Composite scheme

Service Tax (Legacy) 546 views 4 replies

anonymous

proprietor

254 Points Posted on 10 August 2016

I am a work contractor and following the composite scheme wherein I need to pay only 40% of the value. I want to know if the 40% is below 10 lakhs, still I would need to pay tax. Meaning is exemption of 10 lakhs available to me if I'm going under the composite scheme. And if yes the exemption is available then 40% of the value needs to be considered for determining 10 lakhs limit or the entire value.

Replies (4)

CA MANISH BINDAL

CHARTERED ACCOUNTANT

535 Points Posted on 10 August 2016

Only value which is liable for service tax is to be taken for calulating service tax liablity. Means if a person providing a service of Rs 1200000 but as per service tax rules 40% of such value is to be considered for service tax. Than only 480000 is to be taken for calculation of overall limit of Rs. 10 lakh in this case he will be able to get exemption of SSI and not liable to charged service tax

anonymous

proprietor

254 Points Posted on 10 August 2016

Thanks manish...can you please resolve my other query also, which is whether the exemption of 10 lakhs can be availed by an assessee going under composite scheme.

CA MANISH BINDAL

CHARTERED ACCOUNTANT

535 Points Posted on 10 August 2016

As per Rule 2A of Service Tax (Determination of Value) Rules 2006 in case of works contract service Service provider can calulate his taxable turnover by adopting 40% of Total amount charged for service tax.

And you can considered Rs 10 Lakh as a limit for calculating Service tax.

But where Composition scheme opt by Air Travel Agent, Insurer, Money Changing Service, Promotion of lottary. in such case 10 lakh limit will not be considered.

Mir Irshad Ali

Partner

192 Points Posted on 13 August 2016

As per the provisions of Notfn No. 33/2012-S.T -

“aggregate value” means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year".

It appears that for computing the exemption limit of 10 lakhs, the gross amount is to be taken and not abated amount.

Thus, it appears that for a gross value of Rs. 12,00,000/-. The exemption will be for Rs. 10,00,000/- and on the remaining amount of Rs. 2,00,000/-, Service Tax will be payale on Rs. 80,000/- [40% of 2,00,000/-].