Exemption limit from payment of service tax:
1. The turnover limit, i.e., the aggregate value of taxable service for threshold based exemption is, currently, Rs. 10 lakh in a year (Not. No 8/2008, ST dt 01.03.2008 wef from 01.04.2008The expression “aggregate value not exceeding the threshold value of Rs 10 lakh” has been defined in notification No. 10/2008 dated 01-03-08-ST.
2. Earlier this exemption limit, of the aggregate value of clearance, from payment of service tax was Rs 8 lakhs (with effect from 01.04.2007 vide Not. No. 4/2007 dt 01.03.2007).
3. Prior to this the exemption limit, of the aggregate value of clearance, from payment of service tax was Rs 4 lakhs (with effect from 01.04.2005 vide Not. No. 6/2005 dt 01.03.2005. Prior to this there was no exemption and tax was payable from first point.
Persons excluded from exemption benefit
Two categories of persons have ab initio been excluded from the benefits of this exemption, as explained below :
1. Persons using brand name/trade name of another person
2. Exemption not available in cases where service tax is payable by persons other than service providers
Exemption is linked with preceding year's turnover
The notification stipulates an important condition for availing the
exemption benefit. This condition, is that the aggregate value
of taxable services rendered by a provider of taxable service from one or more premises should not have exceeded Rs.10 lakhs, 8 lakhs, or Rs4 lakhs as the case may be in the preceding financial year. Since the object
behind this exemption is to keep service providers whose turnover during the year is small out of the service tax net, this condition must be liberally construed and not as per any strict interpretation like allowing the exemption benefit only if the service provider has provided some taxable service during the preceding financial year.
New services introduced during the financial year
Every year, the Finance Act introduces certain new services. In such cases, if the service provider had been providing such a service even for the period prior to the date on which the said service is made a taxable service, the aggregate value of such services provided by him during the period prior to the date from which the service is made a taxable service cannot be considered for applying the limit of exemption since the service was not a taxable service during that period. Therefore, if the service provider had not provided any other taxable service during the preceding financial year, the aggregate value of taxable services provided by him during the preceding financial year can be taken as 'Nil' (which is less than exemption limit), and consequently the exemption benefit can be extended to him for the current financial year. However, if the service provider has, during the preceding financial year, provided some other service which was a taxable service at the time of providing the same, the aggregate value of taxable services so provided during the preceding financial year should not have exceeded the exemption limit in order to opt for exemption benefit during the current financial year