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that the person providing the service shall exercise such option for a financial year and such option shall not be withdrawn during the remaining part of that financial year.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

[Radha Arun]

The exemption of Rs 10 lakhs refers to value of service. When the cumulative value of the service in the financial year exceeds Rs 10 lakhs, the service tax will become payable. Then the issue of how to compute the tax, including the rule cited by you, comes into the picture.

AI Summary

SSI exemption: taxable once cumulative value of money changing services in a financial year exceeds the exemption threshold.
The SSI exemption is a cumulative financial year value of service threshold: service tax on money changing services becomes payable only when aggregate value in the financial year exceeds the exemption limit. After that point, the taxpayer may opt for the Rule 6(7B) presumptive scheme-a financial year election, irrevocable for that year-using tiered fixed amounts and percentages by slab, or alternatively compute taxable value using the RBI reference rate difference between sale/purchase price and the reference rate.