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Exemptions under Service Tax

Exemptions under Service Tax

Assessees required to pay service tax are often found to be enquiring regarding the availability of exemptions. With the movement towards GST in a few years time and revenue departments looking at ST as the cash cow thanks to the 55% + contribution of the GDP, the exemptions under service tax are not too many. However the nature of the levy itself and the fact that there could be instances where during the course of providing services, transfer of property in goods may take place, exemptions have been provided for value of materials sold from payment of service tax. Apart from this, specific exclusions have been made for specified activities within the individual categories liable to tax as taxable services.

Service tax provides for an exemption to small service providers who provide taxable services of a value not exceeding the specified limit. The specified limit is now Rs. 10 lakhs. In other words where the value of taxable services provided do not exceed Rs. 10 lakhs in the previous financial year, the concerned service provider would not be required to pay service tax upto receipts of Rs. 10 lakhs in the current financial year. The exemption is through notification 6/2005 ST dated 01.03.05 as amended from time to time. The service provider should however satisfy certain conditions in order to avail the benefit of this exemption. The conditions to be noted here are as follows –

·         Taxable services provided by a person under a brand name or a trade name (whether registered or not) of another person would NOT be eligible for this exemption

·          A receiver of services who is liable to pay service tax on the services he has received by virtue of section 68(2) cannot avail the benefit of this exemption with regard to such payments. More commonly this is relevant for recepient of GTA Services or in case of import of services where no exemption is entitled.

·         Once an option is exercised in regard to this exemption during a financial year, it cannot be changed in the same financial year. [ This however does not mean that the claiming of the exemption makes it compulosory to claimfor the whole year. In between even without reaching Rs.10 lakhs the option to pay canbe made.]

·         No cenvat credit can be availed on inputs or input services used in providing such output service for which exemption is being claimed.

·         Cenvat credit cannot be availed on capital goods received in the premises of provider of such service during the exemption period.

·         The service provider shall pay an amount equivalent to the cenvat credit taken by him in respect of inputs lying in stock or in process on the date of availment of exemption. After paying such an amount, if there is any balance of cenvat credit remaining unutilized, such balance would lapse.

·         The exemption shall apply in respect of the aggregate value of all taxable services provided by the service provider (even if from more than one premises) and not individually.

·         Exempted services shall be outside the purview of the exemption of this notification. In other words, the value for ascertaining the limit of Rs. 10 Lakhswould be that of taxable services alone on which service tax is payable.

·         The aggregate value of such services provided in the preceding financial year should not exceed the aforesaid exemption limit.

Exemption on Goods Transport Agency service

Notification 13/2008 ST dated 01.03.2008 provides an exemption of 75% of the gross amount charged towards taxable service in relation to transport of goods by road. In other words, service tax is to be charged on 25% of the gross amount charged towards freight.

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