will be available if previous years turnover is less then10 Lakh. But in the above case previous year turnover is more then 10 lakh so, exemption will not be available...

Am i right sir??

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 24 March 2011

Originally posted by : Pinky Agarwal
	@ U S Sharma Sir, sorry i have not understand what do you want to say.... As per my understanding you hav assumed in your ans that cenvat credit is not taken and in the case where cenvat credit is not taken exemption will be available if previous years turnover is less then Rs. 10 Lakh. But in the above case previous year turnover is more then 10 lakh so, exemption will not be available... Am i right??

10L exemption is threshold limit , it is to be availed every year (without input credit)

u can understand the same in line with incometax, as there is 1.6/1.9 lacs limit per year, then tax is payable ..........

the only diff is that if the servicetax holder opts to take "input credit" then this exemption goes off and he has to pay service tax from Rs 1/-

Ritesh Jain (CA, CS in Job) (675 Points)
Replied 25 March 2011

Dear U.S Sharma sir,

There is also a condition of clause no. Viii in point no. 2 viz.

"(viii) the aggregate value of taxable services rendered by a provider of taxable service from

one or more premises, does not exceed rupees four lakhs(now ten lakh) in the preceding financial year. "

If it is exceeded this notification doesnot find any place.

Am i right..???

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Sharad Suman Das (art) (141 Points)
Replied 25 March 2011

As my my understanding Pinky is right because as the turnover in the last year exeeds RS. 1000000

so service tax will be leveid on the whole amount of turn over for the current year

Ritesh Jain (CA, CS in Job) (675 Points)
Replied 25 March 2011

THis example will be clear things:

suppose, In previous year 2008-09 "A" has provided service and receive payment for Rs.7.5 lakhs and in 2009-10 he has provided services of Rs.11 lakhs he will pay tax on Rs.1 lakh. Now in 2010-11 he is not eligible for SSI exemption as in previous year his limit exceed Rs.10 lakhs so if in 2010-11 he has provided Rs 5 lakhs srevices, he will pay tax on entire amount. Now again in 2011-12 (Assuming there is no change in law for F.Y 2011-12) he provided services of Rs.12 lakhs he is eligible for SSI exemption as his limit in previous year not exceed Rs.10 lakhs and eligible for SSI exemption and pay tax on Rs.2 lakhs only.

Here service provided means payment receive in respect of taxable service provided.

Pinky Agarwal (Chartered Accountant) (426 Points)
Replied 25 March 2011

Originally posted by : Ritesh Jain
	THis example will be clear things: suppose, In previous year 2008-09 "A" has provided service and receive payment for Rs.7.5 lakhs and in 2009-10 he has provided services of Rs.11 lakhs he will pay tax on Rs.1 lakh. Now in 2010-11 he is not eligible for SSI exemption as in previous year his limit exceed Rs.10 lakhs so if in 2010-11 he has provided Rs 5 lakhs srevices, he will pay tax on entire amount. Now again in 2011-12 (Assuming there is no change in law for F.Y 2011-12) he provided services of Rs.12 lakhs he is eligible for SSI exemption as his limit in previous year not exceed Rs.10 lakhs and eligible for SSI exemption and pay tax on Rs.2 lakhs only. Here service provided means payment receive in respect of taxable service provided.

Yes, the above example is right.. I also want to say the same thing..

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 25 March 2011

Originally posted by : Ritesh Jain
	Dear U.S Sharma sir, There is also a condition of clause no. Viii in point no. 2 viz. "(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed rupees four lakhs(now ten lakh) in the preceding financial year. " If it is exceeded this notification doesnot find any place. Am i right..???