Exemption from service tax

If they meet specific requirements, small service providers may qualify for service tax exemptions. A comprehensive list of the services or service providers that qualify for these exemptions is also provided.

Note: As of July 1, 2017, the Goods and Services Tax (GST) has taken the place of the Service Tax.

According to the 2016 Budget, there is a 15% service tax applied to all taxable services. There are, however, several exclusions from the requirement to pay service tax. These exemptions are available to any entity offering a service, regardless of the kind of service they provide.

General Service Tax Exemptions

If their services fit any of the following requirements, service providers may generally make use of the following exemptions:-

(a) Service tax exemption is available to small service providers up to a maximum of Rs 10 lakhs.

(a) Service tax is not applied to any goods or services provided to the United Nations or any other international organisation.

(c) All services provided to Special Economic Zone developers or to their units are free from service tax.

(d) Any free service given or delivered is exempt from the service tax.

(e) Taxable services rendered for official reasons to ambassadors and their families are excluded from service tax.

(f) Taxable services given to diplomats and their families for private use are excluded from service tax as well.

(g) Regardless of when payments were made, services that were rendered before they were deemed to be taxable services are exempt from service tax.

Service Tax is not applicable to small service providers

Service tax exemptions are available to small service providers whose combined annual turnover value of all taxable services they supply does not exceed Rs 10 lakhs. Even if these exclusions are available if the entire revenue exceeds Rs. 10 lakhs, small service providers must nevertheless submit a registration application for the service tax within thirty days of their turnover exceeding Rs. 9 lakhs.

Tax exemption is beneficial. You see more info on 80g deduction.

The following are some additional requirements that small service providers must meet in order to qualify for service tax exemptions:-

(a) If the total cost of taxable services rendered by the small service provider for the current fiscal year and the fiscal year before the current one does not exceed Rs. 10 lakhs.

(b) Small service providers cannot use the CENVAT credit they earned on capital goods or input services during the time they are attempting to apply for service tax exemptions.

(c) In the event that a scenario arises in which a reverse charge would be applicable, small service providers are not eligible for service tax exemptions.

(d) Service tax exemption cannot be used. If a small service provider using a brand or trade name renders any services that are considered taxable,

(e) If a small service provider delivers several services through various outlets, service tax exemption is only available if the combined annual revenue from all of the outlets' services does not exceed Rs. 10 lakhs.

Details about 80g can be seen here.