Exemption

 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 31-03-2007.[Please Refer : Service Tax Notification No. 6/2005-ST, dated 01-03-2005 as amended by Service TaxNotification 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 But, such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year.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

 In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts all the taxable services from so much of service tax which is in excess of the rate of ten per cent of the value of taxable services. [Please Refer : Notification No. 8/2009 ST, dated 24-02-2009.]

 International Organisation :

All the Taxable Services specified in Section 65 of the Finance Act 1994 are exempt if they are provided to United Nations or an International Organisation. Here, international organisation means an organisation declared to be an international organisation by the Central Government in pursuance of section 3 of the United Nations (Privileges and Immunities) Act, 1947. Earlier such exemption was available for only 7 selected services, but from 02-08-2008 in respect of all the services this exemption is available. [Please Refer : Service Tax Notification No. 16/2002-ST, dated 02-08-2002 (Effective from 02-08-2002)]

The list of International Organisations is taken from the concerned Act.
(1) International Civil Aviation Organisation.
(2) World Health Organisation.
(3) International Labour Organisation.
(4) Food and Agriculture Organisation of the United Nations.
(5) United Nations Educational, Scientific and Cultural Organisation.
(6) International Monetary Fund.
(7) International Bank of Reconstruction and development.
(8) Universal Postal Union.
(9) International Telecommunication Union.
(10) World Meteorological Organisation.
(11) Permanent Central Opium Board.
(12) International Hydro-graphic Bureau.
(13) Commissioner for Indus Waters, Govt. of Pakistan and to his advisers and Assistants (Article lV).
(14) Asian African Legal Consultative Committee
(15) Commonwealth Asia-Pacific Youth Development Centre, Chandigarh
(16) Delegation of Commission of European Communities
(17) Customs Co-operation Council
(18) Asia-Pacific Tele-community
(19) International Centre for Public Enterprises in Developing Countries, Ljubliand(Yugoslavia)
(20) International Centre for Genetic Engineering and Biotechnology
(21) Asian Development Bank
(22) South Asian Association for Regional Co-operation
(23) International Jute Organisation, Dhaka (Bangladesh)

 Special Economic Zone :

Taxable services received by SEZ (Special Economic Zone) units (including unit under construction) and SEZ developers for consumption within the SEZ are exempt from service tax. [ Service Tax Notification No. 4 / 2004 - Service Tax dated 31-03-2004 ]

Such exemption can be availed subject to conditions mentioned below-
(i) The developer has been approved by the Board of Approvals to develop, operate and maintain the SEZ.
(ii) The unit of the SEZ has been approved by the development Commissioner or Board of Approvals, to establish the unit in the SEZ.
(iii) The developer or unit of a SEZ shall maintain proper account of receipt and utilisation of the said taxable services. 
[ Please Refer : Service Tax Notification No. 4 / 2004 - Service Tax dated 31-03-2004 ]

 Value of Service Includes cost of goods and materials :

When Service provider provides a taxable service which represents the, cost of goods and material sold apart from the service charged to the recipient. Out of the total value proportionate amount which is equal to the value of goods and materials sold by the service provider to the recipient of service shall be exempt from service tax leviable. [Service Tax Notification No. 12/2003-ST dated 20-06-2003 ]

Such exemption can be availed subject to the following conditions-

i) No credit of duty paid on such goods and materials sold has been taken under the provisions of the Cenvat Credit Rules, 2004.
ii) Where such credit has been taken by the service provider on such goods and materials, he has paid back the amount equal to such credit availed before the sale of such goods and materials. [ Please Refer : Service Tax Notification No. 12/2004-ST dated 10-09-2004 ]

 Services provided for the official / personal use of a foreign diplomatic mission or consular post in India :

Any taxable service provided by any person for the official use of a foreign diplomatic mission or consular post in India is exempt from the levy of the service tax. [ Please Refer : Service Tax  Notification No. 33/2007-ST dated 23-05-2007 ]

Procedure to Claim Such Exemption in case of official use :

1. Issuance of Certificate by Ministry of External Affairs
2. Availment of Exemption
3. Verification of the correctness of availment of exemption
[ Please Refer : (CBEC Instruction letter : F. No. 137/17/2007-CX.4) ]

Any taxable service provided by any person for the personal use of diplomatic agents or career consular officer posted in a foreign diplomatic missions or consular posts in India or for use of their family members, is exempt from the levy of service tax. [ Please Refer : Service TaxNotification No. 34/2007-ST dated 23-05-2007 ]

Procedure to Claim Exemption in case of personal use :
1. Issuance of Certificate by Ministry of External Affairs
2. Availment of Exemption
3. Verification of the correctness of availment of exemption
  Please Refer : (CBEC Instruction letter : F. No. 137/17/2007-CX.4)

 Reserve Bank of India :

All taxable services provided or to be provided to any person, by the RBI

All taxable services provided or to be provided by any person, to the RBI when the service tax for such services is liable to be paid by the RBI u/s 68(2) Finance Act read with Rule 2 of the Service Tax Rules, 1994

Taxable services received in India from outside India by the Reserve Bank of India u/s 66A of the Finance Act, 1994. 
[ Please Refer : Service Tax Notification No. 22/2006-ST dated 31-05-2006 ]

 Technology Business Incubator (TBI) or Science and Technology Entrepreneurship Park (STEP)

Services provided or to be provided by a TBI or STEP recognised by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology, Government of India shall be exempt from the levy of the service tax. [ Please Refer : Service Tax Notification No. 09/2007 dated 01-03-2007 ]

The Following Conditions should be Fulfilled for availing the said Exemption.
1) The STEP or the TBI, who intends to avail the exemption, shall furnish the requisite information in Format I containing the details of the incubator along with the information in Format II received from each incubatee to the concerned Assistant Commissioner /Deputy Commissioner of Central Excise before availing of the exemption.
2) The STEP or the TBI shall thereafter furnish the information in the formats I and II before the 30th day of June of each financial year.

Taxable services provided by an entrepreneur located within the premises of a TBI or (STEP) recognized by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology Government of India shall be exempt from levy of service tax. Please Refer : Service Tax Notification No. 10/2007 dated 01-03-2007

This exemption is available for a period of 3 years from the date on which such entrepreneur enters into an agreement with the TBI or the STEP.

The Following Conditions should be Fulfilled for Availing of the said Exemption: 
1) The entrepreneur enters into an agreement with the TBI or the STEP as an incubatee, to enable himself to develop and produce hi-tech and innovative products.
2) The total business turnover of such entrepreneur does not exceed Rs. 50 Lakh during the current or previous financial year.

The exemption for taxable services under this notification shall not be available for any taxable services provided or to be provided immediately after the total business turnover of the entrepreneur exceeds Rs. fifty lakh during a given financial year. [ Please Refer : Explanation to Notification 10/2007 ]

Format – I : Information to be furnished by TBI / STEP

Filed in the financial year ______
1. Name of the Technology Business Incubator / Science and Technology Entrepreneurship Park
2. Address
3. Whether availing of benefit of exemption for first time
4. If the answer to 3 is not in the affirmative, the date from which benefit is being availed
5. Details of taxable services provided during the previous financial year

  
6. Details of Taxable services provided by incubatees as per enclosure.

Acknowledgement

I hereby acknowledge the receipt of Format I for the period________

Format II – Information to be obtained by TBI / STEP from each incubatee
( to be filed along with Format I )

1. Name of the Incubatee
2. Address
3. Details of the project
4. Date of signing agreement with the TBI / STEP (incubator)
5. Total business turnover during the previous financial year
6. Details of taxable services provided during the previous financial year