Service tax in India is necessary for all services except those in a negative list of services. Exemptions that are available under service tax in India are as follows:
Exemptions Available To All Assesses In Respect Of All Services:
- A service that offers any international organization or to the United Nations is exempt from service tax.
- Any service that offers units of Special Economic Zones or to Special Economic Zone developers is exempt from service tax.
- The provision of services that are free of cost is exempt from service tax.
- Taxable services which provide the diplomats and their family members for official purposes are exempt from service tax.
- Any service that offers without being a taxable service, despite the fact that payments took place at a later date, is exempt from service tax.
Exemptions Available To Specified Assess With Respect To All Services.
Services Provided By:
- Reserve Bank of India
- Technology business incubation and science and entrepreneurship park.
- Technology business incubates.
- A threshold exemption scheme was introduced by CBEC exempting service tax on the aggregate value of taxable service not exceeding 4 lakhs received by the service providers during a financial year. This limit was further extended to 8 lakhs.
This threshold limit exemption can be availed if the following conditions were fulfilled:
- The service provider is not claiming any CENVAT credit of service tax paid on any input service used for providing taxable service.
- The service provider is not claiming any CENVAT credit on capital goods under his premises during the period in which service provider avails benefit.
SERVICE TAX EXEMPTIONS FOR SMALL SERVICE PROVIDERS
Small service providers whose total turnover value of all taxable services provided by them is not more than Rs 10 lakhs over the course of a financial year are eligible to avail of service tax exemptions. However, even though this exemption can be availed if the total turnover is in excess of Rs 10 lakhs, small service providers are mandatorily required to place an application for service tax registration.
Conditions for availing exemption for service tax for SSP:
- If the total value of the taxable services of the small service provider is not more than Rs 10 lakhs for the present financial year as well as the financial year prior to the current one.
- Small service providers must not utilize the CENVAT credit that they have received on input services or capital goods over the period of time during which they are looking to avail of service tax exemptions.
Small service providers cannot avail of service tax exemptions should a situation arise wherein a reverse charge may apply.
- Exemption from service tax will be of no use if any service that is taxable which a small service provider offers by operating under a brand or trade name.
- If a small service provider offers multiple services through multiple outlets, then service tax exemption can only be availed of if the total turnover of all services from all outlets is not more than Rs 10 lakhs.
NEGATIVE LIST OF SERVICE TAX
Under Section 66D of the Finance Act 1994, a negative list of services is set out, which are considered to exempt from service tax. Any service provided that does not come under the purview of this list is liable to be levied with service tax.
Service Tax Exemptions apply to the following services outlined under the negative list:
Any service that is provided by a government or localized authority, with the exception of the following:
- Aircraft services in the vicinity of airports
- Vessel services in the vicinity of ports
- Transportation services with regards to goods or passengers
- Postal service
- Any other services provided to organizations carrying on business, but which do not fall under the services mentioned above
Any service in relation to agricultural operations such as:
- Lease of equipment or land
- Storage of produce
- Agricultural processes which only seek to enhance the marketability of the produce without changing or altering any of its characteristics
- A service that involves the trade of products or goods.
- Any activity that results in the creation or manufacture of goods.
- Any service with regards to toll fees for bridges or roads.
- Provision of services that involve windfalls such as lotteries or betting.
- Services in relation to the admission fees levied on access to events with regards to entertainment.
Providing services related to the distribution and transmission of power and electricity by any utility dealing with the same.
Educational services such as:
- With regard to pre-school.
- Education with regards to higher secondary school or similar.
- In relation to the attainment of any qualification that is recognizable legally.
- Education as a component of an authorized vocational course.
Any funeral services such as:
- Services related to the burial of an individual.
- Crematory services.
- Mortuary services.
- Services involving the transportation and transfer of the deceased individual.