WHEN LIABLE FOR REGISTRATION OF SERVICE TAX

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  1. LAKHAN GOPAL INGALE

    LAKHAN GOPAL INGALE New Member

    SIR,
    MY CLIENT BUSINESS NATURE IS BUILDERS & DEVELOPERS
    TRANSACTION DONE OF RS. 2450000/- SALE A FLAT ( BELOW 2000sq. ft )
    FOR CONSIDERING THE SERVICE TAX LIMIT OF RS. 1000000/-
    AFTER LESS THE ABATEMENT VALUE OF 75% TO ALLOWED FOR BUILDERS AND DEVELOPER ?
    AND WHAT PENALTY FOR LATE REGISTRATION OF SERVICE TAX
    PLZ GIVE ME YOUR SUGGESTION
     
  2. ZED

    ZED Well-Known Member

    I am deliberately using different definitions so as to bring more clarity. I will also pick up the issue of composition/optional scheme alongwith abatement.
    Kindly note that there are 2 issues, One is in respect of registration and other is in respect of SSP exemption. One has to get registered under ST as soon as aggregate value Exceeds 9 Lakhs. Its the exemption which is available for the limit of 10 Lakhs.



    As per Notification No. 33/2013 (SSP exemption)
    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 shall be exempt.


    (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.”


    Kindly note that there is slight difference in definition of aggregate value as provided under
    The Service Tax (Registration of Special Category of Persons) Rules, 2005

    As per R3(2) Any provider of taxable service whose aggregate value of taxable service in a financial year exceeds nine lakh rupees shall make an application to the jurisdictional Superintendent of Central Excise in such form as may be specified, by notification, by the Board, for registration within a period of thirty days of exceeding the aggregate value of taxable service of nine lakh rupees.


    R2(b) “aggregate value of taxable service” means the sum total of first consecutive payments received during a financial year towards the gross amount, as prescribed under section 67 of the Act, charged by the service provider towards taxable services but does not include payments received towards such gross amount which are exempt from the whole of service tax leviable thereon under section 66 of the Act under any notification other than Notification No. 6/2005-Service Tax, dated the 1st March, 2005 [G.S.R. 140 (E), dated the 1st March, 2005]


    (For the purpose of calculating limit of 9Lakhs)
    Reading the second definition, it is clear that we have to consider the value which is "charged by the service provider towards taxable services ". In case of construction service, the payment is in respect of goods aswell as for service.
    Therefore for determining the limit of 9Lakhs we will consider only the amount "charged by the service provider towards taxable services "

    Another noteworthy point is reference to S.67
    As per sub section 4 of S.67
    "Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed."
    That is according to the "SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006"

    This would cover for example "Determination of value of service portion in the execution of a works contract." As per which
    "Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract."




    Coming to abatements.

    The earlier definition (SSP exemption) defined "aggregate value” to be 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.”

    Literally interpreting the provisions, the only exclusion has been for for those services which are exempted from WHOLE of the service tax leviable u/s 66B. When abatement is provided, the service is not exempted from whole of the value of the service. Further Exemption is provided from the value as computed as per S.67 and the rules made there under (SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006).

    When abatement is provided then it is provided from service tax and not from the value of the service. Though in reality, the object was to remove the value of the GOODS. But because of the specific wordings. We have to consider the value. Abatement notification did not decreased the value unlike the SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006 ,which did decreased the value of the service.


    Extracts of the E/N 26/2012
    The Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (2) of the Table below, from so much of the service tax leviable thereon under section 66B of the said Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (3) of the said Table, of the amount charged by such service provider for providing the said taxable service,



    Exemption notification 26/2012 has been issued by deriving the power not from S.67 but from S.93

    93. Power to grant exemption from service tax. – (1) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt generally or subject to such conditions as may be specified in the notification, taxable service of any specified description from the whole or any part of the service tax leviable thereon.

    (2) If the Central Government is satisfied that it is necessary in the public interest so to do, it may, by special order in each case, exempt any taxable service of any specified description from the payment of whole or any part of the service tax leviable thereon, under circumstances of exceptional nature to be stated in such order
     
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