Notification

 

Let us understand the exemption limit provided to small service provider through a suitable example for clarity of the definition.

 

Mr. X has total restaurant sales amounting to Rs.20, 00,000 during the preceding financial year. As restaurants are provided with 60% abatement and after application of abatement the taxable service becomes Rs.8,00,000 ( 20,00,000*40%) and consequently service tax is paid on Rs.8,00,000.Is Mr. X still be regarded as Small Service Provider in this case saying that Taxable service does not exceed Rs.10,00,000 (here is Rs.8,00,000)?

 

In the first case, No he will not be regarded as a small service provider since as per clause (viii) of Notification no 33 /2012 dated 20-6-12 by Service Tax Department provides that basic exemption of Rs 10 lakhs from payment of service tax is available if –

“the aggregate value of taxable services rendered by a provider of taxable services from one or more premises, does not exceed Rs ten lakhs rupees in the preceding financial year.”

 

So its is necessary that aggregate value of taxable services which in this case is Rs 20,00000, should not exceed Rs 10,00000 in the preceding financial year.

 

As per Rule 2C of service tax(determination of value)rules, 2006 the value of taxable service shall be 40% of total amount which is Rs 800000.But however aggregate value of taxable service is Rs 20,0000 in the preceding financial year.

 

Thus he will be liable to service tax since he does not fall under the preview of small service provider definition.

 

But in the second case since the necessary requirement have been met thus he will fall under the definition of small service provider and not liable to service tax.

 

Note:(This matter is for clarification purpose as some were facing problems in respect of the following matter)

 

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