Service Tax Exemption and Related Provisions in brief

1. What are the conditions of exemption to small scale service providers?

Taxable services provided by the small scale service provider were exempted from whole of service tax leviable there-on upto the aggregate taxable value Rs.4 lakhs in any financial year of vide Notification No.06/2005-ST dated 01.03.2005 (effective from 01.04.2005). The exemption limit of aggregate taxable was enhanced to Rs.8 lakhs vide Notification No.4/2007-ST dated 01.03.2007 (effective from 01.04.2007) and the same has been further enhanced to Rs.10 lakhs vide Notification No.8/ 2008-ST dated 01.03.2008 (effective from 01.04.2008).

(i) Above exemption is not admissible to :-

(a) taxable service provided by a person under a brand name or trade name, whether registered or not, of another person or

(b) such value of taxable services in respect of which service tax shall be paid by recipient of service under section 68 (2) of Finance Act read with Service Tax Rules, 1994.

(ii) Above exemption is admissible subject to following conditions:-

(a) taxable service provider has the option not to avail the said exemption and pay service tax on the taxable service and such option are exercised in a financial year shall not be withdrawn during the remaining part of such financial year ;

(b) the provider of taxable service shall not avail Cenvat credit of service tax paid on any input used for providing taxable service on which exemption of small scale is availed.

(c) The provider of taxable service shall not avail Cenvat credit under Rule 3 of the Cenvat Credit Rules 2004, during the period in which the service provider avail small scale exemption.

(d) The provider taxable service shall avail 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 provision of taxable services on which service tax is payable.

(e) The provider of taxable service 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 he starts availing exemption under this notification.

(f) The balance CENVAT Credit lying unutilized if any after the adjustment of credit under

(e) above, shall lapse on the day such service provider starts availing the exemption under this notification.

(g) This notification shall apply to the aggregate value of one or more taxable services provided from one or more premises and not separately for each premises or each service.

(h) The aggregate value of taxable services rendered by a provider of such service from one or more premises does not exceed exemption limit fixed (i.e. Rs.Ten lakhs) in the proceeding financial year.

2 Whether Gross Value of taxable services on which recipient has paid service tax as specified under Section 67(2) of the Finance Act, 1994 read with Service Tax Rules 1994, charged by goods Transport Agency shall be counted for determining aggregate value of small scale exemption ?

No. The Gross amount charged by Goods Transport Agency under Section 67 ibid to the recipient of service shall not to be taken into account for determining the aggregate taxable value under the small scale exemption.

3 What is the meaning of ?brand name or ?Trade name in Para 8(i) (a) above?

A “brand name” or “trade name” means brand name or trade name, whether registered or not i.e. to say, a name or a mark, such as symbol, monogram, logo, label, signature, or a 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 identification of the identity of that person.

4 How to determine the aggregate value of Rs 10 lakh under small scale exemption notification?

The aggregate taxable value means the sum of total of first consecutive payments received during financial year towards gross amount, as prescribed under Section 67 of F.A. 1994 towards the taxable services

5 Are there any other General exemptions?

The following general exemptions from payment of whole of the amount of Service Tax are available for the Service Providers:

5.1 Services provided to the United Nations or International Organisations (Notification No.16/2002-ST dated 02.08.2002).

5.2 Services provided to a developer of Special Economic Zone or a unit of Special Economic Zone as prescribed in the notification.(Notifn. No.04/2004-ST dated 31.03.2004).

5.3 The value of the goods and materials sold by the service provider to the recipient of the service is exempted from payment of the Service Tax, if there is a documentary proof specifically indicating the value of the goods and materials and no credit of duty paid on such goods and material sold, has been taken under the provisions of CENVAT Credit rules, OR where such credit has been taken by the service provider on such goods and materials, but such service provider has paid the amount equal to such credit availed before the sale of such good and materials. (Notifn.12/2003-ST dated 20.06.2003 as amended from time to time).

5.4 Exemptions to Diplomatic Missions for official use of taxable services and also to the officers and their families of a Diplomatic Mission for personal use of taxable services- Refer Notification Nos. 33/2007-ST and 34/2007-ST, both dated 23.5.2007.

5.5. Specified taxable services, as listed below, received by an exporter and used for export of goods (Notification No. 17/2009 dated 07.07.2009 as amended). Under this notification, the service tax paid by an exporter on these services is refunded to the exporter on compliance of conditions mentioned in that notification.

1. General Insurance

2. Port Service

3. Technical Testing & analysis

4. Technical Inspection & Certification

5. Other Ports

6. Transport of Goods by Road (Goods Transport Agency)[from the inland container depot to the port of export]

7. Transport of goods in containers by Rail [from the inland container depot to the port of export]

8. Cleaning Service

9. Storage & Warehousing

10. Courier

11 .Transport of Goods by Road (Goods Transport Agency)[directly from the place of removal, to inland container depot or port or airport,]

12.Transport of goods in containers by Rail [from the place of removal to inland container depot or port or airport]

13. Custom House Agent

14. Banking & other Financial Services

15. Business Auxiliary Services

16.Service of sale or purchase of foreign currency including money changing by a banking company or financial institution including non banking financial company or a body corporate or a financial concern

17.Service of sale and purchase of foreign currency including money changing provided by a person other than those referred at S.No 16

18. Service of supply of tangible goods for use without transferring the right of possession and effective control

19. Clearing and forwarding service

20. Terminal handling charges.

6 Is there any exemption from payment of Service Tax if the receiver/provider of the service is the Central/State Government organization and Public Sector Undertakings?

6.1. No. There is no such exemption. All service providers, including the Central/State Government Organisations and the Public sector undertakings rendering the specified taxable service, are liable to pay Service Tax.

6.2. If a Government Department (sovereign)/public authorities performs any mandatory or statutory function under the provisions of any law and collect any fees, such activity shall be treated as activity purely in public interest and will not be taxable. (Refer B oard?s Circular No.96/7/2007-ST dated 23.8.2007)

6.3 However, if such authority performs a service, which is not in the nature of statutory activity, for a consideration, the same shall be taxable.

6.4 The taxable services provided by a Banking company or a financial institution including a non banking financial company, or any other body corporate or any other person, to the Government of India or the Government of a State, in relation to collection of any duties or taxes levied by the Government of India or the Government of a State, are exempted from the payment of Service Tax. (Notifn .No. 13/2004-ST dated 10.09.2004 as amended).