service tax exemption of 10 Lac ?

This query is : Resolved 

Querist : Anonymous (Querist) 02 August 2010

First 10 Lac TO is exempt. That's OK.

What will be the answer in these cases :-
Below are the figures of first FY of operation

1. Single contract is of 9.5 Lacs (So if
10.3% service tax is to be added, it
amounts to 10.48 Lacs)

2. Single contract of 7 Lacs & next
contract is for 5 lacs

3. Single contract is for 12 Lacs.

Kindly advice

CMA Ramesh Krishnan (Expert)
02 August 2010

1. You may not covered under service tax

2 & 3. you are covered under service tax and need to register and charge service tax from the next financial year

02 August 2010

if value of service corssess rs. 9 lacs then you need to register under service tax.

tax will be charged if the limit crossess Rs. 10 lacs

Querist : Anonymous (Querist) 02 August 2010

My question is, on how much turn over the service tax may be charges in above cases ?

B.Chackrapani Warrier (Expert)
02 August 2010

The three hypothetical situations that may arise in SAME FINANCIAL YEAR is analyzed as follows:-

1. The services has to be registered under work contract services under section 65(105)(zzzza) since the taxable service crossed Rs. 9 Lakhs. No service tax need to be collected and paid since threshold limit of Rs.10lakhs is not crossed.
2. Registration has to be taken .Threshold limit can be availed. Service tax has to be collected and paid on Rs.2 lakhs.
3. As in 2 above.

02 August 2010

when value of taxable service crossess Rs. 10 lacs.

If your taxable service is rs. 10,20,000/-
then service tax will be charged on 10,20,000/-

02 August 2010

If you are providing a taxable service and your last year turnover is less than 10 lakh, you need not pay service tax in current financial year. Whenever you cross the limit 10 lakh your service is become taxable.

Service tax registration
You need registration immediately after the turnover crosses 9 lakhs. Or if you starting a new business and sure about annual turnover will cross 10 lakh need to register with Superintend of central excise. You should register within 30 days of commencement of business.

i.e in case 1 , your turnover is cross 9 lakh, hence registratin is required.

in case 2 & 3 also you have to required registration

Querist : Anonymous (Querist) 02 August 2010

Just to tell you... we have already got our service tax registration.

Now, Like you say...

case 1 > no service tax ?

Case 2 > Service tax on full Second contact
of 5L or only on balance 2L (7+5-10) ?
case 3 > service tax on complete 12 L or
only 2L ? (its a single contract... single bill ... )

02 August 2010

Also, please consider the span / time-spread for execution of all the contracts. This limit of Rs. 10 lacs is not related to work contracts' total value, rather the same is connected with value of taxable services to be provided in a financial year. Therefore, even if the total value of contracts is more than 10 lacs but expected/estimatated value of completion of contracts in a year is less than 10 lacs, no service tax would be attracted.

Querist : Anonymous (Querist) 02 August 2010

Dear sirs,

Thanks for the replies.

However, my basic question is,

in case 2 > 2nd contract > can we have 3 Lac billing without service tax & remaining 2 Lacs with service tax ?

Same question in 3rd case also > can we have 10 Lac billing without service tax & balance 2 lac with service tax ?

02 August 2010

yes, in case 2, you can have 3 lac billing without service tax and remaining 2 lacs only would attract service tax. Same treatment for case 3 also, only balance 2 lac shall attract service tax.

In fact, once the exemption is availed, the basic exemption limit of Rs. 10 lakh would continue. The assessee shall have to charge, collect and pay service tax on the amount invoiced after reaching the limit of Rs. 10 lakh. For example, the assessee has decided to opt for exemption scheme and in the mid of year, he finds that its turnover has exceeded Rs. 10 lakh. For the bills etc issued upto the stage of reaching Rs. 10 lakh limit for which he has already issued bills and collected proceeds without service tax, the exemption will be allowed. He should charge service tax on all subsequent bills issued against the services rendered and pay service tax accordingly on the bills so issued for the remaining part of the year. It would be advisable to make separate bills upto 10 lacs (exempt sale) and subsequently (taxable sale).

Aditya Maheshwari (Expert)
02 August 2010

In case 2 You can we have 3 Lac billing without service tax & remaining 2 Lacs with service tax.

Same in 3rd case also You can have 10 Lac billing without service tax & balance 2 lac with service tax as service tax is to levied on receipts of Rs. 10 lakhs and not on the basis of contract.

V K Bajaj (Expert)
22 March 2013

Dear all experts!

All of you have provided solution in an excellent way.

Now the above discussion have gave birth to a new point.

In case Registration under Service Tax is done and gross turnover is below ten lakhs. Then assesse would e-file the Return or will skip?

If to file then it should be ZERO/NIL amount? OR Value of Receipt be mentioned?


B.Chackrapani Warrier (Expert)
22 March 2013

i) e-filing is mandatory.

ii) amount should be disclosed and exemption notification number should be filled in the respective columns of ST-3.

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