Service tax providers has small relief via small service provider exemption. Last update for it is in  via notification no. 33/2012- ST dated 20/6/2012 ( small service provider exemption notification). Service providers whose value of taxable services does not exceed Rs. 10 lakhs in previous year can avail exemption scheme for small service provider.

Small service provider exemption history:

In notification no. 6/2005, dated 1/3/2005, the government has granted small service provider exemption when service turnover does not exceed Rs. 4 lakhs.

This limit has been increased with time passed. Recently it is Rs. 10 lakhs.

We can see through following table history of small service provider history.

Applicable fromRate of service taxNotification
1/4/20054 lakhs6/2005 dated 1/3/2005
1/4/20078 lakhs4/2007 dated 1/3/2007
1/4/200810 lakhs8/2008 dated 1/3/2008
1/7/201210 lakhs33/2012 dated 20/6/2012

Small service provider meaning:

Small service provider means taxable value of service provided during the previous financial year does not exceed Rs. 10 lakhs.

 Small service provider exemption limit:

Small service provider can get exemption up to aggregate value of taxable services up to Rs. 10 lakhs. When turnover of taxable services exceeds Rs. 10 lakhs, service provider is required to charge and pay service tax.

We can understand if from below table.

Aggregate value of taxable services provided for previous yearAggregate value of taxable services provided for current yearService tax applicable
Less than 10 lakhs or 10 lakhsLess than 10 lakhs or 10 lakhsNil
Less than 10 lakhs or 10 lakhsMore than 10 lakhsservice tax is applicable after Rs. 10 lakh turnover
More than 10 lakhsLess than 10 lakhsService tax is applicable from single rupee. No exemption.
More than 10 lakhsmore than 10 lakhsService tax is applicable on all the service. No exemption.

 

To whom, this service tax exemption is available?

This SSP exemption is available to all type of person. Person is not restricted to natural person.

‘Person’ definition under 65 B ,

  1. Individual
  2. HUF
  3. Company
  4. AOP
  5. BOI
  6. Firm
  7. Society
  8. LLP
  9. Government
  10. Local authority
  11. any artificial juridical person,not falling within any of the preceding sub clauses.

Conditions to avail service tax exemption for small service providers:

Turnover of previous year’s services should not exceed Rs. 10 Lakhs:

As per notification no. 33/2012 , condition mentioned in point 2 ( viii),

Small service provider exemption is available if

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

Meaning of aggregate value:

Explanation given in explanation-  point B of notification no. 33/2012,

(B) “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 invoices 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.”

So turnover should be calculated on the basis of invoice. Before notification no. 33/2012 dated  1/7/2012. The aggregate value is required to be calculated on receipt basis.

Do not consider exempt services’ value while calculating turnover to claim exemption to small service provider.

The small service provider exemption is optional:

The provider of taxable service has the option not to avail small service provider exemption and charge and pay service tax. Once this option is exercised it cannot withdraw during the remaining part of financial year.

Cenvat credit under rule 3 is not available during exemption period:

Service provider cannot avail cenvat credit for service tax paid on input services or cenvat credit for capital goods while claiming exemption for small service provider.

Additionally as per point 2(v) of notification st 33/2012,

(v) the provider of taxable service who starts availing exemption under this notification shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing exemption under this notification;

Sometimes turnover of service provider goes down and he is able to avail small service provider exemption for the financial year. In that case, if he has taken any CENVAT credit for inputs lying in stock or in process on the date of availment of exemption, he is required to reverse that from CENVAT register. He can’t use that CENVAT credit.

Service provider can claim CENVAT credit on input and input services,when the service provider starts paying service tax and used for provision of taxable services for which service tax is payable.

In short, don’t claim CENVAT credit until you start paying service tax for taxable service provided.

Total of tunover of services provided from more than one premises:

If service provider is providing services from more than one premises, he is required to aggregate value of all those services to calculate exemption limit of Rs. 10 lakhs. Also consider all types of services you have provided from those premises. There is no separate limit for separate services.

Exemption not available:

Service provided under brand name of another person:

  1. Exemption for small service provider is not available when service provided by a person under brand name or trade name, whether registered or not, of another person.
  2. When service is provided by person under own brand name or trade name would be eligible for exemption for small service provider.
  3. Brand name definition as per notification ST- 33/2012 dated 20 june 2012.

“‘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 

Service tax is payable under reverse charge mechanism:

Reverse charge mechanism means service tax is not required to charge by service receiver in bill and pay to government but service tax should be paid by service recipient himself to government.

When service receiver is liable to pay service tax under reverse charge mechanism, he cannot avail small service provider exemption. To know who is required to pay service tax under reverse charge mechanism ( RCM), read our following post.

Reverse charge mechanism in service tax

So when you are liable to pay service tax under RCM, you are required to register yourself with service tax department and pay the tax. No matter tax amount is Rs. 100 or Rs. 1,00,000. This provision is really hardship for service receiver because sometime service provider is not liable to pay service tax due to lower turnover but service receiver is liable to pay service tax due to applicability of RCM.

Small service provider is blessing for service provider. You can also avail this scheme of exemption from service tax if your taxable turnover of previous year is less than Rs. 10 Lakhs. If you have any query about service tax exemption under notification ST – 33/2012 ( small service provider exemption), let me know through comments. If this article helps you in some manner, say thanks by sharing the article on social media by clicking buttons on left side.

Abatement and small service provider exemption limit:

Many readers have the question whether abated value should be considered for small service provider exemption. While considering aggregate value for small service provider exemption limit, consider value before abatement to calculate exemption.

Only value of services which is exempted from whole of the service tax should be deducted from taxable turnover.

Example:

Total turnover of business: 17,00,000

(a) Wholly exempted services: 2,00,000

(b) Services on which Abatement at 50% available : 10,00,000

(c) Services on which no abatement is available: 5,00,000

calculation of  taxable turnover for small service provider exemption:

0 (a) + 10,00,000 (b) + 5,00,000 = 15,00,000.

Based on notification no. 33/ 2012 of service tax.