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Service Tax Exemption

Sumit Rai Bindlish (CHARTERED ACCOUNTANT) (41 Points)

03 May 2008

Plz resolve my problem. Case facts are as follows :

This is the company's 1st Year ( F.Y. 2007 - 08 ).

Company has achieved Rs.8 Lac as its Receipts during its first 4 months, on which it has not charged any service tax from its clients.

After that it has achieved another 12 lac as its Receipts in next 8 months , on which it has charged Rs. 148320 as service tax.

Company has also CENVAT credit of Rs. 100000.

So my Questions are :

1. Can it take the exemption of SSP ( i.e. Rs. 800000 ) or it has to pay service tax on Rs. 800000 assuming that it is Inclusive of tax.

2. Can it take the Cenvat Credit and will pay Rs. 48320 ( 148320 - 100000 ).

Plz tell me its Service Tax implication .

With Thanks & Regards

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8 Replies

ragavendhiran (audit asst) (93 Points)
Replied 03 May 2008

In my view

Service tax exemption claimed u/s 66 of the act . As per notification 6/2005 dt 1.3.2005 , the one of the condition for availing exemption is previous year's taxable income is less than 4 lacs. In this case the assessee is first year therefore the assessee claim credit and liable for service tax amount for entire amount.

please discuss further

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v.viswanathan (chartered accountant) (79 Points)
Replied 04 May 2008

I fully agree with the viewsof Mr.Raghavendram

VIPIN KUTUMBALE (TAX CONSULTANT) (410 Points)
Replied 04 May 2008

hi,

to as this is company's first year then company can claim exemption up

8 lacs, till date of crossing of 8 lacs no credit can be availed, after crossing the limite of 8 lacs, credit can be availed on input, that we have to consider while calculation of service tax

VIPIN KUTUMBALE (TAX CONSULTANT) (410 Points)
Replied 06 May 2008

first year is exempted up to 8lacs / 10 lacs , it need not to pay services till exemption limite

SIDDHARTHA SANKAR ROY (Government Servant -MOF) (868 Points)
Replied 01 June 2008

You have to understand the value based exemption allowed in Service Tax. The law says that the a person is exempted from the payment of service tax if his previous years turnover is less than 8 lakhs which has been increased to 10 lakhs in this years budget. Since in your case it is the first year for the company, question of collection of service tax arrises only after the company crosses the exemption limit and hence while assessing the service tax payable you should not include the exempted value i.e, 8 lakhs and assessess the liability of the remaining amount.

Coming to utilisation of cenvat credit, you are allowed to take credit of only that portion of input/input services/capital goods credit which has been utilised for provision of taxable service and not the entire amount of credit availbale

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CA PRAMOD SARAOGI (Chartered Accountant) (1113 Points)
Replied 29 June 2008

As per Service Tax Act you are eligible for the exemption of Threshold limit of Rs. 8.00 Lakh in the consecutive months begining from the first day of financial year 2007-08 since yours is a new company and obviously the previous years figure in NIL i.e. below 8 Lakh. Secondly, as soon as you cross the threshold limit you are liable to pay service tax on the remaining amount . (Total receipts minus 8 lakh) . If you are liable to pay monthly tax then you have to start paying the tax before 5th of the month in which your receipts crossed the threshold exemption.Limit of Rs. 8.00 Lakh. but if you are liable to pay ST quarterly then you have to start paying the tax on or before 5 th at the end of the quarter in which the threshold limit crossed by you.

subhra (Services) (24 Points)
Replied 02 August 2009

Originally posted by :CA PRAMOD SARAOGI
"	As per Service Tax Act you are eligible for the exemption of Threshold limit of Rs. 8.00 Lakh in the consecutive months begining from the first day of financial year 2007-08 since yours is a new company and obviously the previous years figure in NIL i.e. below 8 Lakh. Secondly, as soon as you cross the threshold limit you are liable to pay service tax on the remaining amount . (Total receipts minus 8 lakh) . If you are liable to pay monthly tax then you have to start paying the tax before 5th of the month in which your receipts crossed the threshold exemption.Limit of Rs. 8.00 Lakh. but if you are liable to pay ST quarterly then you have to start paying the tax on or before 5 th at the end of the quarter in which the threshold limit crossed by you.	"

Satish (CA Final Student) (479 Points)
Replied 03 August 2009

In simple terms, Following are the provisions -

1) Since you are a new service provider, the condition of last years value of service does not apply to you.

2) You have an exemption from paying service tax upto the value of service of Rs. 8 lakhs (For FY 07-08). You need to pay service tax only after crossing the above limit that to on the value over and above 8 lakhs.

3. You are entitle to a credit of CENVAT relating to the input service utilised in providing the taxable services after the exemption limit. This means, for availing exemption upto 8 lakhs, you should not avail the credit of service tax or CENVAT upto the value reaches 8 lakhs. Thereafer you can avail the credit.

4) If you are a corporate assessee, you need to pay service on monthly basis. i.e. on or before 5th of the next month. If you are not a corporate assessee, on or before 5th of the next month after the quarter end.

5. In the next year, since it would be ur 2nd year of operation and you have crossed 10 lakh rupees of gross receipts, you need to pay service tax right from first bill amount.