Threshold Limit under Service Tax

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

My client was manufacturers of Control Panels and in addition to provide services to the clients. Now excise audit people called for 4 years of records which relates to 2014-15, 2015-16, 2016-17 & 2017-18. My client had been discharging the excise duty on monthly basis without any default. However, he has not charged service tax on the service charges he collected from the customers since the service tax turnover was not crossed the threshold limit of ₹ 10 Lakhs.

My query is that, whether the client did correct or he needs to discharge the tax on service charges irrespective of the turnover, since the client registered under Excise regime.

Thanks in Advance.

[KASTURI SETHI]

First of all, dive deep into notification no.33/12-ST as amended from time to time and examine whether your client qualify for the conditions laid down therein for availing threshold exemption limit of ₹ 10 lakhs. The following aspects are to be ascertained:

1. Examine the terms and conditions of the contract executed between the manufacturer and the buyer of control panels. Control panels are supplied to Electricity Board and Companies direct also. See whether there is any clause which may indicate that prices were inclusive of all taxes or service tax. If it is so, Service Tax was charged from the buyers.

2. Examine brand name issue.

3. Cenvat Credit issue.

4. Clubbing of turnover (taxable services) of all units through out India.

After examination of above aspects, you can arrive at correct and concrete decision. If there is still any doubt or confusion emerging from the scrutiny of docs/situation, you may further post your query here.

[Ganeshan Kalyani]

In my view, criteria for registration under Service tax need to be separately determined and should not be linked with Central Excise. Also, as said by Sri Kasturi Sir you need to scrutinize the points suggested in his reply.

AI Summary

Service tax threshold may exempt service charges if specified conditions satisfied; registration separate from excise regime. Whether manufacturer-provided services are subject to service tax depends on applicability of the threshold exemption and on separate service-tax registration requirements. To assess correctness of non charging, verify contract terms for tax-inclusive pricing or separate service components, classification issues such as brand or characterization, Cenvat credit consequences, and whether taxable-service turnover must be clubbed across units; registration under service tax is distinct from excise registration.