Service tax registration - exemption limit

[Guest]

Company A is in consultancy, covered under Management Consultancy Services.As 100% billing ( Total billing Rs. 25 lacs) is outside india, it is covered under Export of services and thus no service Tax. The query is that if it does Local billing of Rs. 6 lacs in a year, will it have to register and charge service tax ??

[Guest]

Export of service is not an exempted service and it is like a taxable service virtually zero-rated. Thus in my view, the value of export of service should form part of ‘value of taxable service’ for the purpose of calculating the exemption limit for small service providers. On the other hand, where a service provider renders some service (like Insurance agency etc) where the liability to pay tax is shifted to the service receiver as per provisions, the value of the service will not form part of ‘value of taxable service’ for calculating exemption limit. Thus, in the example quoted by you, the benefit of exemption on small service providers is not applicable as the aggregate value of service i.e. exports + local billing crosses the exemption limit and service tax is payable on local billing component.

AI Summary

Export of services treated as taxable value affects registration threshold; local taxable component becomes liable to service tax. Export of service is not an exempted service but is treated as a taxable, zero-rated service; therefore the value of taxable service for the small service provider exemption includes export receipts. The aggregate of exports and local billing must be compared with the exemption threshold, and where the total exceeds that threshold the provider must register and the local taxable component is liable to service tax. Services subject to reverse charge are excluded from this computation.