EXEMPTION LIMIT

on Rs. 200000 itself

Any person who has collected any sum on account of service tax, is under obligation to pay the same to the Government. He can not retain the sum so collected with him by contending that service tax is not payable. (Refer section 73A of the Finance Act, 1994.) Because there is no basic exemption in service tax.  

1200000

Dear Piyush

The receipt of Rs.2.50 Lakhs in the year 2010-11 has nothing to do with the status of the "Small service provider" to get the exemption of threshold Limit of service tax in 2011-12. Here see to get the exemption of  first collection of Rs. 10 Lakhs the asseee should be a small service provider in 2011 -12 and to be a small service provider he has to fulfill the following condition:-

The aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed rupees Eight lakhs in the preceding financial year.

If the total services provided by the assessee (i.e. billing) irrespective of the amount of collection is less than Rs. 10 Lakhs in 2010-11 then he can get a exemption of Rs. 10 Lakhs in 2011-12. 

If you want to go for all the mechanism of this scheme and see the myths and realities of this scheme please see my following articel in ICAI- CA JOURNAL:-

Threshold Limit under Service Tax: Some Myths and Realities – Sudhir Halakhandi –

- CA SUDHIR HALAKHANDI

Mr. Sudhir Halakhandi,

I am confused, please help,

Suppose a service provider "A" made a billing of Rs. 9 Lacs in F.Y 2009-10 out of which he received Rs. 1Lacs in same F.Y..........  In 2010-11,he received Rs. 12 Lacs out of which 8 lacs were of F.Y 2009-10(4 Lacs are of same F.Y)..................     Hence it means he will have to pay Service Tax on Rs. 2 lacs in F.Y 2010-11.

On the other hand there is a service provider "B" who also made a billing of Rs. 9 Lacs in F.Y 2009-10 out of which he received Rs. 3 Lacs in same F.Y................ In F.Y 2010-11, he received Rs. 10 Lacs out of which 6 Lacs were of F.Y 2009-10(4 Lacs were of same F.Y).....................Hence he will have to pay no Service Tax in F.Y 2010-11

Situation of Both Service provider is same.The only difference is timing of receipt of payments of F.Y 2009-10 as a result of which one pays Service Tax & other doesn't

Am i Right.....?????? If i am, then whether it is fair?

Dear Ritesh

This is CA Sudhir Halakhnadi. As you have mentioned the situation of two service providers and you believe it or not , the conclusion made by you is CORRECT.

When a law is made what we have to do it is only to follow it . There are so many ambiguties in the law which is a seperate matter of discussion . We can protest but till any amendment is made we have to follow it.

Ritesh , i am giving you one more situation which I have properly discussed in my article mentioned previously. Suppose you are a small serivce provider then in the next year your don't have to pay tax on first 10 Lakhs of collection and in that case how will you bill your customers since the payments are not received in chrnological order. Then at the verge of Rs. 10 Lakhs (Near reaching collection of Rs. 10 Lakhs) how will you bill your customers plus service tax or without service tax. Suppose at the time of billing your collection is less than Rs. 10 Lakhs hence you have not added service tax in your bill but at the time of receipt of bill you have crossed the collection of Rs.10 lakhs. Think about this problem also.

I don't know whether you have read some more illogical laws in the country like Fringe benefit tax, Banking cash transaction Tax, Section 50C of the capital Gain tax....so on and so forth.  

- With goods wishes and happy new year.

(CA SUDHIR HALAKHANDI)

Thank you sir,

Its indeed an ambiguous law but i am afraid we have to live with it till it is changed.........

HAPPY NEW YEAR to you too and all other members.

Dear Friends,

We can be a part of the problem or a part of the solution. In India part of the solution may appear to be difficult. However my experience has been that you would be surprised that some of the many suggestions made individually or through a forum ( Chamber/ Institute/ Association) are taken up and acted on.

Here we would be the cause in the matter. professional taken up being a cause in the matter of making laws transparent/ clear and unambiguos is a great move.

Join the club

Have a exciting and joyous year of fulfillment in 2009

Warm Regards

Madhukar 

I CONFUSED WITH ALL OF ANSWERS

NOW MY QUESTION IS

WHEN THE PERSON IS LIABLE TO COLLECT THE TAX?  EITHER REACH THAT EXEMPSION LIMIT SAY LIKE 10 LAKHS,

OR

IF THEY REGISTERED MEANS NOT TAKEN A LIMIT FOR COLLECTING TAX EVEN THE RAISED THE INVOICE OF RS.10000 ALSO THEY LIABLE TO COLLECT?

PLEASE CLARIFY.

Dear Mr. Suresh

The law has not fixed any responsibility to collect tax. It has given the liability to pay tax whether it is collected by the assessee or Not.

Further the assessee has to pay tax after crossing his collection of Rs.10 Lakhs and at the verge of Rs.10 Lakhs how he will bill the service or collect the Tax is not clear in the law  because the payment are not received in chronological manner. Hence one should note that the assessee has to pay tax after crossing the limit of First collection of Rs.10 Lakhs and how he will collect the same from the service receiver is not known. The problem has been mentioned by me in my previous reply.

If assessee is registered with the Service tax department i.e. service tax cell of central excise department , it does not mean that he has opted for collecting the service tax instead of going for exemption limit but if during the year assessee has paid any service tax  than he can not go for Exemption Limit . This has been provided in the Notification of the exemption Limit i.e. Notification No. 6/2005 - ST dated 1-3-2005. Let us see the relevant provision of the scheme:-

I have seen so many places in this discussio "I am confused" or  "there is a confusion" so please see that all the taxation laws in our country are generators of confusions but see here the more the confusion in the law , more it sharpen the mind of professionals.

- Regards

(CA SUDHIR HALAKHNADI)

Service Tax liabilty depends upon Aggregate Value of the taxable services rendered in the preceding year. If the same is below Rs.10 lacs in the Preceding year, value of taxable services is exempt upto Rs.10 lacs i.e. sum total of the first consecutive payments received during the current year and thereafter it is taxable. However, the said General exemption is optional. You can collect service tax from the begining without availing exemption limit. Once this option is exercised, the same can not be withdrawn in the remaining period of the year. Thanks, CA. Ashok Shah

Dear Mr. Ashok Shah

With due respect it is a repeated question of Mr. Suresh which I have already replied . Please see the answer and send your coments on it.

-With regards

(CA SUDHIR HALAKHANDI)