Is tax on service is not mandatory before 10 lac turn over?

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 February 2015 For small scale service provider registration is required upto 9 Lac and service tax is payable once turn over exceeds thresholds limit of Rs: 10 Lac. When one commences its business & provide its services, in this case he/she issues the bills to increase the turnover. Wanna know would service tax is charged with the bill issued to service recipient, or until turnover exceeds the thresholds limit amounting Rs: 10 lac. One should not charge service tax with the bills amount.

RENGARAJ R.K

RENGARAJ R.K (Expert)
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08 February 2015 Once you crossed 9 lac and got the RC, the option is with you whether to to collect service tax in the bills and pay or after reaching 10 lacs you can start collecting the applicable service tax. Once you start paying service tax you are also eligible for cenvat benefit and set off the same against your output tax.

Querist : Anonymous

Querist : Anonymous (Querist)

09 February 2015 Rengaraj R.K Sir, I want to know when One starts business & provide its services then shouldn't service tax be charged with the invoice amount until turnover cross the limit of Rs 10 Lac.

Point No 2: As per law service tax shouldn't be charged until turnover cross 10 lac. If someone starts charging service tax from the first invoice & it has charged service tax more than 50 invoices to reach the limit of thresholds limit of Rs 10. In this case what one do with service tax amount charged on 50 invoice. should he give back the amount of service tax charged on 50 invoices to service recipients or deposit to Govt.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 ### Service Tax Threshold Limit and Applicability

**1. Threshold Limit for Service Tax Registration**

- **Threshold Limit**: As per the earlier Service Tax regime, the threshold limit for mandatory service tax registration was Rs. 10 lakh in aggregate turnover. This means that service providers with turnover below this threshold were not required to register for service tax and were not required to charge service tax on their invoices.

- **Registration**: If your turnover was below Rs. 10 lakh, you were not obligated to obtain service tax registration. However, once your turnover crossed this threshold, you were required to obtain service tax registration and start charging service tax on your services.

**2. Charging Service Tax Below the Threshold Limit**

- **No Service Tax Below Threshold**: You should not charge service tax on invoices if your turnover is below the threshold limit of Rs. 10 lakh. The service tax liability and registration requirements only kick in once your turnover exceeds this limit.

- **Impact of Charging Service Tax Below Threshold**: If you start charging service tax before reaching the threshold limit, this would not be in line with the regulations. The amount collected as service tax should not have been collected, and you should not deposit this amount with the government.

### Steps to Take if Service Tax Was Charged Incorrectly

**1. **Refund or Adjustment of Incorrectly Charged Service Tax**

- **Refund to Service Recipients**: If you charged service tax on invoices before crossing the threshold limit, you should refund the service tax amount to your service recipients. This is because, under the regulations, service tax should not have been charged at that stage.

- **Deposit to Government**: If you have already deposited the service tax collected on these invoices to the government, you should ideally refund the service tax to the customers and adjust your records accordingly. The government expects that service tax is only collected and deposited when it is legally required.

**2. **Correct Handling of Service Tax**

- **Invoices Post-Threshold**: Once your turnover exceeds Rs. 10 lakh, you should obtain service tax registration and start charging service tax on your invoices from that point forward. Ensure that you issue invoices with service tax and comply with all filing requirements.

- **Record Keeping**: Maintain accurate records of when your turnover crossed the threshold limit. This will help in justifying when service tax liability began.

**Legal Reference and Practical Advice**

- **Regulatory Compliance**: Always ensure compliance with the prevailing service tax laws. The laws and thresholds can change, and it's important to stay updated with the latest regulations.

- **Consult a Tax Advisor**: If you find yourself in a situation where service tax was incorrectly charged or handled, consult a tax advisor or professional to get specific advice tailored to your situation. They can guide you on how to rectify errors and ensure compliance with tax laws.

**Summary**

- **Below Threshold**: Do not charge service tax if your turnover is below Rs. 10 lakh.
- **Above Threshold**: After crossing Rs. 10 lakh in turnover, obtain service tax registration and start charging service tax on invoices.
- **Incorrect Charges**: Refund service tax incorrectly charged before reaching the threshold limit and adjust your records accordingly.