GENERAL EXEMPTIONS AND ABATEMENTS IN SERVICE TAX

[Dr. Sanjiv Agarwal]

The general exemptions available in service tax are as listed below –

1. Small Scale Exemption

The threshold exemption limit of Rs. 10 lakh continues to exist and it is over and above the exemptions notified in Notification No. 25/2012-ST dated 20.6.2012. The threshold exemption of presently Rs. 10 lakh is available to all service providers vide Notification No. 6/2005-ST dated 1.3.2005 as amended from time to time and last amended vide Notification No. 33/2010- ST dated 20.6.2012. W.e.f. 1.4.2012, aggregate value of Rs. 10 lakh would mean the sum total of value of first consecutive invoices issued during a financial year, but does not include value charged in invoices towards such services which are exempt from whole of service tax leviable thereon under section 66 of the said Finance Act, under any other notification.

W.e.f.1.07.2012, Notification No. 6/2005 as amended shall no longer be applicable and such exemption to small service providers shall be covered by Notification No. 33/2012-ST. There is a change in scope of aggregate value which shall mean as follows and subject to following conditions –

a)      total of value of taxable services

b)      value shall be as charged in first consecutive invoices issued during financial year

c)      value charged in invoices issued for taxable services which are exempt from whole of Service Tax shall be excluded in determining the aggregate value

For more details, readers may refer to Topic No. 25 in Volume 1 of the Book.

2. Exemption for Exporters/SEZ

• Transportation of export goods by Goods Transport Agency in a goods carriage received by an exporter for transport of the said goods directly from –

(i) any container freight station or inland container depot to the port or airport, from where the goods are exported;

(ii) his place of removal, to an inland container depot, a container freight station, a port or airport, from where the goods are exported. (Refer Notification No. 31/2012- ST dated 20.6.2012)

• Refund of service tax paid on certain specified taxable services received by an exporter of goods and used for export of goods, subject to certain specified conditions. (Refer Notification No. 39/2012-ST dated 20.6.2012)

• Taxable services, received by a unit located in a Special Economic Zone or Developer of SEZ for the authorised operations. (Refer Notification No. 40/2012-ST dated 20.6.2012)

3.         Exemption to Import of Technology

Taxable service involving import of technology, from so much of service tax, as is equivalent to the extent of amount of cess payable on the said transfer of technology under the provisions of section 3 of the Research and Development Cess Act, 1986. . (Refer Notification No. 14/2012-ST dated 17.3.2012)

4.            Exemption for Services to Foreign Diplomatic Mission

Taxable services provided for the official use of a foreign diplomatic mission or consular post inIndia, or for personal use or for the use of the family members of diplomatic agents or career consular officers posted therein.  (Refer Notification No. 27/2012-ST dated 20.6.2012)

5.         Exemption to Services by TBI or STEP

Taxable services provided by a Technology Business Incubator (TBI) or a Science and Technology Entrepreneurship Park (STEP) recognized by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology, Government of India.  (Refer Notification No. 32/2012-ST dated 20.6.2012)

6.         Exemption to Renting of an Immovable Property

Taxable service of renting of an immovable property, from so much of the service tax leviable thereon, as is in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable property less taxes on such property, namely property tax levied and collected by local bodies. (Refer Notification No. 29/2012-ST dated 20.6.2012)

Abatements

Apart from full exemption available to 39 categories of services vide Notification No. 25/2012-ST dated 20.6.2012, the abatements as available under Notification No. 1/2006-ST have been superceded vide Notification No. 26/2012-ST dated 20.6.2012. The increase in taxable portion of value are accompanied with liberalization in input tax credits following the principle of neutrality of taxes that the burden of taxes should not raise the cost per se but passed on to the point of consumption. It is expected that, though the taxable portion of services may appear a little higher, but the availability of credits will lead to reduction in costs and hence prices for the consumers.

The existing and new abatements shall be as follows –

S.No.	.                   Service	Existing  taxable portion	W.e.f. 1.07.2012 taxable portion	CENVAT credits
1.	Convention center or On mandap with catering	60%	70%	All credits, except inputs, of chapter 1 to 22, will now be available.
2.	Pandal or Shamiana with catering	70%	70%
3.	Costal shipping	75%	50%	No credits as at present
4.	Accommodation in hotel etc.	50%	60%	Credits on input services allowed
5.	Railways : goods	30%	30%	All credits will be allowed
6.	Railways : passengers	New levy	30%	All credits will be allowed
7.	Construction of complex / building etc. except where entire consideration is received after completion certificate	33% or 25%	25%	No credits as at present

Discussions to this article

[CA Sumit Aggarwal]

Good Morning Sir, In Your article in the abatement to Construction you have mentioned that No credit will be availble. However as per me Credit of input services and capital goods will be allowed. Please confirm ?

sandeep Garg-09971133229

[ANAND SHEMBEKAR]

Dear Dr. Sanji Agarwal

I am at all time find out first on this website the article written by you.Very nice .

Thanking you

ANAND SHEMBEKAR

CELL 91-9421187122

[RAJESH MANGAL AGRAWAL]

I am also agree with Mr Sandeep. In my opinion also Cenvat Credit on Inpurt Service and Capital Goods will be allowed. The same issue can be verified also from serial No. 12 of the Notification No. 26/2012-Service Tax issued on 20.06.2012.

One point also to be keep in mind that the abatment of 75% will be allowed only if the value of land is included in the amount charged from the service receiver.

CA RAJESH MANGAL AGRAWAL

9425219252

29.06.12

[RAJENDRA KHADILKAR]

Good Evening Sir, It is mentioend in your article in the abatement to Construction that No credit will be availble. However, if the condition "Credit n Inputs" read with Cenvat Credit Rules [Input Definition], the credit on service would be allowed except Work Contract, Construction or construction support services rest input services credit would be allowed, in case of Capital Goods, it would be allowed, please conform your views.

[RAJESH BAWKAR]

I would like to know that whether we have the option to apply the abatement to each and every contract independently? OR If we opt once for a contract , we have to follow it whole of the year, to rest of the contracts. I could find no such compulsion in the Notification. Notification No.01/2006-ST,