Dr. Sanjiv Agarwal
Vide Notification No. 6/2005-ST dated 1.3.2005, a threshold exemption scheme was introduced by Finance Act, 2005 (effective from 1.4.2005) exempting from service tax aggregate value of taxable services not exceeding four lakh rupees received by the service provider during a financial year.
Accordingly, following are the salient features of the scheme –
(a) All services will be taken together
(b) All premises will be taken together
(a) Sum total of first consecutive payments received during financial year towards the value of taxable services rendered till the amount equals to Rs 4 lakh or Rs 8 lakh or Rs 10 lakh, as the case may be.
(b) Payment received towards exempted services will not be considered for reaching this limit.
(c) Preceding financial year’s taxable services will be considered for eligibility.
Exemption Scheme at a Glance
|Particulars||From 1.4.2005 to 31.3.2007||W.e.f. 1.4.2007||W.e.f.1.4.2008||W.e.f. 1-7-2012|
|Relevant Notification||06/2005-ST, dated 1-3-2005||04/2007-ST, dated 1-3-2007||08/2008-ST, dated 1-3-2008||33/2012-ST,dated 20-6-2012|
|Application||w.e.f. 1.4.2005||w.e.f. 1.4.2007||w.e.f. 1-4-2008||w.e.f. 1-7-2012|
|Threshold limit||Rs 4 lakhs||Rs 8 lakhs||Rs 10 lakhs||Rs 10 lakhs|
|Registration requirement underService Tax (Registration of Special Category of Persons) Rule, 2005||Rs 3 lakhs||Rs 7 lakhs||Rs 9 lakhs||Rs 9 lakhs|
|Qualifying financial years for claiming exemption||2004- 05(for 2005-06)2005- 06(for 2006-07)||2006-07 (for 2007-08)||2008-09 (for 2009-10)||2011-12 (for 2012-13)|
Recent Amendment in Scheme
Amendment w.e.f. 1.4.2012
Vide Notification No. 5/2012- ST dated 17.3.2012, w.e.f. 1.4.2012, amendment had been made in the meaning of ‘aggregate value’ to the effect that first clearances up to Rs. 10 lakhs will be constituted in terms of invoices raised or to be raised and not on the basis of payments received to determine the ‘aggregate value’.
W.e.f. 1.4.2012, ‘aggregate value’ shall mean the sum total of value of 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 towards such services which are exempt from whole of service tax leviable thereon under section 66 of the Finance Act under any other notification.
Amendment w.e.f. 1.7.2012
Vide Notification No. 33/2012-ST dated 20-6-2012, Notification No. 6/2005-ST has been superceded and new scheme announced. W.e.f. 1-7-2012, ‘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 invoice 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.
Receiver cannot avail the benefit of exemption scheme
The exemption scheme is meant only for service providers. The exemption cannot be availed by service providers who are not liable to pay service tax on the services rendered by them. Similarly, service receivers who avail the services but are person liable to pay the tax under Section 68(2) as a special case are not the service providers. As such, service receivers cannot claim the benefit of exemption scheme. Thus, this scheme will not be of any benefit to either the service receiver or the service provider in such cases. Uptil 30 June, 2012, these included mutual fund distribution, services rendered from outside India, life insurance, general insurance auxiliary services, recipient of goods transport service etc.
The exemption scheme does not apply to person liable under section 68(2) of the Finance Act, 1994 or person other than service providers as specified under rule 2(1)(d) of Service Tax Rules, 1994. To avail the exemption, the person should be a service provider only. However, CENVAT credit can be taken as per rules subject to fulfilment of the specified condition of being an input service.
Thus, exemption scheme meant for small service providers does not applied to following persons paying service tax under reverse charge method —
— Recipient of service
— Importers of service
— Input service distributors
— Insurance agents
— Mutual fund AMC’s
— Specified consignors or consignee for GTA services
— Sponsors for sponsorship services
— Service providers under franchise or brand.
The reverse charge mechanism has been expanded w.e.f. 1 July 2012. As such, the service recipients of services such as arbitral tribunal, legal services, support services provided by the Government, renting of vehicles, works contracts, manpower supply, security services, director’s service etc covered under reverse charge as per Notification No 30/2012-ST dated 20.6.2012 shall have to pay service tax and in such cases, benefit of exemption scheme will not be available to service receiver.
The service receiver is only liable to pay service tax and by doing so, he does not become service provider. The liability to pay service tax has only been shifted.