Service Tax Exemption for small service providers

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Joice Jacob

Managing Partrner

22 Points Posted on 11 July 2011

Dear Expert,

I have a partnership company from October 2007, which provide 100% service under Consulting Engineer category. During FY 2007-08, we didn't have any business. During FY 2008-09, we had business for Rs.570000/-. And during the FY 2009-10 we have done 870000/-. Since we new that we may cross the exemption limit of Rs.10 L, during the FY 2010-11, we had taken the Service Tax registration and paid Collected and paid the Service tax for the service above 10 lakhs and did upto Rs.1470000/- (Service tax for Rs.470000/-). As we thought that our gross service would not exceed 10 lakhs, we have not collected any service tax (also not paid, other than the due of FY 2010-11) for the FY 2011-12 till date. But at this situation we are going to exceed 10 lakhs from the next month onwards (August 2011) due to an uns*xpected order to us (Thank God).

Dear Expert, my question are that, 1) should I collect the service tax for the amount which I have already provided till date (Which is about 9 laks) ?

2) Or we need to collect and pay service tax only for the amount above 10 L ?

3) what would be my position in FY 2012-13, since I may cross 15 lakhs.

Your kind advice is requested.

Joice Jacob.

Replies (4)

U S Sharma

glidor@gmail.com

21670 Points Posted on 11 July 2011

once the exemption limit is crossed 10L, you are not eligible to get 10L benefit in next year, i.e you have to pay from Rs 1/-

again in any year when ur total taxable service is below 10L ( service tax paid though) then in next succedding year you can opt for 10L exemption.

CA Unnikrishnan Nair N

Chartered Accountant

2114 Points Posted on 12 July 2011

Since you have crossed Rs.10 L for the year 2010-11, you are ineligible for the exemption for the year 2011-12. For 12-13 also you are ineligible for the exemption since you crossed Rs.10 L for 11-12.

CA. Rashi Goyal

Chartered Accountant

378 Points Posted on 13 July 2011

If in a year a service provider avails exemption and does not charge service tax from customer till the value is 10Lakhs. After that he starts charging the service tax and he is eligible to claim the cenval for service tax on inputs from the date when he starts charging service tax provided the inputs are being used for providing the service which are taxed.

Now the query is how to corelate the inputs with output services before authorities. As the same can be a matter of debate between taxpayer and authorities.

Would rule 6 of cenvat credit rules be applicable in this case.