Threshold limit provision doubt

Queries 1117 views 5 replies

Vikram Simha

Student

75 Points Joined August 2011

Hi,

My self an Articaled Student, My query is:

1) How is the threshold Limit of 10 lakhs is applicable?

2) If the service provider crosses the limit of 10 lakhs, then on What amount Service tax is Applicable "is it on excess of 10 lakhs" or "from rupee 1"?

3) If incase of party crossing 10lakhs limit by the month of feb2012 is he liable to pay tax on the amount (answer of 2nd question) from the FY 2012-13 or Service tax is lyed from subsequent year (i.e., FY 2013-14)?

Note: The party is running business from 3years and never crossed the 10 lakhs limit. party is not under negative list

Replies (5)

Rajeev Kumar Garg

Consultant of Excise Customs & Service

836 Points Joined January 2013

Hello Mr. Vikram,

Here are the answers against your queries:

1. The threshold limit of 10 Lakh is applicable for every year until the limit is crossed in any year. It means as soon as the limit is crossed service tax is applicable.

2. Service Tax will be applicable on excess of Rs. 10 Lakhs, not from rupee 1.

3. As soon as the limit is crossed, the service tax is applicable in the same year and also in the next years from Rs. 1 without availing the benefit of the threshold limit of 10 lakh.

4. If the limit is not crossed in the next year then the party will get the benefit of it in 2^nd next year.]

Rajeev Kumar Garg

(M.Com, L.L.B.)

Consultant (Excise, Customs & Service Tax), Agra

Ph. No. 7500802402.

Sambhav

B.com(D.U)CA-Ipcc-final

65 Points Joined October 2009

to the extent i could understand ur question, ll try to satisfy ur query:.

the year in which ur client exceeds the TAXABLE services of 10 lakhs..in that year over and above 10 lakhs is the liability arises for service tax.. and from the subsequent year(s)..each pennybecomes taxable.

for eg .."A" a service provider exceeded his turnover from 10 lakhs , the first time, in the month of march 2012. then in 2012 total turnover minus 10 lakhs would be the amount on which ser.tax will be applicable. and for nxt 2013 -14 year every ruppee earned will be taxable .

**( exception in the case where the turnover drastically falls belw 10 lakhs again ).

Dipjyoti Majumdar

CA in service & CS. dipmaj@

3488 Points Joined June 2011

Nicely explained by Experts.

Dipjyoti Majumdar

CA in service & CS. dipmaj@

3488 Points Joined June 2011

Just to add, if the service recipient has to pay service tax on reverse charge mechanism, there is no threshold limit of 10 l applicable.

Regards,

Manoj Agarwal

Service Tax Consultant Rourkela Service

3456 Points Joined March 2012

Example:

Preceding FY	Aggregate of Taxable Services from all location in preceding PY	Current FY	Taxability in Current FY
10-11	Less than or Equal to Rs. 10 Lacs	11-12	Upto 10 Lacs - NIL Afterwards ST applicable
11-12	Exceeds Rs. 10 Lacs	12-13	ST applicable from Re. 1 onwards
12-13	Suppose again less than Rs. 10 Lacs	13-14	Exemption upto Rs. 10 again available

So, the simple rule is:

IF the Taxable Turnover in ANY Preceding Financial Year Exceeds Rs. 10 Lacs, then no exemption is available and charge Service Tax from Day 1 from Bill 1.

Otherwise, Exemption from Service Tax is available upto Rs. 10 Lacs and taxable thereafter.

Cenvat Credit not allowed if exemption is availed upto time of availment.

Claiming exemption is optional, but once exercised, it cannot be changed during that FY.

Exemption is available only to Service Provider and not to Service Receipient

Regards,

Manoj Agarwal