Exemption from Service Tax

[CA AJAY KUMAR AGRAWAL]

Kindly share your views on the following:-

In the year, where value of Taxable Services exceeds ₹ 9 Lacs he is required to get registration & pay Service Tax when Gross Receipts ₹ 10 Lacs. My question is once he so starts paying Service Tax & in future his Gross receipts become much less (may be it remains low for 1 or 2 years or for long period) whether he has to regularly pay Service Tax or he will be again exempted when Gross Receipt is less than ₹ 10 Lacs?

[DR.MARIAPPAN GOVINDARAJAN]

It will be again got exempted. But GST is going to be introduced. Therefore, in my opinion, this question would not arise.

[CA AJAY KUMAR AGRAWAL]

Thank you sir very much. But considering GST is not there, what would have been the position?

[Rajagopalan Ranganathan]

Sir,

If your turnover falls below the limit of 10 lakhs in any financial year then during next financial year you need not pay any service tax. However unless the registration taken by you is surrendered by you, you have to file Nil return on half yearly basis till your registration is cancelled by the Department..

If you have taken registration since you have reached turnover of 9 lakhs and during that financial year your turnover did not exceed ₹ 10 lakhs limit you need not pay any service tax during the subsequent financial year. If you exceeded the ₹ 10 lakhs limit you have to start paying service tax not only in the financial in which you have exceeded the limit but also in the financial year following the the year in which you have stated to pay service tax.

[DR.MARIAPPAN GOVINDARAJAN]

If GST is not introduced if the threshold limit is down exemption may be available. If the assessee wants to pay tax he may pay the tax, despite the exemption.

[Rajagopalan Ranganathan]

Sir,

What I have stated in my reply date 27.9.2016 may change under GST Law and the rules to be made thereunder. We have to wait for the event to occur. What I have state is pertinent to the law prevailing as on today.

[YAGAY andSUN]

If there is no service tax applicable, then, it is settled legal position that even filing of Nil returns are not required. Rule 7 c.

[Ganeshan Kalyani]

Sir, service tax is applicable if turnover crosses the SSI limit. If registration is taken after crossing the limit of ₹ 9 lacs then payment of service tax is required once turnover crosses ₹ 10Lacs.

If in subsequent year, the turnover does not crosses the limit till 11 months of the year and if in the 12th month the service provided exceeds the limit then service tax would be liable to pay for entire amount from the beginning of the financial year with interest.

[Ganeshan Kalyani]

In GST the threshold limit proposed is ₹ 20 Lacs and for Northern East states ₹ 10 Lacs.

[Venkataprasad Pasupuleti]

I agree with the above views expressed

AI Summary

Service tax threshold: falling below it restores exemption, but registration and nil return obligations may continue. Exemption from service tax resumes when gross receipts fall below the threshold after previously exceeding it, but registration remains effective until formally surrendered and filing obligations (including possible nil returns) may continue; late-year crossings of the threshold can create liability for the entire financial year with potential interest, and pending tax reform may change rules.