Availability of exemption

[MANOJ JAIN]

A person having income from commissions,(which is taxable under BAS),of Rs. 725000.00 in FY 06-07.Threshold exemption being Rs. 400000.00) In next FY i.e. 07-08, he earns a commission of Rs. 890000.00 (Threshold Exemption limit being 800000.00) In the next FY i.e. 08-09, he earns commision of Rs. 1950000.00 (Threshold exemption limit being Rs. 1000000.00) Can anybody give suggestion, what amount would be net taxable in each year? Can we claim exemption of Rs. 400000.00, 800000.00 and Rs. 1000000.00 as exemption in each respective year. I presume, it is available for all three years on the contention as under: Rs. 400000 exemption is available for Ist year. Rs. 800000 exemption available for 2nd year because income for previous year was less than Rs.800000.00. Rs. 1000000.00 exemption available for 3rd year because income for previous year was less than Rs. 1000000.00. I am not sure about my contentions.Can anybody will help me out. Manoj Jain

[madhavvan n]

the exemption limit as mentioned by you is one time it is not on yearly basis as per provisions of service tax and it is for all taxable services put together. hence you will be liable for service tax in fy 06-07 itself after availing the exemption limit of rs. 400000 and there after you will be liable for service tax on rs. 8.90 lacs in fy 07-08 and rs. 19.50 lacs in fy 08-09 this is unlike income tax where you can take benefit of income slabs on yearly basis

As per the provisions of notification no. 6/2005 regarding exemption to small service providers (SSP), eligibility to claim exemption is to be examined year to year basis, irrespective of the fact that you were paying service tax in the previous year or not. It appears that for each financial year mentioned with turnover of the current and previous year, it is clear that turnover of the previous year is not exceeding the maximum limit prescribed and therefore for each year you can claim exemption. But for the year 2009-10 you can not claim any exemption since your turnover of the previous year is exceeding 10,00,000.

[Mukesh Kumar]

I agree with the views expressed by Mr. Rama Krishna

AI Summary

Small service provider exemption: eligibility assessed annually based on previous year's turnover, influencing service-tax liability.
Eligibility for the Small Service Provider exemption is disputed: one view treats the exemption as a single aggregate threshold causing tax liability once crossed, while another view-based on the small provider exemption rules-states entitlement is assessed year by year and depends on whether the previous year's turnover falls below the prescribed threshold; if the previous year's turnover exceeds the threshold, exemption for the subsequent year is not available.