Small Service providers are exempted from payment of service tax up to ₹ 10,00,000/-. Is they are really exempted?

[SAKTHIVEL PONNUSWAMY]

Interestingly in recent past many of the services are pushed under notification 30/2012 dated 26-12-2012 for reverse charge mechanism. By doing so Government is achieving the following:-

1. Collection of revenue is easy
2. One side can announance exemption from service tax up to ₹ 10,00,000/- by saying small service providers and
3. Other side it can collect revenue on the same by inserting the provisions stating that nothing contained in this notification shall apply to, such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules,1994.Which means payable under reverse charge mechanism.

Presently the following are the services covered under both “ under notification No.33/2012” i.e exempted from service tax up to ₹ 10,00,000/- and taxable under “notification No.30/2012” i.e covered under reverse charge mechanism.

Sl.No	Description of a service	Percentage of service tax payable by the person providing service	Percentage of service tax payable by any person liable for paying service tax other than the service provider]
1	in respect of services provided or agreed to be provided by an insurance agent to any person carrying on insurance business	Nil	100%
2	in respect of services provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non-banking financial company	Nil	100%
3	in respect of services provided or agreed to be provided by a mutual fund agent or distributor, to a mutual fund or asset management company	Nil	100%
4	in respect of service provided or agreed to be provided by a selling or marketing agent of lottery tickets to a lottery distributor or selling agent	Nil	100%
5	in respect of services provided or agreed to be provided by a goods transport agency in respect of transportation of goods by road	Nil	100%
6	in respect of services provided or agreed to be provided by way of sponsorship	Nil	100%
7	in respect of services provided or agreed to be provided by an arbitral tribunal	Nil	100%
8	in respect of services provided or agreed to be provided by individual advocate or a firm of advocates by way of legal services	Nil	100%
9	in respect of services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate]	Nil	100%
10	in respect of services provided or agreed to be provided by Government or local authority by way of support services excluding,- (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994	Nil	100%
11	(a) in respect of services provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers on abated value to any person who is not engaged in the similar line of business	Nil	100 %
12	in respect of services provided or agreed to be provided by way of supply of manpower for any purpose [or security services]	Nil	100%
13	in respect of any taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory	Nil	100%
14	in respect of any service provided or agreed to be provided by a person involving an aggregator in any manner	Nil	100%

 

Some of the cases it may happen that both service receiver and service provider are covered under notification 33/2012 , that is both of their turnover are less than ₹ 10,00,000/-. In this case the service receiver has to pay service tax on the service provider service even though his taxable service is less than the exemption limit.

In this case small service provider is getting additional burden under this notification instead of getting exemption from payment of service tax. If this is the case how the notification says the small service providers are getting exemption under this notification?

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Thanks and Regards,

SAKTHIVEL PONNUSWAMY M.Com, ACA

68, Green Garden, Avalapalli Road, Hosur, Tamil Nadu - 635109

Mobile: +91-9600242441

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Discussions to this article

[LALIT MUNOYAT]

The issue is plain and simple. SSI exemption up to Rs. 10 Lakhs of turnover is available only to service providers and not to service receivers. In case of RCM, the receiver is supposed to pay service tax on full amount of services received without any floor limits. In order to obviate the problems of small service receivers, being business entities, it has been provided that in some such cases no service tax will be payable by the service receiver if his turnover in the preceding year is less than ₹ 10 Lakhs.

[SAKTHIVEL PONNUSWAMY]

Dear sir,

Could you please elaborate your views that " it has been provided that in some such cases no service tax will be payable by the service receiver if his turnover in the preceding year is less than ₹ 10 Lakhs"?.

I understood that service provider is exempted if his turnover is less than ₹ 10 Lacs. Is Service receiver also exempted?

Kindly give your thoughts.