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Service tax Applicability

Ankit (...) (74 Points)

20 June 2008

Hello All,

I would like to whether that is service tax exemption limit is 8,00,000 & i think that i am not going to cross but still somehow i cross that limit during the year will i have to pay service tax on 8 lacs also...

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8 Replies

M.Sriram Shenoy (CA Final) (814 Points)
Replied 20 June 2008

You have to charge service tax on the entire amount of taxable service extended and NOT on the amount exceeding the exemption limit.

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Ankit (...) (74 Points)
Replied 20 June 2008

thnks...

can u plz tell me the section no. or notification or any circular reference for the same....

CA Anand Sarda (Working) (1580 Points)
Replied 21 June 2008

In the previous financial year if a person is having taxable service of 10 lacs then in the current financial year, he need to pay service on the amount exceeding rs.10 lacs. and if in the previous FY, the taxable services crossed rs.10 lacs, then he need to collect and pay service tax on whole amount.

Ankit (...) (74 Points)
Replied 21 June 2008

in my case the assessee has started providing taxable services in the year 2007-08 and has not yet applied for registration. turnover is more than 25 lacs now i wanted to know that whether he should pay service tax on all 25 lacs or on 25-8 = 17 lacs (8 lacs exemption limit)

CA PRAMOD SARAOGI (Chartered Accountant) (1113 Points)
Replied 28 June 2008

A scheme of small scale exemption in service tax was introduced by way of Notification No. 06/2005-ST dated March 1, 2005, w.e.f. April 1, 2005, exempting from service tax such aggregate value of taxable services not exceeding Rs 4 lakh received by the service provider during a financial year.

As per Para 2 (viii) of the above notification, the benefit is linked to the preceding year’s turnover. The aggregate value of all the taxable services provided by the service provider in the immediately preceding financial year should not exceed Rs 4 lakh.

Service tax will be payable only on the amounts over and above Rs 4 lakh, that is, the first Rs 4 lakh shall be exempt from service tax. In the next year, if the preceding year's turnover exceeded the threshold limit, the exemption cannot be used even if the value of services is less than Rs 4 lakh in that year because the eligibility has to be considered with respect to previous year.

However, in Budget-2007, the Finance Minister has raised the threshold exemption limit for the small service providers available under Notification No. 6/05-ST from the existing ‘rupees four lakhs’ to ‘rupees eight lakhs’ w.e.f. 1.4.2007. Thus, the eligibility limit i.e. the aggregate value of the taxable services in the preceding financial year has also been raised from ‘rupees four lakhs’ to ‘rupees eight lakhs’ by suitably amending the notification No. 6/05-ST.

The above amendments to Notification No. 6/05-ST have been made vide Notification No. 4/07-ST dated 1.3.2007 effective from 1.4.2007.

In other words, the eligible service providers, whose aggregate value of taxable services does not exceed rupees eight lakhs in the current financial year i.e. 2006-07, shall be eligible to the exemption upto rupees eight lakhs in the next financial year commencing from 1.4.2007.

The annual threshold limit of service tax exemption for small service providers has been increased from Rs.8 lakh to Rs.10 lakh.

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CA PRAMOD SARAOGI (Chartered Accountant) (1113 Points)
Replied 28 June 2008

Previous Year	Commission Receivable in Previous year Rs. In Lacs	Commission Receivable in the Current Year	Exemption Available In Current Year (against period mentioned in column 3)	Remarks
2002-03 and earlier year	Any Amount	01/04/2003 to 30/06/2003 and earlier period.	Non –Taxable	Previous year figure Is immaterial
2002-03	Any Amount	01/07/2003 to 31/03/2004	Exempted by Notification 13/2003-S.T. dated 20/06/203	Previous year figure Is immaterial

2003-04	Any Amount	01/04/2004 to 08/07/2004	Exempted by Notification 13/2003-S.T. dated 20/06/203	Previous year figure Is immaterial
2003-04	Any Amount	09/07/2004 to 31/03/2005	No Exemption	Previous year figure Is immaterial

2004-05	Upto 4	01/04/2005 to 31/03/2006	4.00*
2004-05	Plus 4	01/04/2005 to 31/03/2006	No Exemption	Even if current year Commission is below 4 lakh

2005-06	Upto 4	01/04/2006 to 31/03/2007	4.00*
2005-06	Plus 4	01/04/2006 to 31/03/2007	No Exemption	Even if current year commission is below 4 lakh

2006-07	Upto 8	01/04/2007 to 31/03/2008	8.00**
2006-07	Plus 8	01/04/2007 to 31/03/2008	No Exemption	Even if current year commission is below 8 lakh

2007-08	Upto 10	01/04/2008 to 31/03/2009	10.00***
2007-08	Plus 10	01/04/2008 to 31/03/2009	No Exemption.	Even if current year commission is below 10 Lakh in current year