Payment of Service tax exemption when taxable service turnover is less than 10 lakhs

[RameshBabu Kari]

Please clarify the payment of service tax when turnover of taxable services is less than 10 lakhs.

[Rajagopalan Ranganathan]

Sir,

If your turnover is less than ₹ 10 lakhs during previous financial year you liability is nil during current year vide Notification No. 33/2012-ST dated 20.6.2012.

[RameshBabu Kari]

Namasthe Mr.Rajagopalan Ranganathan, Thank you very much for the reply given.

I have found one article from business standard, which is as below:

“So, assuming the aggregate value of your or your firm's services is ₹ 11 lakh for 2014-15, you have to pay service since the threshold value of₹ 10 lakh has been exceeded. If the value of services for 2015-16 crosses Rs eight lakh, you still have to pay service tax, since the aggregate value of service is calculated on the previous year. Then if in 2016-17, the aggregate value of service comes to Rs seven lakh, then you have the option of not paying service tax, because in the previous year (2015-16), the threshold was less than ₹ 10 lakh (Rs 8 lakh in this case). But if in 2016-17, the aggregate value of service exceeds ₹ 10 lakh, then you will have to pay service tax.”

[KASTURI SETHI]

Dear Querist,

First of all forget brand name. Here we are talking about unbranded service being provided.

Suppose your aggregate turnover of all taxable services remained ₹ 11 lakhs in the year 2014-15, you paid Service Tax on value of Rs.one lakh only. In 2015-16 you were not eligible for small scale exemption. ST had to be paid from the very start in 2015-16. In case your aggregate turn over remained ₹ 9,99,999/- (i.e. below ten lakhs) in the year 2015-16, you were again entitled to exemption of ₹ 10 lakhs in 2016-17 but Service Tax registration will be kept inasmuch as for condition for registration turnover is ₹ 9 lakhs in a financial year. Pl. note the words, "any financial year" in first para of Notification No.33/12-ST and "in the preceding year" in para no. 2(vii).

Also the definition of "turnover" has to be considered while arriving at threshold exemption limit.

 

[Himansu Sekhar]

In the previous year if the turnover from one or more premises or services is less than 10 lakh, then exemption is eligible in the current year. If in one year it crosses 10 lakh, then in the succeeding year exemption from paying tax will not be applicable.

[Rajagopalan Ranganathan]

Sir,

Mr. Kasturi Sethi has clarified you query. I endorse the same. I have not come across any branded service or unbranded service in service tax field. In my opinion what ever may be the nature of the service provided, if the turnover is less than 10 lakhs during previous financial year you need not pay any service tax during the current year.

[KASTURI SETHI]

Circular No. 202/12/2016-S.T., dated 9-11-2016. S.No.35.	Most of the online services are branded services. Whether small scale exemption would be available to the said service providers?	Small scale exemption is not applicable to taxable services provided by a person under a brand name or trade name, whether registered or not, of another person. [notification No. 33/2012-ST refers]
		[Brand name or trade name has been defined in the said notification to mean a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as an invented word or writing, or a symbol, monogram, logo, label, signature, which is used for the purpose of indicating, or so as to indicate a connection, in the course of trade, between a service and some person using the name or mark with or without any indication of the identity of that person.]

[KASTURI SETHI]

2015 (40) S.T.R. 336 (Tri. - Del.) = 2015 (9) TMI 310 - CESTAT ALLAHABADISHWAR CONSULTANT Versus COMMISSIONER OF CENTRAL EXCISE, KANPUR

[Ganeshan Kalyani]

I agree with the views of the expert collegue. In order to avail small scale exemption you will have to maintain proper accounts to substantiate your stand in case of audit. In the year in which service tax is not paid, service tax NIL is anyway need to be filed.

[Himansu Sekhar]

The branded service is not eligible for small scale exemption. For example if somebody provides coaching in the brand name of fiitjee,akash etc. They will not get the exemption

AI Summary

Small-scale exemption for service tax applies when previous year's taxable turnover falls below the prescribed threshold, branded services excluded. Small-scale exemption applies when aggregate taxable service turnover in the preceding financial year is below the prescribed threshold, yielding nil liability in the current year; branded or trade-name services are excluded. Registration may still be required where registration turnover conditions are met. Providers should maintain records to substantiate turnover and file nil returns when no tax is payable.