Service tax exemption

Page no : 2

The One (379 Points)
Replied 10 May 2007

The One Says:

I'm sorry what? I did not get your point [b]free[/b]. Are you referring to any of my posts being wrong or something ...... I never claimed to be a master in any area ...... I'm also looking for clarification just like you :) lets hope someone does provide us with some morsel.

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Free (97 Points)
Replied 10 May 2007

My God,
Dear "The one", I've not at any point tryied to right any word against you. After all we both are the initiater of the discussion. How can I go against ur views or any of the members. What i maen to express is only that, the views we have put on the board are not seeming as the "final wordings". You must also be in support of my view. There is still a little confusion over the issue. That's why i asked the very senior members to throw the lights and may he/they can lead us all to the better and real path...
Sorry once more, if you thought that the previous reply was targetted to you, actually it wasn't

The One (379 Points)
Replied 10 May 2007

The One Says:

My friend I just asked for a clarification since there seemed to be some typos in your previous post. No need for any apologies :) Lets get back to the issue - I am rating this thread with a view to draw some attention.

I would like to point out this issue and others involving service tax are causing a perennial problem with each person having their own interpretation. Just have a look at the internal audit reports of Companies or even Govt. Departments for that matter and you will usually find problems with interpretation of Service Tax and Service Tax & TDS.
[b]
All members please post your views here [/b]

Harsh Raiyani (Chartered Accountant) (71 Points)
Replied 10 May 2007

Dear,

Exemption notification No. 6/2005, dtd. 01-03-2005 (effective from 01-04-2005) is a conditional exemption.  The conditions to be fulfille to avail the exemptio are :

1.  If the VALUE of taxable service PROVIDED during the previous year does not exceed Rs. 4 Lacs

2.  Party is not taking CENVAT credit on inpuits or input services.

Now,  for previous year - it is the VALUE of TAXABLE SERVICE PROVIDED which is to be considered, whereas for current year it is PAYMENT RECEIVED FOR TAXABLE SERVICE PROVIDED.  Thus, even if payment for service provided during previous year is received in current year, it will be counted for the limit of 4 Lacs of Current year.

And if the VALUE of taxable service provided during the P. Y. has exceeded Rs. 4 lacs, then exemption is not available, evenif the payment recd. for taxable serivce during C. Y. is less than Rs. 4 Lacs.

The One (379 Points)
Replied 10 May 2007

The One Says:

This is precisely what I have interpreted that for exemption it is the Value of Service Provided as Mr. Harry has put it or Amount Charged as I have used (since the act uses these terms). Therefore I was not off the mark ..... phew!!

However the matter raised by Mr. Anand Chauhan still remains unanswered which in my opinion could be regarded as tax evasion or at least tax avoidance both of which are a circumvention of the laws or their intent.

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Free (97 Points)
Replied 10 May 2007

[quote=930]Dear,

Exemption notification No. 6/2005, dtd. 01-03-2005 (effective from 01-04-2005) is a conditional exemption. The conditions to be fulfille to avail the exemptio are :

1. If the VALUE of taxable service PROVIDED during the previous year does not exceed Rs. 4 Lacs [/quote=930]

Dear sir,
Can you please guide me regarding the term you used "PROVIDED"?, Why this term might have been used by Finance Minister?, Do u think it is for the service tax payers which are having practice of earning only upto the limit of Rs. 4 lacs or is it for those who once in a ten years PROVIDED the service beyond 4 lacs of rs. and came to the earth back when he/she didn't got the charged bills realised?

The One (379 Points)
Replied 10 May 2007

The One Says:

This is getting on [b]free's[/b] nerves now isn't :) I can put forth these aspects just to get a general agreement and then we can proceed (even between ourselves if no one else contributes)

As per rule 3(a) of Service Tax Valuation Rules, Valuation shall be on basis of gross amount charged by service provider for similar services.

Rule 3 of Valuation Rules makes it clear that value of taxable service shall be determined by service provider. Thus, responsibility of valuation has been cast on service provider. However, rule 4 authorises Central Excise Officer to reject the value as determined by service provider and determine the value, after following principles of natural justice.

Rule 6(1) of Service Tax Rules makes it clear that service tax is payable on value of taxable services received. Thus, if service provider does not receive any payment from his customer, there is no liability of service tax. Service tax is payable only on value of taxable service actually received, and not on amount billed.

If the service receiver does not pay full amount of Bill and pays less amount, reasonable interpretation is that proportionately less tax is payable.

Service Tax is fully exempted in respect of the taxable services of aggregate value not exceeding four lakh rupees in any financial year.

So if your aggregate value exeeds four lakh rupees but you have received a lower amount you won't get exemption but you need not pay service tax on the amount not received from the service receiver.

No need for complex interpretations. This is my opinion ..... contribute yours please.

Free (97 Points)
Replied 10 May 2007

Dear The one,
Why I'm confused is only because of NATURAL JUSTICE interpretation.
If the F.M. willing to keep the service providers who actually done a LABOUR WORK (Bills raised) of more than 400000/- in a year but have not able to REALISED the money (Bills realised) for his job (it happens in India only), is still not able to receive the exemption. Don't you think it is really sad thing about our system? :o

The One (379 Points)
Replied 10 May 2007

The One Says:

So [b]Mr. Free[/b] you agree with my interpretation then as far as legal aspects go? If so, then our problem is solved. If not tell me why I would like to know.

As far as rationalization of the Tax Regime in India that will be done in due course. The FM is a brilliant man. I have faith in the system - and I will never agree with those who criticize our system. VAT has been introduced and soon there will be removal of CST entirely ie it was 4% now 2% in due time it will be 1% then 0%. It will happen mark my words. ( too dramatic?? )

Any tax regime will find favour with some and will not please others. Things are improving my friend (remember our tax rate was once 94% ... its lower now isn't?)