SSI Exemption

[ROHAN THAKKAR]

Sir, 

 

The person who provides foreign exchange facilities are required to pay service tax at the rates mentioned below.

 

Rule 6of service tax rule 1994.

(7B). The person liable to pay service tax in relation to purchase or sale of foreign currency, including money changing, provided by a foreign exchange broker, including an authorised dealer in foreign exchange or an authorized money changer, referred to in sub-clauses (zm) and (zzk) of clause (105) of section 65 of the Act, shall have the option to pay an amount calculated ³³[at the following rate] towards discharge of his service tax liability instead of paying service tax at the rate specified in section 66 of Chapter V ³³[of the Act, namely:

          (a) 0.1 per cent. of the gross amount of currency exchanged for an amount upto rupees 100,000, subject to the minimum amount of rupees 25;  and

           (b) rupees 100 and 0.05 per cent. of the gross amount of currency exchanged for an amount of rupees exceeding rupees 100,000 and upto rupees 10,00,000; and

           (c) rupees 550 and 0.01 per cent. of the gross amount of currency exchanged for an amount of rupees exceeding 10,00,000, subject to maximum amount of rupees 5000:

          Provided that the person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year.

Alternatively, RBI reference rate may be arrived and value will be derived by making the difference between the sale price and RBI reference rate or between purchase price and RBI reference rate.

My query is:

How to calculate SSI exemption of Rs 10 lakhs as per  Notification No. 6/2005-ST, in case assessee opts for making payment as per Rule 6(7B) of the service tax rule 1994.

AI Summary

Clarification on SSI Exemption Calculation: Rs 10 Lakh Limit Applies Before Service Tax Under Rule 6(7B) Becomes Payable. A query was raised regarding the calculation of the Small Scale Industries (SSI) exemption of Rs 10 lakhs under Notification No. 6/2005-ST, specifically when an assessee opts to pay service tax as per Rule 6(7B) of the Service Tax Rules, 1994. The rule provides an alternative method for calculating service tax on foreign exchange transactions. A response clarified that the Rs 10 lakh exemption pertains to the value of services provided. Once the cumulative service value exceeds this threshold within a financial year, the service tax becomes payable, necessitating the computation method outlined in the rule.