Service Tax Exemption to Small Service Providers

[KALPESH BHATT]

Dear All,

In FY 2014-15 Taxable value of service is less than ₹ 10 Lakhs and in FY 2015-16 it is ₹ 11.20 Lakhs. Hence in FY 2015-16 service tax is payable on ₹ 1.20 lakhs only. Is this correct?

Can you please provide relevant Sections/Rules and Notifications in relation to above.

I have received SCN stating that in F Y 2015-16 tax is payable on entire ₹ 11.20 Lakhs instead of ₹ 1.20 lakhs.

Also can you please explain how to reply online in respect this matter.

Thanking You,

Kalpesh

[KASTURI SETHI]

Sh.Kalpesh Bhatt Ji,

Reply is as under :-

1. Service Tax is payable only on taxable value of ₹ 1.20 lakhs and NOT on the whole amount of ₹ 11.20 lakhs because you are entitled to threshold exemption limit of Rs. Ten lakhs in the year 15-16 also.

Go through relevant clause of Notification No.33/12-ST dated 20.6.12 which is as follows:-

Provided that nothing contained in this notification shall apply to,-

(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ten lakh rupees in the preceding financial year.

The word, 'preceding' makes it crystal clear that you are entitled to small scale exemption of ₹ 10 lakhs in 15-16. There is not even an iota of doubt about this entitlement.

2. There must be email ID of the SCN issuance authority in the SCN (at the top of SCN). You can email reply to the SCN citing the above clause.The word, 'preceding' should be emphasized.

I suggest that you must read the SCN word for word very carefully. In my view, the department cannot commit such mistake.

Anyhow, if your query is correct, ST is payable only on taxable value of ₹ 1.20 lakh and not on the value of ₹ 11.20 Lakhs.

[KALPESH BHATT]

Thank You So Much Sir.

Kalpesh

[KALPESH BHATT]

Hello Sir,

In SCN they stated that Income of ₹ 10 Lakhs has been suppressed deliberately and therefore tax is payable on it.

Can you guide on suitab;e reply?

[Ganeshan Kalyani]

The use of certain words by authority is to invite you to the dept to provide clarity. If regular words are used then one may not pay that much heed to it and may take it lightly. So, not to get panic.

AI Summary

Small service provider threshold exempts services if aggregate in preceding year below limit; tax limited to excess in current year. Service tax for a small service provider is determined by reference to the Small Service Provider Exemption: where the provider's aggregate taxable services in the preceding financial year did not exceed the statutory threshold, tax applies only to the excess in the current year, not the entire current-year receipts. A show-cause notice alleging suppression should be answered by citing the exemption's preceding-year test and using the SCN contact details to submit supporting records and rebuttal.