SMALL SERVICE PROVIDER :
Service Providers providing taxable services of less than Rs. 10 Lakh in a period of a whole year are termed as SMALL SERVICE PROVIDER. Threshold exemption of Rs 10 lakh is given to small service providers. This monetary limit was Rs 4 lakh from 01-04-2005 to 31-03-2006 and Rs 8 lakh from 01-04-2006 to 31-03-2008.[Please Refer : Service Tax Notification No. 6/2005-ST, dated 01-03-2005 as amended by Service Tax Notification No. 8/2008-ST dated 01-03-2008 ]
Benefit of Service tax Levy as well as Registration :
Now small service providers are not likely to pay service tax on taxable services provided by them as it is exempted upto taxable services provided of aggregate value not more than Rs. 10 Lakhs. Also, registration is not required when taxable service provided by them is valued up to Rs. 9 Lakhs.
Value not exceeding Rs. 10 lakhs means the sum total of first consecutive payments received during a financial year towards the amount charged by the service provider towards taxable services till the aggregate amount of such payments is equal to Rs.10 lakh. It does not include payments received towards such amount which are exempt from service tax u/s 66 of Finance Act or under any other notification.
Option Not To Avail Such Threshold Exemption :
The taxable service provider has the option not to avail such exemption of Rs. 10 Lakhs and may choose to pay service tax on the taxable services provided by him. But, such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year. [Please Refer : Notification No. 6/2005-ST]
Different Scenario in case of Goods Transport Agency
The payment received by a goods transport agency shall not be taken into account, For the purpose of determining such value of Rs. 10 lakh in relation to taxable service provided by such goods transport agency.
Conditions to be complied with for Availing Exemption of Rs. 10 lakhs
(1) CENVAT credit of service tax paid on any input services shall not be availed of if such input services are used for providing taxable service, for which exemption from payment of service tax is availed.
(2) CENVAT credit of service tax paid on any capital goods shall not be availed of during the period in which the service provider avails of exemption from payment of service tax.
(3) CENVAT credit on such inputs or input services received shall be availed of on or after the date on which the service provider starts paying service tax and provided that such input / input services are used for the provision of taxable services.
(4) If any CENVAT credit is taken, the service provider shall be required to pay an equivalent amount to the credit taken, in respect of inputs lying in stock or in process on the date on which the provider of taxable service starts availing of exemption.
(5) The balance of CENVAT credit lying unutilised in the account of the taxable service provider after deducting the amount referred to in sub-paragraph (4), if any, shall not be utilised and shall lapse on the day such service provider starts availing of the exemption.
(6) Where a taxable service provider provides one or more taxable services from one or more premises, the exemption of Rs. 10 Lakhs shall apply to the total value of all such taxable services and from all such premises and not separately for each premise or service;
(7) 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.
Non applicability of exemption notification of Rs. 10 lakhs
When taxable services are provided by a person under a brand name or trade name, whether registered or not, of another person, the benefit of Rs. 10 Lakhs exemption notification shall not be available.
Here, “brand name” or “trade name” means a brand name or a trade name, whether registered or not, that is to say, a name or a mark, such as symbol, monogram, logo, label, signature, or 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 indication of the identity of that person [Please Refer : Explanation to Notification No. 6/2005-ST]
The exemption of Rs. 10 Lakhs shall not be available in respect of taxable services where service tax is paid by person specified u/s 68(2) of the Finance Act.
It refers to the persons who are not service providers but still liable to pay tax in terms of Rule 2(1)(d) of Service Tax Rules 1994.
List of persons mentioned in 2(1)(d) :
i) Person receiving Goods Transport Agency Service
ii) Asset Management Company or Mutual Fund receiving Business Auxiliary Service of distribution of Mutual Fund
iii) Recipient in case of Import of Services
iv) Insurer or Reinsurer in case of Insurance Business
v) Body Corporate or firm receiving Sponsorship service in India