Benefit of exemption limit - New services brought in service tax net w.e.f. 1.4.05

[Asked by Guest]

THRESHOLD EXEMPTION LIMIT OF RS. 4 LACS W.E.F. 1.4.2005. IF AT ALL BUSINESS IS NEWER ONE AND PREVIOUS YEAR TAXABLE RECEIPTS IS NIL WHETHER BENEFIT OF EXEMPTION LIMIT OF RS. 4 LACS WILL BE RECEIVED. SIMILAR IN THE CASE OF NEW SERVICES BROUGHT IN SERVICE TAX NET W.E.F. 1.4.2005 AND IN EARLIER YEAR THE RECEIPTS FROM THE SERVICES ARE LESS THAN RS. 4 LACS WHAT WILL BE THE SITUATION

[Surender Gupta]

You the business was not in existance, the turnover will be taken as NIL. Therefore even if there is a new business in the current year, you can avail the exemption to Rs. 4 lakhs as per notification no. 6/2005 dated 1/3/2005. This position will remain same even if you add a new service in the current year with other services. In that case, turnover of all the services new and old will be taken together for calculation of limit of Rs. 4 lakhs. In the like manner, if a service become taxable first time in the current year, situation would remain same and turnover of this service in the previous year would be taken.

[Brijesh Verma]

I Firmly agree to my learned brother Sri Surendra gupta Sahib. but the matter shall not be free from disputes and show cause notice are bound to be issued by the department.

AI Summary

Threshold exemption for service tax applies when prior-year receipts are nil; turnover of new and existing services is aggregated.
Availability of the threshold exemption depends on previous-year taxable receipts: if the business did not exist or had nil receipts in the prior year, the exemption may be claimed. When a new service is added, prior-year turnover of all services (new and old) is aggregated to determine exemption entitlement. If a service is taxable for the first time in the current year, its prior-year receipts are considered for the threshold calculation.