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Service Tax exemption for SMEs under new circular
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SME Times News Bureau | 15 Apr, 2016
The government on Thursday said that any service provided by the Government or local authority to a business entity has been made taxable from April 1, 2016, but services provided by the Government or a local authority to business entities up to a turnover of Rs 10 lakh in the preceding financial year have been exempted.
According to the Ministry of Finance, "Prior to this, only support services provided by Government or local authority to business entities were taxable."
The ministry said it has issued a detailed circular on service tax charges on Wednesday to clarify doubts raised by industry organisations and to mitigate the small tax assessees from compliance burden.
"This would relieve small and medium enterprises (SMEs) from compliance burden," it added.
Besides, services by way of grant of passport, visa, driving license, birth or death certificates have been exempted.
"Services provided by government or a local authority to another government or a local authority have been exempted," the statement said.
"However, this exemption is not applicable to services provided by government or a local authority which were subjected to service tax prior to 1st April 2016 (for instance, the services of transport of goods or passengers by Indian Railways)."
The ministry elaborated that services provided by the government, where the gross amount charged for such services does not exceed Rs.5,000, have been exempted.
"In case of continuous service, the exemption shall be applicable where the gross amount charged for such service does not exceed Rs.5,000 in a financial year," the statement pointed out.
"Needless to say that this exemption is not applicable to the services provided by government or a local authority which were subjected to service tax prior to 1st April 2016."
The ministry stated that taxes, cesses or duties are not taxable under service tax.
"It has been clarified that fines and penalty chargeable by government or a local authority imposed for violation of a statute, bye-laws, rules or regulations are not leviable to service tax," the statement said.
The ministry cited that any activity undertaken by the government against a consideration constitutes a service and the amount charged for performing such activities is liable to service tax.
"It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not," the statement explained.
"As long as the payment is made (or fee charged) for getting a service in return, it has to be regarded as a consideration for that service and taxable irrespective of by what name such payment is called."
The ministry reiterated that service tax is being levied on any payment, in lieu of any permission or license granted by the government.
"However, services provided by the government or a local authority by way of registration required under the law have been exempted," the statement informed.
"Services provided by way of testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under the law, have been exempted."
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SERVICE PROVIDED TO GOVT / STATEMENT / PSU
DEEPAK JOSHI | Sun Apr 24 12:27:24 2016
SINGLE BILL VALUE / ORDER VALUE OF THE SERVICES PROVIDED BY THE PSU TO CENTRAL GOVT / STAT GOVT. / PSU ANY GOVT DEPTT. MAY BE CONSIDERED AS EXEMPTED SERVICES FROM SERVICE TAX LIABILITY TO REDUCE WORK BURDEN OF ALL REALTED UNIT SO AS TAKING THE MONEY/FUND/PAYMENT FROM ONE DEPTT. AND AGAIN TO DEPOSIT THE SAME THE SERVICE PROVIDER TO GOVT EXCHEQUER AGAIN.WHAT IS THE USE NEEDS TO BE EXAMINED
service tax
sunanda | Fri Apr 22 13:36:39 2016
It is definitely a positive move in promoting SMEs. However, the 10 lakh turnover is a too less an amount for a micro-unit also.
Circular for SME
Hasmukhlal D.Vora | Fri Apr 22 05:32:45 2016
CAN YOU GIVE THE CIRCULAR NUMBER AND DATE ON WHICH IT WAS NOTIFIED.
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Re: Circular for SME
Saurabh | Tue Apr 26 07:58:57 2016
The Circular can be accessed at http://www.cbec.gov.in/resources//htdocs-servicetax/st-circulars/st-circulars-2016/st-circ-192-2016.pdf
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