• Aug
  • 09
  • 2012

SSI Exemption under Service Tax

CA Kamlesh Singh Chauhan

SSI/ threshold Exemption under Notification No. 33/2012 – Service Tax Dt. 20/06/2012:

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 Government of India has superseded the notification No. 6/2005-Service Tax, dated 01-03-2005 through notification No. 33/2012-Service Tax, dated 20-06-2012 and framed new conditions for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…..”

Clubbing concept:

(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.

————————

Authored By

CA Kamlesh Singh Chauhan

FCA, LL B, DISA(ICA)

Mob: +91 9839 094 094

Email ID: ks_chauhans@yahoo.com


22 Responses to “SSI Exemption under Service Tax”

  1. MOHMADRAFI says:

    SIR,
    I AM UNDER 10 LAC IN A YEAR.
    I AM UNDER EXEMPTION FOR MY SERVICE.
    BUT MANY OF MY CLIENT ASK ME FOR ST NO.
    WHAT SECTION I HAVE TO MENTION IN MY INVOICE CLAIMING FOR THE ST EXEMPTION.

  2. VINAY G HEGDE says:

    Sir,

    Please clarify me whether commission received by multilevel marketing agent acting for a particualr Co (branded) is liable service tax. If liable for service tax can he avil SSI exemption of RS.10lakhs.

  3. viresh says:

    if person A (service provided Rs. 8 Lakhs) and person B (service provided Rs. 8 Lakhs) providing services from same premises, is SSI exemption under service tax available.

    thanks
    viresh shah

  4. Shilpa says:

    Sir,
    We are manufacturing excisable goods using imported capital goods, on which cenvat availed. By using the same capital goods we are providing aervices also. But not charging service tax as we thought to avail ssi exemption.
    Now my doubt is whether we are eligible for ssi exemtipn or not? Ours is pvt ltd company & taxable service is below 10L. How to consider the taxable aervice value to pay tax, if reaches 10L?
    Whether we have file returns though we comes under ssi exemtion?
    Pls reply…
    Urgent…

  5. SBAgarwala says:

    You are requested to clarify how to pay service tax taking abatement of 67% & SSI exemption
    My aggregate taxable service was 9 lac in 2010-11
    My aggregate taxable service was 25 lac in 2011-12

  6. Arun says:

    One of my client is providing services under erection and commissioning since many years from 2003-04 to 2009-10 and then as business is near closure he applied for surrender but service tax officials wanted financials for 2-3 previous years as the requirement.

    WE had submitted the same and as there is pending of registration cancallation continue to file NIL return. He had service provider receipt in the year 2011-12 for 2.5 lacs and in 2012-13 Rs.3.82 lacs.

    Now what he had to do about the service tax benefit of Rs.10 lacs could be availed or NIL return or Turnover data to be given in the return filed.

    Plz reply ..its urgent.

    Arun

  7. Ajay says:

    Dear All,

    We have dealership of one well known software company of india, We do sales, service, support of that particular brand, also earn money from AMC from customers for that software, call charges & other.

    so we want to know weather we must have to take service tax no, charged service tax in our all type of service invoices as we are selling one brand, give services for that brand?

    Thanking You,
    Ajay Bohra

  8. Roshan says:

    Hi we are a new formed pvt. ltd.company that has opened a salon/beauty parlour (December 2012) are we required to obtain service tax registration and collect service tax from clients initially ?

  9. Prakas says:

    if I have paid service tax of 2009-2010 & 2010-2011 & 2011-2012 but my turn over in 2011-2012 is 957000 .can I get exemption in 2012-2013 ? & when I pay service tax in this year. so pl answer

  10. CA. Kamlesh Singh Chauhan says:

    yes

  11. raju kumar says:

    during 2007-08 exemption limit was Rupees eight lakhs. and a person’ s turn over is nine lakhs only during 2007-08. from 01.04.2008 exemption limit enhanced to rupeees ten lakhs, then whether that person is again eligible for 10 lakhs exemption or he has to pay duty from first rupee.

  12. CA P K JHA says:

    Dear collegue

    i have a company(Builder) having 3 branches in 3 cities,and decentralised accounting system. Taken 3 registration for different cities. whether threshold exemption under service tax would apply seperestely for seperste branches. As i have read that each registration is to be treated as seperate assessee

    kindly make a clear comment

  13. Monil Shah says:

    My client charged service tax in 1st year of registration to get CENVAT though he didn’t cross limit. In second year can he avail the exemption limit? 

  14. CA Prakash Mishra says:

    Very good effort. Really useful 

  15. RAVI KIRAN R says:

    Dear Kamlesh Sir and Adamya Sir, thanks a lot for your valuable inputs.  As you rightly pointed out only services/transactions which are wholly exempt from the levy of service tax can be excluded from the “aggregare value”;  My arguement is, as Kamlesh Sir pointed out Abatement/exemption is a legal right and also value of goods traded is in the Negative list,  why the ad-hoc deduction allowed by way of an abatement towards value of goods [included in a composite & indivisible contract such as a Civil Works Contract] be treated as value of service (deemed) and included in “aggregate value” to compute 10 lacs limit..  Thank you

  16. Adamya says:

    any new company is exempted till 10 lac, however please evaluate that if you are expecting good amount of CENVAT credit during the initial period from purchase of capital good and other infrastructure, then opt to pay service tax

  17. Adamya says:

    it is an interesting discussion regarding aggregate value; however please consider the definition before concluding
     “aggregate value” 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.”

    the words used are -“such services which are exempt from whole of service tax leviable thereon”

  18. CA. Kamlesh Singh Chauhan says:

    Dear Nikhil Ji
    This exemption is available to every assessee subject to fulfilment of turnover criteria & other criteria discussed in the article.
    CA. K S Chauhan

  19. CA. Kamlesh Singh Chauhan says:

    Dear Ravi Kiran Ji,
    Pl. refer notification index at the site www. servicetax.gov.in/st-notfns-home.htm where nickname of notifications are given and for notification number 25 & 26, these are as hereunder;
    26/2012-ST dt. 20-06-2012 [Eng]: Abatement notification
    25/2012-ST dt. 20-06-2012 [Eng]: Mega exemption notification.
    Exemption is ex-gratia so available at the pleasure of government but abatement is legal necessity which can be in-forced in court of law. Further, value of sales of goods is now excluded by the definition of “service” itself. If you refer earlier notifications related to exemption, the language used therein is also of exemption to the extent…………………………….. CA. K S Chauhan

  20. RAVI KIRAN R says:

    Dear Sir,  this is a very comprehensive article on SSI exemption, which many commentaries have failed to do, as on date; I appreciate your effort.  However, I wanted one clarification in this regard,  you have stated that Abatement is different from exemption, but abatements are normally awarded only when the “goods” portion also is involved in a composite indivisible contract and abatement intends to provide an ad-hoc deduction for the value of such goods, when it is not readily ascertainable;  moreover Not. 26/2012 ST, which is the Abatement Notification is issued under same Section of Finance Act, 1994, under which other exemption notifications are issued; it also states that, a portion of the value of taxable services is “hereby exempted from the levy of service tax”, that being the case, why one has to include the abate value also in the aggregate value for the purpose of computation of SSI limit of Rs. 10 lacs?

  21. NITIN GAJJAR (ADVOCATE) says:

    THANKS FOR LATEST UPDATE. THIS IS MOST IMPORTANT FOR ME.
    THANKS & REGARDS
    NITIN P. GAJJAR
    (ADVOCATE)
    +91 94264 62859

  22. Nikhil says:

    Can a newly formed pvt ltd company claim SSI exemption immediately after getting registered with Service Tax dept. ?

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