Threshold limit 10 l vs. 50 l limit 2 pay tax receipt basis

Vikas (CA) (1135 Points)
Replied 11 January 2013

I am afraid that in this case, your client is correct in saying that for first Rs.50 Lakhs of turnover, he is eligble to pay service tax on receipt basis only. however, you contention in stating to maintain proper books of accounts is the correct.

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 11 January 2013

Dear Vikas,

You are suggesting that the applicability of Rs. 50 Lacs Limit for taxing on Receipt basis is over and above the threshold exemption limit of Rs. 10 Lacs, i.e. the benefit is available upto Rs. 60 Lacs in aggregate.

Can you kindly explain with reference to the rules and notifications?

Thanks,

MA

Vikas (CA) (1135 Points)
Replied 11 January 2013

Dear Mr. Manoj,

As per 3rd Proviso to Rule.6(1) of the STR, '94, the benefit shall be availed upto a taxable turnover of Rs.50 Lakhs, meaning the first 10 lakhs turnover on which the small service provider's exemption is claimed, would not be counted for this purpose, as it is exempted turnover.

Hence, the benefit would be claimed upto 50 lakhs over and above the exempt turnover of Rs.10 lakhs.

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 11 January 2013

Dear Vikas,

Thanks for your prompt reply. But my dobut remains due to reasons below:

'taxable turnover' is with reference to the aggregate taxable turnover of service, so what is taxable service.

Section 65B of the Finance Act, 1994 as amended defines Taxable Service as:

(51) "taxable service" means any service on which service tax is leviable under section 66B;

So the term used here is 'leviable' means the tax may or may not be actually levied and collected u/s 66B.

Further, Section 66B says,

"66B. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed."

In my opinion, Any service, which is not specified in the negative list (sec 66D), and provided in the taxable territory by one person to another is a Taxable Service, even though it is fully exempted by any notification. In case of Fully exempted service, the tax is levied at 0% rate.

Again, in Point of Taxation Rules, 2011, taxable service is defined u/s 2(f) as: “taxable service” means a service which is subjected to service tax, whether or not the same is fully exempt by the Central Government under Section 93 of the Act;

Therefore, the Rs. 50 Lacs limit should be taken from 1st invoice and actual benefit is available only on Rs. 40 Lacs after availing the threshold exemption of Rs. 10 Lacs upto which there is no tax.

EXPERTS PLEASE ADVICE (tax2001-it @ yahoo.com)

Vikas (CA) (1135 Points)
Replied 12 January 2013

Dear Mr. Manoj,

I believe the contentions presented by you are correct and apologise for my hasty views.

I would like to correct you as the definition of "taxable service" under POTR has been omitted vide Notification No.37/2012-ST dated 20 June 2012.

Secondly, the terms used in 3rd proviso to Rule6(1) of STR and the Notification No.33/2012-ST, is "taxable Service" only.

Hence, it shall be 10 lakhs +40 lakhs.

I deeply, regret my mistake in interpretation and thank you for correcting me.

However, a second view is possible as the ealier definition under Rule 2(f) of POTR expressly included the term "whether or not the same is fully exempt by the Central Government under Section 93 of the Act", which has been omitted.

1 Like

Manoj Agarwal (Service Tax Consultant Rourkela ServiceTaxExpert@yahoo.com) (3456 Points)
Replied 14 January 2013

Dear Mr. Vikas,

First I would request you not to apologise for differences in opinion regarding interpretation of law, coz we all learn and understand law till the end. What seems correct today, may subsequently proof to be wrong.

I Thank You for correcting me that vide notification no. 37/2012, Rule 2(b) and (f) of POTR has been omitted, which i overlooked. It seems that the same may have been omitted coz the 50 Lacs exemption, which was earlier provided under POTR on specified services like CA's, CS's, ICWA's, etc has been shifted to Service Tax Rules, 1994 in modified form in Rule 6(1) Proviso to all the service providers. Also, since the term 'Taxable Service' has been clearly defined under the Act, there is no legal meaning to define the same under any Rules as the provisions of the Act always prevails over the Rules.

Regards,

Manoj

priya pandey (4 Points)
Replied 30 June 2017

currently if the service provider is paying service tax on receipt basis what is the effect of gst on that person . whether he required to pay all the dues of his service tax liability for which he did not receive the payment.

priya pandey (4 Points)
Replied 30 June 2017

currently if the service provider is paying service tax on receipt basis what is the effect of gst on that person . whether he required to pay all the dues of his service tax liability for which he did not receive the payment?