Service tax exemption

The One Says:

The Value of taxable services is the amount CHARGED .... I don't see the amount received being the criterion .... this is my opinion ..... others are welcome to add theirs. (the amount charged being Rs. 600000 in this case the person is not a small service provider, the service tax should be paid on Rs. 200000). The following extract should provide you with some information:

To be eligible, it should be satisfied that aggregate value of all taxable services rendered by a service provider from one or more premises does not exceed Rs 4 lakh in previous financial year. Aggregate value of Rs 4 lakh means sum total of first consecutive payments received during financial year towards the value of taxable services rendered till the amount equals Rs 4 lakh. Payment received towards exempted services will not be considered for reaching this limit. Preceding financial year's taxable services will be considered for eligibility.

The exemption is related to first payments received in a financial year irrespective of the actual date of provisions of services. Assessees will have to take note of two important conditions for enjoying the exemption meant for small service providers.

In Notification No. 06/2005-ST dated March 1, 2005, clause 2(viii) states that to be eligible for exemption, [b]the aggregate value of taxable service [/b]from one or more premises should not exceed Rs 4 lakh in the preceding financial year. Service tax will be payable only on the amounts over and above Rs 4 lakh, that is, the first Rs 4 lakh shall be exempt from service tax.

In the next year, if the preceding year's turnover exceeded the threshold limit, the exemption cannot be used even if the value of services is less than Rs 4 lakh in that year because the eligibility has to be recovered with respect to previous year.

Hope it helps.

I agree about service tax to be paid after limit if Rs. 4,00,000/-, who took the exemption, but my personnal opinion is that service tax is a base for the RECIEPT only. If you didn't get a service tax, naturally you don't have to pay.
In other way if you are not getting the AGGREGATE of Rs. 400000/-, then you are exemped from the service tax net, irrespective of how much service you have paid.

For example somebody produced the bills of Rs. 5,00,000/- in 2003-2004
and got amount of Rs. 4,50,000/- in 2004-2005,
and had have produced the bills of Rs. 3,00,000/- in the year 2004-2005, even he/she produced the bills under Rs. 400000/-, he/she is not able to avail the exemption,(because his/her aggregate receipt is above Rs. 400000). Can you / anybody please throw more lights on the issue?

The One Says:

In this matter please read the highlighted (emboldened) words which state that the aggregate value of taxable service (which one should interpret as charged/provided rather than received for and this is an extract no my opinion). Emphasis on changeability arises from a charging section and for exemption the conditions should be met i.e. the aggregate value of taxable service should be less than Rs.400000. Each section where Value of taxable service is given reads [b]"amount charged"[/b] . (or am I terribly mistaken?? )

Now where the the aggregate value of taxable service does not exceed Rs.400000 in the preceding year, as per the notification the exemption will be upto Rs.400000 amounts over which service tax would be payable.

In the next year, if the preceding year's turnover exceeded the threshold limit, the exemption cannot be used even if the value of services is less than Rs 4 lakh in that year because the eligibility has to be recovered with respect to previous year.

Each case being unique such as your case of no possibility of recovery etc would have to be dealt with on that basis - in any case a simple solution is to throughly document what you have done and reasons for that and you should not have any problem.

Let me say I don't specialize in tax matters. I would request someone who deals with service tax matters to clear the air a bit until then .... lets continue our discussion hopefully arriving at a concensus  :)

yes, the person automatically gets eligible for service tax exemption as by the end of the financial year it is clearly evident that the assessee is unable to receive the same.

Dear THE ONE,

You are right in your interpretation, but i'm also right in interpretation(!!), yes that is the fun of wording in Service Tax.

vvvskiran also on the same track on which i'm.
But still as you said, the master's voice on Service tax is awaited.

The One Says:

I think one of us must be incorrect .....

vvvskiran could you kindly substantiate your reply as to what you are referring to as its not clear .... just asking for a clarification not questioning your reasoning.

Dear Friends,

Seen your discussions.

I would like to draw your attention to the article on the same subject written by me on the subject at the time of release of another related notification. on www.taxindiaonline.com

Still you will also get required inputs for your understanding.

Link is here under.

https://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=2706

With Regards.

Chauhan Anand Narayanbhai

Excellent stuff!

Dear Chauhan Anand Narayanbhai, i've gone trough ur second link.

Is the notification 26/2005 will be applicable to engineers, etc.? I think yes it should related to all service provider, and with the support of this NTS, i think, the person, even though provided a service of 6,00,000/- in 2004-2005, and realised only Rs. 2,00,000/- then he is eligible to claim a exemption in 2005-2006. Am i right in my view? I need a real solution not MANIPULATION of law. that's why i'm asking once more sir

The One Says:

Currently as per notification on 01-03-2006 as from this day [b]all services [/b]provided by CA/CS/CWAs are taxable.

This article  is well written thanks for this link ... but even so the doubt persists in this which seems to be a gray area ... Though I must agree with your interpretation of harmonious construction one must say that what appears in the last sentence of the article is tax avoidance which has been held to be as heinous a crime against society as tax evasion in McDowells case. I refer to this sentence in your article:

[quote] If it is on receipt basis one can manipulate turnover as being on receipt basis!!! However, it will not be material as manipulation could be only for one or two year. [/quote]

Also how would one interpret this now with a view to the changes ie the new section 67 that has been introduced w.e.f. 18-4-2006 where valuation on the basis of [b]money consideration[/b] defines taxable value of service as - in a case where the provision of service is for a consideration in money, be the[b] gross amount charged by the service provider[/b] for such service provided or to be provided by him.

And later in the same section says - "consideration" includes any amount that is payable for the taxable services provided or to be provided.

What appears to me is that the value is the amount payable for services provided. This sure is a contentious issue ........

Once more let's get advice from Chauhan Anand Narayanbhai as well as from other masters.

The One Says:

Yeah I urge those of you dealing with service tax matters to shed light on these aspects.

By the way, don't mean to confuse matters further but it has recently come to my knowledge that the limit for exemption [u]might[/u] be increased to Rs. 8 Lakhs

thanks for the stuff brothers.
I have one doubt,
this threshold expemtion is available for one time only or
even we can get the same every  next year where the total turnover durig previous year not exceeds Rs.4,00,000.
Pl. clarify?

The One Says:

ravikumar.murugesh my friend just read my previous posts on this topic you will find your answer in there. But here is an extract:

[quote]In Notification No. 06/2005-ST dated March 1, 2005, clause 2(viii) states that to be eligible for exemption, the aggregate value of taxable service from one or more premises should not exceed Rs 4 lakh in the preceding financial year. Service tax will be payable only on the amounts over and above Rs 4 lakh, that is, the first Rs 4 lakh shall be exempt from service tax.

In the next year, if the preceding year's turnover exceeded the threshold limit, the exemption cannot be used even if the value of services is less than Rs 4 lakh in that year because the eligibility has to be recovered with respect to previous year.
[/quote]

I don't think the persons expressed their valuable comments are the exostive number of the masters of the board. Their must be some others highly experienced fellows also who can throw more lights on the issue of exemption, I've strated and hence the discussion will reach to the destination as expected and exeptable to all the viewers/righters