Small Service Providers - Value Based Exemption upto 10 lakhs - Service Tax Practice Manual / Ready Reckoner - Service Tax

Small Service Providers - Value Based Exemption A. Exemption amount- Who Can Avail the Exemption? B. Turnover of 10 lakh C. Who Can Not avail the Exemption D. Special procedure for goods transport operator: E. Conditions for availing exemption F. Consequences of breach of conditions G. Registration and Exemption H. Services provided under own brand name and brand name of others ==================== Notification no. 33/2012 dated 20-6-2012 w.e.f. 1-7-2012 [earlier Notification No. 6/2005 dated 1-3-2005 ] provides an Exemption on the basis of value of Taxable Services provided in the previous year. ==================== A. Exemption amount- Who Can Avail the Exemption Small Service provider can claim exemption up to Rs. Ten lakh in a financial year. Any person, irrespective of its nature of services, can avail exemption under this notification. It is quite possible that a service provider may start providing a service in middle of the year; in this case he is entitled to avail full exemption for rest of the financial year. The exemption limit does not get proportionately reduced. ==================== B. Turnover of Rs. 10 lakh Before 1.4.2012 For the purpose of notification no. 6/2005 dated 1-3-2005 , turnover of 10 lakhs is required to be calculated for two different purposes in different manner:- Eligibility is decided on the basis of turnover of previous year. For this purpose one has to determine the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ten lakh rupees. [term one] However while calculating the exemption limit during the current year, he has to calculate aggregate value not exceeding ten lakh rupees. [term two] There is no explanation or clarification in the notification with respect to term one whereas explanation B of the notification prescribes how to calculate term two i.e. aggregate value not exceeding ten lakh rupees Therefore, before claiming exemption these two terms are necessarily must be understood. After 1.4.2012 The anomaly in respect of calculation of turnover has been removed as substitution of meaning of the term aggregate value not exceeding ten lakh rupees with the term aggregate value , now therefore, aggregate value means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year but does not include value charged in invoices issued towards such services which are exempt from whole of service tax leviable thereon under section 66B of the said Finance Act under any other notification. See: Notification no. 33/2012 dated 20-6-2012 w.e.f. 1-7-2012 [earlier Notification No. 6/2005 dated 1-3-2005 ] ==================== C Who Can not avail the Exemption The following persons can not avail the exemption: - User of brand name or trade name of other - Where he is the receiver of Services, liable to pay tax on reverse charge basis u/s 68(2). Brand name or Trade name means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which is used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any indication of the identity of that person. ==================== D. Special procedure for goods transport operator: Paragraph 3 of the notification prescribes that where recipient of services is liable to pay service tax, the same shall be deducted from the turnover of the goods transport agency. ==================== E. Conditions for availing exemption Paragraph 2 of the notification prescribes certain conditions which need to be taken into account before availing exemption. These conditions are as under: (i) the provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him and such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year; (ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on any input services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after referred to as the said rules), used for providing the said taxable service, for which exemption from payment of service tax under this notification is availed of; (iii) the provider of taxable service shall not avail the CENVAT credit under rule 3 of the said rules, on capital goods received, during the period in which the service provider avails exemption from payment of service tax under this notification; (iv) the provider of taxable service shall avail the CENVAT credit only on such inputs or input services received, on or after the date on which the service provider starts paying service tax, and used for the provision of taxable services for which service tax is payable; (v) the provider of taxable service who starts availing exemption under this notification shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing exemption under this notification; (vi) the balance of CENVAT credit lying unutilised in the account of the taxable service provider after deducting the amount referred to in sub-paragraph (v), if any, shall not be utilised in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse on the day such service provider starts availing the exemption under this notification; (vii) where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services; and (viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ten lakh rupees in the preceding financial year. ==================== F. Consequences of breach of conditions The exemption is available only if the person availing his exemption under this notification fulfils the conditions prescribed therein. If he fails to fulfil any condition during the period of exemption, he would be liable to pay entire service tax on which he has availed the exemption. For an example, first condition is that, the provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him and such option , once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year . Therefore, a person availing the exemption under this notification cannot withdraw in the middle of the year. If he withdraws in the middle of the year before reaching the maximum amount exempted under this notification, he shall be liable to pay service tax on the entire exemption availed by him before such withdrawal, with interest and penalty. ==================== G. Registration and Exemption Any person who is unregistered or a new service provider Any provider of taxable service whose aggregate value of taxable service in a financial year exceeds nine lakh rupees shall make an application to the jurisdictional Superintendent of Central Excise in such form as may be specified, by notification, by the Board, for registration within a period of thirty days of exceeding the aggregate value of taxable service of nine lakh rupees Rule 3 of Service Tax (Registration of Special Category of Persons) Rules, 2005 Already Registered There is no provision in the Service Tax or Rule made there under which specifies the procedure of surrender of registration certificate by a person availing value base exemption. However, practically, a person who is availing value base exemption and not expecting to cross to limit of aggregate value of taxable services in a financial year from Rs. 9 lakh, may choose to surrender the registration certificate. ==================== H. Services provided under own brand name and brand name of others In excise an SSI unit can avail the exemption on basis of value of clearance and the unit availing the exemption is allowed to avail the exemption in relation to goods manufactured under own brand name and pay excise duty on goods bearing the brand name of others. Here a question arise that whether on the same analogy, whether a service provider can avail the exemption under this notification as well as can pay service tax on services bearing the brand name of other? After comparing the words and expressions used in the SSI exemption notification 8/2003 CE dated 1-3-2003 and service tax exemption Notification no. 33/2012 dated 20-6-2012 w.e.f. 1-7-2012 [earlier Notification No. 6/2005 dated 1-3-2005 ], it may be concluded that simultaneous facilities of exemption notification on the basis of value of taxable services provided bearing the own brand name and payment of service tax on the services bearing the brand name of other is available. Person will be entitled to the benefit of the exemption in respect of the other taxable services provided without using a brand name or a trade name of another person. However, the value of taxable services bearing the brand name of other is not excludible for calculation of limits of Rs. 10 lakh for the previous year or for the current year. ====================