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Small service provider

Shivani (Learner) (1881 Points)

03 September 2014

Dear Members

Mr. Sanjay is providing two taxable services, Service A and Service B.

The value of taxable service A during the FY 13-14 is Rs. 600000.

The value of taxable service B during the FY 13-14 is Rs. 500000.

Taxable service B is taxable on full reverse charge basis where the service receiver is liable to pay service tax (100%).

Is Mr. Sanjay eligible for Small Service Provider Exemption as per Notification No. 33/2012 in the FY 14-15?
What will be your answer if taxable service B was taxable on partial reverse charge basis, say share of service provider and service receiver both being 50%.

I am a teacher so i made this question myself for better understanding of the notification.

Regards

Shivani

shivaniadream @ gmail.com

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40 Replies

Gagan Deep Singh (CHARTERED ACCOUNTANT) (1190 Points)
Replied 03 September 2014

In both the cases he can claim exemption for value of A services. SSP exemtion is not available under RCM, therefore he has to pay tax on value of B services. Computation for service tax will be as follows

1st case

Value of A services Rs 6 lac

Exemtion under N/N 33/2012 Rs 10 Lac

Taxable Value NIL

Value of B services Rs 5 Lac

Exemption under N/N 33/2012 N.A.

Taxable Value Rs 5Lac

Total Taxable value Rs 5Lac

ST Payable @ 12.36% Rs .618 Lac

2nd case

Value of A services Rs 6 lac

Exemtion under N/N 33/2012 Rs 10 Lac

Taxable Value NIL

Value of B services(Partial RCM) Rs 2.5 Lac

Exemption under N/N 33/2012 N.A.

Taxable Value Rs 2.5Lac

Total Taxable value Rs 2.5Lac

ST Payable @ 12.36% Rs .309 Lac

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Shivani (Learner) (1881 Points)
Replied 03 September 2014

Dear Gagan deep

In (ii) of Proviso of Notification it says that this Notification is not applicable in cases where service provider provide services on which reverse charge (full or partial) is applicable.

hence, service provider cannot take benefit of this notification in resepct of reverse charge services.

there is no doubt on this.

but my question is that while calculating aggreate value of taxable services why are you excluding reverse charge services.

while calculating aggregate value we have to consider value of taxable service and even though in reverse charge cases the service tax is payble by service receiver, it is still a taxable service provided by service provider.

just because service receiver is paying tax doesnt imply that it was not a taxable service rendered by service provider. so i feel reverse charge services should be included while calculating aggregate value.

i know you may give the logic of part (ii) of proviso that reverse charge services are excluded but that proviso is basically saying that dont consider this notification at all in such cases. you wont get any exemption in these 2 cases even if ur taxable services is less than 10 lakh.

also if u see point 3 of notification they are specifally taking pain to say that in case of GTA please exclude the rcm portion of services from taxable services value.

y will they say so if reverse charge services are not to be inlcuded while aggregare value of services of rs. 10 lakh.

in my view in FY 14-15 in both cases 1 (full reverse charge) and case 2 (partial reverse charge) Mr. Sanjay is not entiled to claim benefit of this exemption notification because the aggregate value of his taxable services during the preceding FY exceeded Rs. 10 lakh (i.e. 6 lakh normal services + 5 lakh reverse charge services).

in FY 14-15 Mr. Sanjay will pay service tax on whatever his taxable value of services is in FY 14-15.

Your comments please

shivani

Gagan Deep Singh (CHARTERED ACCOUNTANT) (1190 Points)
Replied 03 September 2014

Dear Mam,

U have rightly pointed out and there is logic in ur view. But i just simply want to say that since the service reciever has already paid tax on value of serivces under RCM, hence it cannot be again included while determining aggregate value of Rs 10 Lacs.

Moreover proviso (iI) to notification specifically state persons under 68(2) not liable to pay tax & point 3 nowhere states it is clarification, eplanation or exception to proviso(iI). Therefore, we cannot interpretate that it is an exception.

In practice also, practioners exclude the value of service under RCM and i have never witnessed CBEC objecting to it. May be I am wrong but its all about interpretation and taking the benefit of loopholes in wording.

If i get any case law on this matter i will share with u and if u get any clarifictaion or case law then please share.

Regards

Shivani (Learner) (1881 Points)
Replied 03 September 2014

(ii) of Proviso that persons who pay service tax under reverse charge are not eligible to claim this exemption notification just like person who provide service under the brand name of others.

and thats just about it.

it does not say anywhere that while calculating aggregate value of taxable services you need to exclude the reverse charge services.

its only us who are giving (ii) of proviso further meaning by saying that reverse charge services should not be included while calcuating aggregate value of services ALSO.

its a matter of interpretation i guess.

perhaps any expert can throw some light who is right and where am i wrong if i am.

waiting eagerly

shivani

Gagan Deep Singh (CHARTERED ACCOUNTANT) (1190 Points)
Replied 04 September 2014

Dear Mam

With all due respect to you, I think u r contradicting yourself. On one hand u r saying that recepient of service is not eligible to claim this notification and on other hand you are saying why we are not including the value of service recepient while computing aggregate value of Rs 10 lacs under this notification.

When this notification specifically excluding the persons under sec 68(2) then why we would include value of their services. By your logic value of services provided under brand name of others should also be included becoz they are also not eligible to claim this exemption notification and nowhere it is stated that value of those services should not be included while calculating Rs10 lacs.

Mam if you still have any doubt then you may ask any practioner of service tax, 99% will give you the same reply. I have applied my all logics to persuade you, but its a nice and knowledge enhancing discussion.

Regards

Gagan Deep Singh

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Shivani (Learner) (1881 Points)
Replied 04 September 2014

Dear Gagandeep

I don't mind.

its just a healthy discussion on a topic on which we both have our views.

in fact i love such debates.

Yes as per me services rendered by service provider using brand name of others should also be included while calculating aggregating value of taxable services.

suppose i render normal service of Rs. 5 lakh and the services using brand name of others Rs. 2 crore in a financial year.

the purpose of the notification is to benefit small service provider. Now will u call me a small service provider in this case. My value of taxable services is 2 crore 5 lakh in this case.

Can i claim exemption of Rs. 5 lakh?

You will say yes because 2 crore is not included.

I will say no because i am not a small service provider as value of my taxable services run in crores.

second point i make is that notification talks about calculating aggregate value of taxable service.

now what is taxable service as per section 65B(51). it is on which service tax is leviable under section 66B.

and section 66B says service tax on all services except ones in negative list. Section 66B doesnt exclude reverse charge services from ambit of taxable services.

reverse charge services remain taxable service of service provider.

Its only when aggregate value of our all taxable services is less than 10 lakh in preceding year that we can take benefit of this notification and that benefit we can take only in respect of taxable services other than brand name and reverse charge services (as per proviso)

third point i make is they specifically mentioned GTA in point 3.

they say in case of GTA while calculating its total taxable service exclude reverse charge services rendered by GTA. they specifially said so in case of GTA.

what about non-GTA services. Why silence on that?

I dont think you and i can add any further to this debate.

we have to wait and see.

regards

shvani