Exemption Limit

[DEEPAK SHARMA]

Is 10 Lakh exemption limit for service provider is available every f. year

[A Wilson]

Dear Sir,

1. Service tax exemption limit is available based on the aggregate value of Preceding Financial year Taxable Services.
2. If the previous Financial year taxable services exceeds Rs.10 Lacs, you should collect the service tax continuously in the current financial year also.

Thanks & Regards,

A.Wilson

[dilip joshi]

For availing exemption there are two conditions. In a year where value of taxable service from all sources remained within exemption limit you have not to pay service tax.  If you feel it is likely to be exceeded after 9 lakhs you must start all procedure to obtain registration and filing ST-3 etc. Once you cross this limit the next year you will loose the benefit of exemption, you will have to continue to pay service tax. however for certain reasons while you pay service tax during the said year, your income is reduced to below Rs.10 lakhs, then you will be eligible for exemption in next financial year. this can be explained as under:- 

2010-11 first year business reached to Rs.11 lakhs you will have to pay ST on one lakh,

2011-12 you wil have to pay tax on  entire taxable value from Re.1 (turnover reached to Rs.8 lakhs)

2012-13 you will be eligible for exemption since during preceding year you were upto Rs.8 lakhs

AI Summary

Service tax exemption rule: entitlement hinges on preceding financial year aggregate and triggers registration and continuous collection.
Exemption depends on the aggregate value of taxable services in the preceding financial year: if the preceding year exceeds the 10 lakh exemption, service tax must be collected in the current year; if the preceding year remains within the limit, no service tax is payable. Anticipated breaches require prior registration and compliance, and crossing the threshold causes loss of exemption for the following year; if the preceding year's taxable services fall below the limit, exemption is restored for the next year.