Basic Exemption Limit for Small Service Providers

In Its pre-budget memorandum-2014 on Indirect taxes Institute of Chartered Accountants of India (ICAI) has suggested that Current Service Tax Exemption Limit of Rs. 10 Lakh should be increased to Rs. 25 Lakh. It has submitted as follows :-

The service tax exemption limit for small service providers in terms of Notification No. 33/2012 ST dated 20.06.2012 is currently limited to Rs.10,00,000/-. It is proposed to extend the exemption limit due to the following reasons:

(i)    Small service providers are poor, uneducated and mainly in the unorganized sector.

(ii)  Limit was not enhanced since 1st April, 2008

(iii) After 1.7.2012 post Negative list era, more services are under the ambit of service tax, which earlier was not includible in the exemption limit.

Suggestion

It is suggested to extend the exemption limit to Rs.25,00,000/-.

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Category : Service Tax (3289)
Type : News (12755)
Tags : Budget (1482) ICAI (2199)

19 responses to “Increase Basic Service Tax Exemption Limit to Rs. 25 Lakh”

  1. K.Shanmugasundaram says:

    If the Limit increased to 25 Lacs, it is very well & good for small industries.
    Thank U.
    K.Shanmugasundaram.

  2. Janardhan says:

    The present limit of 10 lacs was fixed in 2008. When the limits of everything is increased year over year, what is the logic of this being not revised. Does it mean that the expenses for running consultancy services remained the same for the past 7 years. The argument for not increasing this exemption limit is a stupid argument. First of, people should find out why there was a limit of 10 lacs fixed in 2008. This is to protect the interest of small scale consultancy services. By keeping the limit the same, the government is conveniently forgetting about the inflation, DA hikes etc. The exemption limit should be increased to 15 lacs.

  3. S Balasubramanian says:

    Service tax in excess of 10% is really uncalled for. There is urgent need for the rate to be reduced to 10%.

  4. GopalB says:

    There is no justifiable reason for increasing the limit to Rs 25 Lacs under the pretext of relieving small service providers. With annual revenue of Rs 25 lacs they are by no means small. Rs 10 lacs can at best be increased to 12 lacs. Book keeping and other procedures may be relaxed , but they must pay service tax, after all since the same is collected from the users of service.I do not agree with one comment where the writer sought to compare the limit with excise duty exemption assuming 25% GP. GP for manufacturing is not more than 7% . so exemption limit of 150 lacs for manufacturer is comparable to service tax exemption limit of 10 Lacs.

  5. GopalB says:

    There is no justifiable reason for increasing the limit to Rs 25 Lacs under the pretext of relieving small service providers. With annual revenue of Rs 25 lacs they are by no means small. Rs 10 lacs can at best be increased to 12 lacs. Book keeping and other procedures may be relaxed , but they must pay service tax, after all since the same is collected from the users of service.

  6. GopalB says:

    There is no justifiable reason for increasing the limit to Rs 25 Lacs unedr the pretext of relieving small service providers. With annual revenue of Rs 25 lacs they are by no means small. Rs 10 lacs can at best be increased to 12 lacs. Book keeping and other procedures may be relaxed , but they must pay service tax after all since the same is collected from the users of service.

  7. narasimheswar says:

    In the light of ICAI’s suggestion and the discussions we have seen above, one should know that service tax, whether the collector-payer is truthful or a liar, the small service providers have a less competitive leverage and have less infrastructure to collect, pay, and maintain records regarding Service Tax. That is the reason why at all a exemption limit is fixed. However at present compared to 2008 when the limit was fixed the values have gone up (rupee value went down)and the service billing has gone up without tangible increase in service. I mean for the same service, the amount charged is more now than in 2008 (ie.,6 years down the lane) This is due to various factors like cost etc. In all fairness Service Tax exemption limit should be reasonably increased to ease the problems of small operators. Mind you all that not increasing the limit would push the otherwise honest small service providers to be dishonest.

  8. KRK Prasad says:

    Service tax limit should be inreased, since most of transporting/travelling agent use to arrange the vehicle from out side, so the billing amount may be more than 25 lakhs, but acutal income will be 2 lakhs.

  9. lucky says:

    Hi
    I started a consultancy (Education) proprietorship firm last year in June 2013.
    Last year my earning did not go beyond 10 LACS but my CA made me pay Service tax every quarter.
    This year again when I have to fill the return, my income has not exceeded 10 lacs. Will I be able to redeem my tax amount that I paid as Service tax. If yes, what is the process

  10. Abhishek Nanda says:

    Government shall organize programming for pay taxes and service tax limit is fine for small organize company

  11. P ROY says:

    DEALY THERE SHOULD NOT BE ANY PENSION PAY FOR RETIRED GOVERNMENT SERVANTS ONLY. TAX IS PAID BY EACH AND EVRY CITIZEN SO IF PENSION AS OLD AGE SU[PORT IS TO BE GIVEN THEN IT SHOULD BE GIVEN ALL CITIZENS AFTER A CERTAIN AGE AND ALL SHOULD BE PAID SAM AMOUNT PER MONTH.
    DIFFERENCE OF SALARY FOR GOVERNMENT SERVANT AT DIFFERENT POSTS ARE BASED ON DIFFERENCE IN EDUCATIONAL QUALIFICATION AND TYPE OF SERVICE PROVIDED BY AN EMPLOYEE DURING HIS/HER SERVICE. AFTER RETIREMENT, ALL MUST BE TREATED SAME FOR PENSION PAY FOR OLD AGE SUPPORT.

  12. CA SIVARAMAN VISWANATHAN says:

    Why Service Tax limit is to be raised:->
    Not on such baseless grounds but on a solid ground of NATURAL JUSTICE as under:
    As it is Service tax is on the lines of Excise Duty. Further since the point of taxation has been pinned to point of sale, it is just similar to clearance of goods under excise. Excise exemption is given up to Rs. 1.50 crores. Taking a highly conservative estimate of GP at 25% the GP there on is Rs.37.50 lakhs.
    In the case of Service EVEN considering the GP as 100% the tax exemption should be min of Rs.37.50 lakhs if not more but nothing less is justifiable. Else it will be denying of natural justice and bias against Service renderers.

  13. Harsha H says:

    I fully agree with Mr. Sekaran.
    exemption limit should not be increased.

  14. SEKARAN says:

    Exemption limits should not be lifted too high too soon. The indian tax payer is a ruthless liar.He will call it tax planning to save some grace. If his contribution of a few thousands( case of street corner pan beeda wallah who makes lakhs in various other ways including drugs etc etc) do not go to the coffers, the coffers will be poorer by that much.But the cheater has been left unpunished by the CBDT which encourages him to bigger loots and that is the bane of the indian society.
    The concessions should come only in small doses with strict implementation of laws and subjecting the cheat to imprisonment immediately. A disproportionaet wealth case takes decades to get solved by a competent(?) court.That is the nature of India.

  15. Jayant L Aasher says:

    The reverse mechanism in service tax should be removed fully. The exemption given to one person is indirectly taxed at the hands of the service receiver. This is quite unfair.

    • SEKARAN says:

      Until all the people are sincere towards CBDT attempt at collection of higher taxes has no meaning at all. First the compliance aspect has to be ensured.The AADHAR card so much touted has just evaporated into thin air already! So where is the guarantee that people would comply with new enhanced rules without breaking them with the help of their CAs in waiting!

  16. CA. Naresh Khanna says:

    That would be great – if it happens ! The reasons for increase in exemption limit are also genuine.

  17. subhashchandrapodder says:

    Suggestion should not be accepted from Rs 10 lakhs to Rs 25 Lakhs . This is nothing but to show how efficient they are .
    CA, Subhash Chandra Podder , FCA
    16/6/2014

  18. KANAGARAJ S says:

    The limit must be increased to 25 Lacs, as the limit 10 lacs is very meagre and the department save more time for collecting the tax upto the limit of 25 lacs

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