CA Kamlesh Singh Chauhan
SSI exemption limit along with date of applicability and relevant Notification number:
|Period||Exemption limit (Rs.)||Relevant Notification of Service Tax||Effective date|
|01-07-1994 to 31-03-2005||Nil||N.A.||N.A.|
|01-04-2005 to 31-03-2007||4 lakhs||6/2005* dt. 01-03-2005||01-04-2005|
|01-04-2007 to 31-03-2008||8 lakhs||* as amended by 4/2007 dt. 01-03-2007||01-04-2007|
|01-04-2008 to 30-06-2012||10 lakhs||* as amended by 8/2008 dt. 01.03.2008||01-04-2008|
|01-07-2012 onwards||10 lakhs||33/2012 dt. 20-06-2012||01-07-2012|
Since the basic unit of the tax system is the Service Provider, it is only his transactions which have to be analyzed for the purpose of SSI Exemption benefit. If a service provider is also paying duty under reverse charge or partial reverse charge, it will not be included or considered for the purpose of arriving at aggregate value exempted under notification number 33/2012. Government of India has superseded the notification No. 6/2005-Service Tax, dated 01-03-2005 through notification No. 33/2012-Service Tax, dated 20-06-2012 and framed new conditions for threshold (SSI) exemption, which are discussed below;
What is Exempted: Central Government exempts taxable services of aggregate value not exceeding ten lakh rupees in any financial year from the whole of the service tax leviable thereon under section 66B of the said Finance Act except the following services described below;
(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; Here “brand name” or “trade name” means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or invented word or writing which is used in relation to such specified services for the purpose of indicating, or so as to indicate a connection in the course of trade between such specified services and some person using such name or mark with or without any indication of the identity of that person, OR
(ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified in section 68(2) of the said Finance Act read with Service Tax Rules,1994 [i.e. Complete/partial reverse charge (except complete reverse charge in case of GTA service, which is excluded by this notification itself)]. Section 68(2) Notwithstanding anything contained in sub-section (1), in respect of such taxable service as may be notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
This notification used two terminologies in defining the scope of threshold exemption; first is taxable services, and second is aggregate value. Taxable services are defined in section 66B, which is as hereunder;
Charging Section 66B: There shall be levied a tax (hereinafter referred as the service tax) at the rate of twelve percent, on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed. Section 65B(52): Taxable territory means the territory to which the provisions of this chapter apply. Section 64(1): This Chapter extends to the whole of India except the State of Jammu and Kashmir. Also read Rule 3: Place of provision (of service) generally: The place of provision of a service shall be the location of the recipient of service…..it means in case of export of service, the place of provision of service would be out of taxable territory.
What can be inferred by the charging section ‘66B’ read with rule 3 of place of provision of services rules, 2012 (as notified vide Notification No. 28/12 – Service Tax dt. 20-06-2012) that service provided out of taxable territory is not a taxable service. In the definition of ‘aggregate value’ also, the words used are sum total of taxable service, which is evident of abovementioned concept that quantum of export of service is out of ambit of aggregate value for the purpose of calculating threshold exemption limit. Further, services included in the negative list under section 66D are not taxable at all and therefore kept out of ambit of aggregate value for the purpose of calculating threshold exemption limit. Now, we have to find out what is included in aggregate value for this purpose.
“Aggregate value” [as defined in this notification itself] means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year but does not include value charged in invoices issued towards such services which are exempt from whole of service tax leviable thereon under section 66B of the said Finance Act under any other notification.”
From this definition, following aspects emerges;
(i) “Aggregate value” means the sum total of value of taxable services……. but does not include…… which are exempt from whole of service tax leviable thereon under section 66B of the said Finance Act under any other notification.” SSI exemption is available only to the Provider of the service and not to the Receiver of the service and therefore, while calculating the aggregate value of Rs. 10 Lakhs the sum total of value of taxable services charged by the provider in the first consecutive invoices issued or required to be issued has to be considered.
The value of the following services need not be considered in aggregate value:
(a) Value of services in the Negative List,
(b) Value of services under Exemption Notification 33/2012 or any other notification which provides for full exemption from service tax.
The value of the following services will be considered in aggregate value:
Complete reverse charge and partial reverse charge has to be included in the aggregate value except complete reverse charge in case of GTA service as clarified in the notification number 33/2012 itself. “For the purposes of determining aggregate value not exceeding ten lakh rupees, to avail exemption under this notification, in relation to taxable service provided by a goods transport agency, the payment received towards the gross amount charged by such goods transport agency under section 67 of the said Finance Act for which the person liable for paying service tax is as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules, 1994, shall not be taken into account.”
(ii) It is pertinent to mention here that exemption and abatement are two different things which are not comparable and therefore non inclusion of fully exempted services in the aggregate value does not entitle abatements to be treated at par and these will form part of aggregate value.
(iii) “Aggregate value” means the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year…..” emphasizes first consecutive invoices issued during a financial year, and which includes following two situations;
(a) Where service was taxable from the commencement of financial year i.e. taxable earlier, aggregate value for this exemption will include first invoice from the commencement of financial year, while
(b) Where service became taxable from 1st July, 2012 by the new definition of service then aggregate value for this exemption will be computed from 1st July, 2012 as invoices issued for non taxable service in the financial year cannot be included in the aggregate value. It is clear from the words used in the definition of aggregate value…..” the sum total of value of taxable services charged in the first consecutive invoices issued during a financial year…..”
(i) Proprietorship is trade / business name of individual so if a person is rendering taxable services in his own name, various trade / business name then they are liable to be clubbed to compute threshold exemption limit of Rs. 10 lakhs under this notification.
(ii) If the entity is an incorporated body, it has separate legal entity and clubbing of taxable turnover cannot be done merely on the ground of mutuality of some common directors/managers etc. unless there is material mutuality of interests or flow back of funds.
• COMMISSIONER OF C. EX. & CUS., Versus CATALCO CHEMICALS (P) LTD. 2012 (277) E.L.T. 56 (Guj.) – Merely because a company being subsidiary of another, clearances by both companies cannot be clubbed together for ascertaining SSI limits – Department to establish mutuality of interests or flow back of funds.
• SPICK-N-SPAN STEEL WOOLS PVT. LTD. Versus COMMISSIONER OF C. EX., NAGPUR 2011 (274) E.L.T. 568 (Tri. – Mumbai) Private companies and partnership firms are independent entities and merely because of some mutuality of interest in the business of each other, their turnover (value of clearances) cannot be clubbed for determining their eligibility to SSI.
(iii) If some partners are common in various partnership firms or Karta of HUF is also the partner in the partnership firm, their taxable turnover cannot be clubbed unless there is material mutuality of interests or flow back of funds.
(iv) If there is change in ownership and thereby change in the constitution of the entity but factory and premise are same, clubbing will be done. Further, if more than one manufacturer is clearing goods or the service provider is rendering service from common factory/premise and also using of common facilities/infrastructure directly required for such purpose, clubbing will be done (except in the cases of use of remote/immaterial services).
• APPALO THREADS Versus COMMISSIONER OF C. EX., COIMBATORE 2011 (267) E.L.T. 371 (Tri. – Chennai) Clubbing of clearances of more than one manufacturer from one factory/premise. Requirement under impugned notification that value of clearances of specified goods from any one factory premises required to be aggregated even if clearances made by or on behalf of more than one manufacturer –HELD: Clubbing of clearances was proper.
• COMMISSIONER OF C. EX., AHMEDABAD Versus S.C. PATEL 2011 (264) E.L.T. 414 (Tri. – Ahmd.) Units having proximity, common passage and storage of raw materials, and inter-relationships between their partners – No evidence of flow back between units, and major part of interest free loan, taken on principal to principal basis, paid back – Both units having separate income/sales tax, import and export code numbers, bank accounts etc. – HELD : Clearances of such units cannot be clubbed.
(v) Where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services (para-vi of T&C in the notification).
Whether making claim for the exemption is mandatory or procedural lapse of not claiming it will not debar its entitlement: Jay Travels vs. Commissioner of Service Tax Order No. A/306/W ZB/AHD OF 2012: The benefit of notification is statutory and should have been automatically be given to the assessee even if such claim was not seeked by him on the principles of natural justice.
Whether a service provider is also discharging ST liability under reverse/ partial reverse charge, can avail benefit under this notification: This notification, 33/2012 – Service Tax, does not impose any restriction on availing threshold exemption subject to fulfillment of all others T&C framed in this regard.
Thus, in a nutshell it may be said that in the case of a Provider of Service (except reverse charge mechanism applied in case of GTA) full value of taxable services provided must be considered for calculating the limit of Rs. 10 Lakhs irrespective of the fact as to who pays the service tax and up to what extent. Similarly in case of a Service Receiver, the full value of services, on which he is required to discharge service tax liability under reverse charge, whether fully or partially, shall be excluded for calculating the limit of Rs. 10 Lakhs
Terms and Conditions for availment of threshold exemption as per notification number 33/2012 – Service Tax:
The exemption contained in this notification shall apply subject to the following conditions, namely:-
(i) the provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him and such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year;
(ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on any input services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after referred to as the said rules), used for providing the said taxable service, for which exemption from payment of service tax under this notification is availed of;
(iii) the provider of taxable service shall not avail the CENVAT credit under rule 3 of the said rules, on capital goods received, during the period in which the service provider avails exemption from payment of service tax under this notification;
(iv) the provider of taxable service shall avail the CENVAT credit only on such inputs or input services received, on or after the date on which the service provider starts paying service tax, and used for the provision of taxable services for which service tax is payable;
(v) the provider of taxable service who starts availing exemption under this notification shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing exemption under this notification [i.e. either reversal of CENVAT credit from the balance lying unutilized (refer para –vi- below or pay cash differential];
(vi) the balance of CENVAT credit lying unutilized in the account of the taxable service provider after deducting the amount referred to in sub-paragraph (v), if any, shall not be utilized in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse on the day such service provider starts availing the exemption under this notification;
(vii) where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services (clubbing concept); and
(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ten lakh rupees in the preceding financial year.
CA Kamlesh Singh Chauhan
FCA, LL B, DISA(ICA)
Mob: +91 9839 094 094
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