CA Kamlesh Singh Chauhan
SSI/
threshold Exemption under Notification No. 33/2012 – Service
Tax Dt. 20/06/2012:
SSI exemption limit along with date of
applicability and relevant Notification
number:
| Period | Exemption limit (Rs.) | Relevant Notification of Service Tax | Effective date |
| 01-07-1994 to 31-03-2005 | Nil | N.A. | N.A. |
| 01-04-2005 to 31-03-2007 | 4 lakhs | 6/2005* dt. 01-03-2005 | 01-04-2005 |
| 01-04-2007 to 31-03-2008 | 8 lakhs | * as amended by 4/2007 dt. 01-03-2007 | 01-04-2007 |
| 01-04-2008 to 30-06-2012 | 10 lakhs | * as amended by 8/2008 dt. 01.03.2008 | 01-04-2008 |
| 01-07-2012 onwards | 10 lakhs | 33/2012 dt. 20-06-2012 | 01-07-2012 |
Since the basic unit of the tax system is
the Service Provider, it is only his transactions which have to be analyzed for
the purpose of SSI Exemption benefit. If a service provider is also
paying duty under reverse charge or partial reverse charge, it will not be included or considered
for the purpose of arriving at aggregate value exempted under
notification number 33/2012. Government of India has
superseded the notification No.
6/2005-Service Tax, dated 01-03-2005 through
notification No. 33/2012-Service
Tax, dated 20-06-2012 and framed new conditions for threshold
(SSI) exemption, which are discussed below;
What is Exempted: Central
Government exempts taxable services of aggregate
value not exceeding ten lakh rupees in any financial year from the whole of the
service tax leviable thereon under section
66B of the said Finance Act except the following services described
below;
(i) taxable services provided by a person under a
brand name or trade name, whether registered or not, of another
person; 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, OR
(ii) such value of taxable services in respect of
which service tax shall be paid by such person and in
such manner as specified in section 68(2) of the said Finance Act read with
Service Tax Rules,1994 [i.e.
Complete/partial reverse charge
(except complete reverse charge in case of GTA service, which
is excluded by this notification
itself)]. Section
68(2) Notwithstanding anything
contained in sub-section (1), in respect of such taxable service as may be
notified by the Central Government in the Official Gazette, the
service tax thereon shall be paid by such person and
in such manner as may be prescribed at the rate specified in section 66 and all
the provisions of this chapter shall apply to such person as if he is the person liable for paying
the service tax in relation to such
service.
This notification used
two terminologies in defining the scope of threshold
exemption; first is taxable services, and second is
aggregate value. Taxable services are defined in
section 66B, which is as hereunder;
Charging Section 66B: There shall be
levied a tax (hereinafter referred as the
service tax) at the rate of twelve percent,
on the value of all services, other than those
services specified in the negative list, provided or agreed to be
provided in the taxable territory by one person to another and
collected in such manner as may be prescribed. Section
65B(52): Taxable territory means the territory to which the provisions
of this chapter apply. Section 64(1): This Chapter extends to
the whole of India except the State of Jammu and Kashmir. Also read
Rule 3: Place of provision (of service)
generally: The place of provision of a service shall be the
location of the recipient of service…..it means in case of export of
service, the place of provision of service would be out of taxable
territory.
What can be inferred by the charging section
‘66B’ read with rule 3 of place of provision of services rules, 2012 (as
notified vide Notification No. 28/12 –
Service Tax dt. 20-06-2012) that service provided out
of taxable territory is not a taxable service. In the definition of ‘aggregate
value’ also, the words used are sum total of taxable service, which is evident
of abovementioned concept that quantum of export of service is out
of ambit of aggregate value for the purpose of
calculating threshold exemption limit. Further, services included in the
negative list under section 66D
are not taxable at all and therefore kept out of ambit of
aggregate value for the purpose of calculating threshold exemption
limit. Now, we have to find out what is included in aggregate value for this
purpose.
“Aggregate value”
[as defined in this notification itself] 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.”
From this definition, following aspects
emerges;
(i) “Aggregate
value” means the sum total of value of taxable
services……. but does not include…… which are exempt from whole of
service tax leviable thereon under section
66B of the said Finance Act under any other
notification.” SSI exemption is available
only to the Provider of the service and not to the Receiver of the service and
therefore, while calculating the aggregate value of Rs. 10 Lakhs the sum total
of value of taxable services charged by the provider in
the first consecutive invoices issued or required to be issued has to be
considered.
The value of the following services need
not be considered in aggregate value:
(a) Value of services in the Negative List,
(b) Value of services under Exemption
Notification 33/2012 or any other
notification which provides for full exemption
from service tax.
The value of the following services will
be considered in aggregate value:
Complete reverse charge and
partial reverse charge has to be included in
the aggregate value except complete reverse charge in case
of GTA service as clarified in the
notification number 33/2012 itself. “For the
purposes of determining aggregate value not exceeding ten lakh rupees, to avail
exemption under this notification, in relation to
taxable service provided by a goods transport agency, the payment received
towards the gross amount charged by such goods transport agency under section 67
of the said Finance Act for which the person liable for paying
service tax is as specified under sub-section
(2) of section 68 of the said Finance Act read with
Service Tax Rules, 1994, shall not be taken into
account.”
(ii) It is pertinent to mention
here that exemption and abatement are two different things which are not
comparable and therefore non inclusion of fully exempted services in the
aggregate value does not entitle abatements to be treated at par and these will
form part of aggregate value.
(iii) “Aggregate value” means
the sum total of value of taxable services charged in the first
consecutive invoices issued during a financial
year…..” emphasizes first consecutive invoices issued during a
financial year, and which includes following two
situations;
(a) Where service was taxable from the
commencement of financial year i.e. taxable earlier,
aggregate value for this exemption will include first invoice from the
commencement of financial year, while
(b) Where service became taxable from
1st July, 2012 by the new definition of service then aggregate value
for this exemption will be computed from 1st July, 2012 as invoices
issued for non taxable service in the financial year
cannot be included in the aggregate value. It is clear from the words used in
the definition of aggregate value…..” the sum total of value of taxable
services charged in the first consecutive invoices issued during a
financial year…..”
Clubbing concept:
(i) Proprietorship is trade /
business name of individual so if
a person is rendering taxable services in his own name, various trade /
business name then they are liable to be clubbed to
compute threshold exemption limit of Rs. 10 lakhs under this
notification.
(ii) If the entity is an
incorporated body, it has separate legal entity and clubbing of taxable turnover
cannot be done merely on the ground of mutuality of some common
directors/managers etc. unless there is material mutuality of interests or flow
back of funds.
• COMMISSIONER OF C. EX. & CUS., Versus
CATALCO CHEMICALS (P) LTD. 2012 (277) E.L.T. 56 (Guj.) – Merely because a
company being subsidiary of another, clearances by both companies cannot be
clubbed together for ascertaining SSI limits – Department to establish mutuality
of interests or flow back of funds.
• SPICK-N-SPAN STEEL WOOLS PVT. LTD. Versus
COMMISSIONER OF C. EX., NAGPUR 2011 (274) E.L.T. 568 (Tri. – Mumbai) Private
companies and partnership firms are independent entities and merely because of
some mutuality of interest in the business of each other, their turnover (value
of clearances) cannot be clubbed for determining their eligibility to SSI.
(iii) If some partners are
common in various partnership firms or Karta of HUF is also the partner in the
partnership firm, their taxable turnover cannot be clubbed unless there is
material mutuality of interests or flow back of funds.
(iv) If there is change in
ownership and thereby change in the constitution of the entity but factory and
premise are same, clubbing will be done. Further, if more than one manufacturer
is clearing goods or the service provider is rendering service from common
factory/premise and also using of common facilities/infrastructure directly
required for such purpose, clubbing will be done (except in the cases of use of
remote/immaterial services).
• APPALO THREADS Versus COMMISSIONER OF C. EX.,
COIMBATORE 2011 (267) E.L.T. 371 (Tri. – Chennai) Clubbing of clearances of more
than one manufacturer from one factory/premise. Requirement under
impugned notification that value of clearances of specified goods from any one
factory premises required to be aggregated even if clearances made by or on
behalf of more than one manufacturer –HELD: Clubbing of clearances was
proper.
• COMMISSIONER OF C. EX., AHMEDABAD Versus S.C.
PATEL 2011 (264) E.L.T. 414 (Tri. – Ahmd.) Units having proximity, common
passage and storage of raw materials, and inter-relationships between their
partners – No evidence of flow back between units, and major part of interest
free loan, taken on principal to principal basis, paid back – Both units having
separate income/sales tax, import and export code numbers, bank accounts etc. –
HELD : Clearances of such units cannot be clubbed.
(v) Where a taxable service
provider provides one or more taxable services from one or more premises, the
exemption under this notification shall apply to the aggregate value of all such
taxable services and from all such premises and not separately for each premises
or each services (para-vi of T&C in the notification).
Whether making claim for the exemption is
mandatory or procedural lapse of not claiming it will not debar its entitlement:
Jay Travels vs. Commissioner of
Service Tax Order No. A/306/W ZB/AHD OF 2012: The
benefit of notification is statutory and should have been automatically be given
to the assessee even if such claim was not seeked by him on the principles of
natural justice.
Whether a service provider is also
discharging ST liability under reverse/ partial
reverse charge, can avail benefit under this notification:
This notification, 33/2012 – Service Tax, does not impose any
restriction on availing threshold exemption subject to fulfillment of all others
T&C framed in this regard.
Thus, in a nutshell it may be said that in the
case of a Provider of Service (except reverse charge mechanism
applied in case of GTA) full value of taxable services provided
must be considered for calculating the limit of Rs. 10 Lakhs irrespective of the
fact as to who pays the service tax and up to what extent. Similarly in case of
a Service Receiver, the full value of
services, on which he is required to discharge service tax liability under
reverse charge, whether fully or partially, shall be excluded for calculating
the limit of Rs. 10 Lakhs
Terms and Conditions for availment of
threshold exemption as per notification number 33/2012 – Service
Tax:
The exemption contained in this notification
shall apply subject to the following conditions, namely:-
(i) the provider of taxable service has the
option not to avail the exemption contained in this
notification and pay service tax on the taxable services provided by him and
such option, once exercised in a financial year, shall not be
withdrawn during the remaining part of such financial
year;
(ii) the provider of taxable service
shall not avail the CENVAT credit of service tax paid on any input
services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004
(herein after referred to as the said rules), used for providing the said
taxable service, for which exemption from payment of service tax under this
notification is availed of;
(iii) the provider of taxable service
shall not avail the CENVAT credit under rule 3 of the said
rules, on capital goods received, during the period in which
the service provider avails exemption from payment of service tax under this
notification;
(iv) the provider of taxable service shall
avail the CENVAT credit only on such inputs or input services received,
on or after the date on which the service provider starts paying service
tax, and used for the provision of taxable services for which service
tax is payable;
(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
[i.e. either reversal of CENVAT credit from the balance lying unutilized
(refer para –vi- below or pay cash differential];
(vi) the balance of CENVAT credit
lying unutilized in the account of the taxable service provider after
deducting the amount referred to in sub-paragraph (v), if any, shall not be
utilized in terms of provision under sub-rule (4) of rule 3 of the said rules
and shall lapse on the day such service provider starts
availing the exemption under this notification;
(vii) where a taxable service provider
provides one or more taxable services from one or more premises, the exemption
under this notification shall apply to the aggregate value of all such
taxable services and from all such premises and not separately for each
premises or each services (clubbing concept); and
(viii) 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.
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