Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

Service tax query

Rinkal Bansal (proprietor) (57 Points)

04 December 2012

Dear All,

Please help me out on the below mentioned subject matter:

One of my client is running a Beauty Parlour and it was opened 1 year back and the receipts during the year is also less than Rs. 10 lacs. For the purpose of advertisement, they have made an arrangement with one of the agent. They issued a card containing list of services worth around Rs. 6,000/- and the card is valid for 1 year. But this card was issued at a discounted ratte of Rs. 600 and the parlour is getting Rs. 125 only. 500 cards of such type has been issued. Whether the parlour comes within the ambit of service tax as the receipts are less than Rs. 10 lacs.

Reply
Follow
Share

3 Replies

CA CS Chirag (Practicing CA) (834 Points)
Replied 04 December 2012

The exemption of ten lakhs is available every year if you have not crossed the ten lakh limit in the previous year. If you cross the ten lakhs limit this year, then you cannot avail the exemption for the next year. Thus every years exemption availability is based on previous years turnover. The turnover in the previous year decides whether you can avail exemption this year.When it crosses Rs 10.00 Lakhs in any financial year, it should collect Service Tax from its customers and remit to Government. In the next financial year, from the first Rupee of the turnover, it should collect Service tax and remit to Government. The Exemption limit of Rs 10.00 Lakhs do not apply.

Upgrade to CAclubindia Pro. Subscribe Now!

Rinkal Bansal (proprietor) (57 Points)
Replied 04 December 2012

Actually i want to know whether through the sale of those cards as mentioned in which services of Rs. 6,000 (is to be given in just Rs. 600), they are coming under the levy of service tax?. Number of cards issued is 500 and if we see the amount of which services are provided becomes Rs. 30 lacs (6000*500) but the amount actually received is 3 lacs (600*500). Now what amount will be taken into considertion while calculating the 10 lacs limit.

Priyanka Maheshwari (Assistant Manager) (76 Points)
Replied 08 December 2012

for calculating the turnover, the actual amount booked as revenue shall be taken into consideratin and not the MRP value. In this case, the revenue earned is Rs. 3 lakh and not 30 Lac. in my opinion, service tax will not apply. However, if the parlour books rs. 30 lac as turnover and then debits the P&L with Rs. 27 lac as some sort of discount, then it would fall under the ambit of service tax.