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Am i eligible for service tax this year? please read inside.

P Kahyap (Others) (50 Points)

31 December 2015

Hello Experts,

I am seeking some advice here from all you experience people here, such a wonderful forum for us.

On FY 13-14 my turnover was 1CR+ major part of which was from inward remittances, but I had some domestic income in INR as well.

Now in FY 14-15 I took a huge loss and my turnover was 55 lakh but profit was barely around 2 lakh (that is through bank transaction), I made some profit of around 4-5 lakhs by providing services in cash. Do I need to pay service tax on that 5 lakh cash income this year?I have not given any invoice or anything to those clients.
My business is web designing.

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3 Replies

Aditya Sharma (finance advisory) (377 Points)
Replied 31 December 2015

SERVICE TAX IS NOT CHARGED ON PROFIT.

SERVICE TAX IS TO BE CHARGED ON EVERY INVOICE YOU RAISE (i.e. on your sales/ turnover).

SERVICE TAX IS AN INDIRECT TAX WHICH YOU HAVE TO COLLECT FROM YOUR CLIENT AND PAY IT TO THE GOVT. (NO OUT-OF-POCKET EXPS.)

I PRESUME YOU AVE NOT COLLECTED S.T. FROM CLIENT. NOW MEET A C.A. AND GET ALL THE FORMALITIE DONE.( registration etc.)

back calculation shall be done on your turnover to find out the amount of service tax along with interest.

CA Pallav Singhania (IT System Auditor) (33678 Points)
Replied 31 December 2015

Service Tax act/Rules has provided exemption to small scale service provider from service tax up to aggregate value of taxable services provided of 10 lakh in a Financial Year .

If in the previous financial year the aggregate value of taxable services provided by you was less than Rs.10 lakh and in the present financial year the aggregate value of taxable services provided by you is also less than Rs.10 lakh. Then no need to pay service tax .

If in the previous financial year aggregate value of taxable services provided was less than 10 lakh but this year aggregate value of taxable services provided is more than 10 lakh them you start paying service tax after crossing the threshold of Rs 10 lakh.

If in the previous financial year aggregate value of taxable services provided was more than 10 lakh but this year aggregate value of taxable services provided is less than 10 lakh them you start paying service tax from rupee one.

You are required to pay Service Tax {assuming ST is inclusive of payment received}

Madhukar N Hiregange (Chartered Accountant) (39039 Points)
Replied 01 January 2016

As I understand you are doing web designing which would fall under rule 3 ( default rule) wherein as long as the recepeint of the service is outside India there is no liability. The services provided to local clients in India would be laiblew after corssing the threshold limit of Rs 10 Years since the previous year taxable services provided in India is less than 10 lakhs.

Once you are likely to cross 10 lakhs for local services, youmay register and pay the service tax after setting off the eligible input credits, capital goods credit as well as the input services credit.

If you are availing services form outside India you are required ot pay the ST on reverse charge. It maybe noted however that there is no threshold limit for the payment of service tax on reverse charge.