CA LALIT MUNOYAT
Service tax, like any other indirect tax, is a destination based consumption tax born the ultimate user and collected by the provider. The core of the system is section 66B which is the charging section levying service tax @ 12% on the value of all services, other than those services specified in the negative list which are provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.
A reading of the above section makes it clear that the primary liability is on the person providing the service, though the same may be collected in a manner prescribed by the taxing authority. Section 68 prescribes the manner of collection of the tax. The manner of collection is as under:
1) Collected 100% from the Provider- Direct Charge
2) Collected 100% from the Receiver- Reverse Charges
3) Collected partially from both , the provider and the receiver- Partial Reverse Charge-2012
Since the basic unit of the tax system is the Provider, it is his transactions which have to be analyzed for the purpose of SSI Exemption benefit.
SSI exemption Notification No. 6/2005- Dated 1st March, 2005, if read, in the light of the above discussion would clarify the following:
1) This notification exempts taxable services of aggregate value not exceeding Rs. 10 Lakhs in any financial year from the whole of the service tax leviable thereon under section 66 of the said Finance Act.
2) The notification does not apply to such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules,1994.(Payment under Reverse Charge)
3) 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.
4) Other restrictions on the availment and use of CENVAT credit.
5) 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; and
6) The aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed Rs. 10 Lakhs in the preceding financial year.
7) Aggregate value means the sum total of value of taxable services charged in the first consecutive invoices issued or required to be issued, as the case may be, 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 66 of the said Finance Act under any other notification.
8) From the above reading it is clear that the 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:
a) Value of services in the Negative List
b) Value of services under Exemption Notification 12/2012 or any other notification which provides for full exemption from service tax.
9) EXCEPTION: For the purposes of determining aggregate value not exceeding Rs. 10 Lakhs 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 for which the person liable for paying service tax is as specified under subsection (2) of section 68 of the said Finance Act read with Service Tax Rules,1994, shall not be taken into account.
10) Thus SSI exemption is available only to the Provider of the services (including GTA) irrespective of the fact WHO PAYS THE TAX. The limit of Rs. 10 Lakhs in all cases will be the sum total of value of taxable services charged in the first consecutive invoices issued or required to be issued , with the exception of GTA service in whose case the payment received by way of freight from the specified persons shall not be taken in to account for calculating the limit of Rs. 10 Lakhs of the GTA. Invoices are issued only by the service providers (including input service distributor) and not by the service receivers. (Rule 4B Service Tax Rules 1944)
11) As a natural corollary when the full value of service provided ,by the service provider, is to be considered for calculating the limit of Rs. 10 Lakhs, the same value must be excluded for calculating the limit of Rs. 10 Lakhs in case of service Receiver, if he is also engaged in providing services not covered under Reverse charge Syatem.
12) Thus, in a nutshell it may be said that in the case of a Provider of Service (except GTA) the 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 upto what extent.
13) 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
14) It is also important to note that the Government of India vide Notification No.15/2012-Service Tax w.e.f. 01-07-2012 notifies only some classes of taxable services on which the receiver has to pay service tax, either fully or partially, and the extent of service tax payable thereon by the provider and the receiver. The value of service as a whole remain intact and what is bifurcated is the value of service tax for the purpose of payment only and for no other purposes.
15) In my last article I had reproduced the views expressed by various service providers and the service receivers as to the applicability of the provisions of SSI Notification No. 6/2005- in the light of notification No.15/2012-wherein the question of payment of service tax under partial reversal charge system was notified. I agree with the first view expressed which was as under:
a) One may argue that to the extent service tax is payable on the above 3 services by the Service Provider, he may not face any problem because he is making payment under Direct Charge Mechanism only as provider of service u/s 68(1) and that it is only a portion of the service tax which is being paid by the Receiver. As such , in so far as the providers are concerned, they are still eligible to SSI exemption upto Rs. 10 lakhs.
|CA LALIT MUNOYAT|
|B.Com.(Hons.), CS, FCA, DISA|