Service tax on receipt basis

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viren (Querist)
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18 January 2015 As per Point of taxation rules,Individual and partnership firms are allowed to pay service tax on receipt basis upto value of Rs. 50 lacs only if the value of taxable services in previous financial year is Rs. 50 lacs or less.

My question is Whether the above rule of payment on recipt basis upto Rs. 50 lacs applicable to New business entity??

Kalam

Kalam (Expert)
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18 January 2015 Relevant part of Rule 6 of the Service Tax Rules reads as follows

" Provided also that in case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or agreed to be provided by him up to a total of rupees fifty lakhs in the current financial year, by the dates specified in this sub-rule with respect to the month or quarter, as the case may be, in which payment is received.

Hence new business entity upto 50 lakhs in the current FY can make payment on receipt basis.

viren

viren (Querist)
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18 January 2015 As the new entity will not have any turnover in previous year, still the above rule applies to new entity?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Yes, the rule **does apply to new business entities** as well.

Here’s why:

* The **point of taxation rule (Rule 6 of Service Tax Rules)** states that individuals and partnership firms can opt to pay service tax on **receipt basis** if their turnover in the **previous financial year** was up to Rs. 50 lakhs.
* For a **new entity**, there is **no turnover in the previous financial year** (effectively zero), which is less than Rs. 50 lakhs.
* Therefore, a new individual or partnership firm can **opt for payment of service tax on receipt basis** for the current financial year, up to an aggregate value of Rs. 50 lakhs taxable services.

**In summary:**
New entities automatically qualify for this option, since their previous year turnover is nil.

If you want, I can share the exact legal text or explain how to maintain compliance while using receipt basis payment. Want me to?

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