Exemption clarification

[pramod agrawal]

If i want to avail the exemption under notification No 6/2005 dt 01.03.2005 modified by Finance Act, 2008 wef 01.04.2008 , what to do with regard to the invoices raised upto 31.03.2008 which has not been realised as on date.

[Surender Gupta]

It is common understanding that once you are availing exemption under notification no. 6/2005, you have to deposit the amount of service tax charged on the bills raised in the previous year but realized during the exemption period. However, I have a different view and accordingly you need not to pay service tax on such realization during the exemption period.

[Madhukar N Hiregange]

I presume that in the current year you have not reached the exemption limit of Rs. 8 lakhs and are nopt paying the ST. The eligibility limit of Rs. 10 Lakhs for the year 08-09 depends on the taxablke service provided. If you do not reach the same you would be eligible for the exemption in the next year. If already crossed I am of the opinion that the eligibility would remain the same. however the amount on which you have charged the ST in the current year which is recived in the next year would be liable for the payment of ST. I differ with the view of Mr. Gupta.

[Guest]

If you are taxable in the year 2007-08 and started charging tax on your bills, you are liable to pay tax on collections from 1.4.08, though you may fall within the threshold limit from 1.4.08. Thus, what is important in this case, if tax liability is already passed on, then the same should be deposited irrespective of the fact whether you are opting for exemption or not from 1.4.08.

AI Summary

Service tax exemption: collections on previously issued invoices can remain taxable if tax was charged earlier. Collections on invoices issued before the exemption period but realised during it may be taxable if tax was charged or the taxpayer was taxable earlier; while one view treats such realisations as exempt when opting for the service tax exemption, other views require deposit of tax on those receipts irrespective of subsequent exemption eligibility, distinguishing prospective threshold entitlement from ongoing liability on previously taxable bills.