Hi,
I run an brand promotions company which is a Limited Liability Partnership firm. We have obtained our service tax number but have not crossed the 10 lakhs turnover for the last financial.
Taking advise from a known friend who is in the same field, we have been billing our clients with the service tax charged on our mangagement fees. For example if our cost of execution happens to be Rs.1,00,000 we charge a management fee of 10% which is Rs.10,000. We charge Service tax on 10,000 which comes to Rs.1030. So our total billing amount would be 1,11,030/-
Now the service tax department is asking us to pay the department by calculating the service tax on the whole amount i.e 10.3% of 1,10,000/- which means Rs.11,330 - 1030 = 10,300 as dues.
For whatsoever service tax, we have charged the clients, we have been paid the department and have filed the returns as well.
Kindly let me know since we have still not crossed the 10 lakhs amount, can we justify our stand, that we are not liable to pay service tax since we are under the threshold limit and for whatsoever amount we have charged the client, we have paid the department.
Looking forward for your valuable help.
Regards
Vijay
CAclubindia
