Service Tax Exemption in India

Service Tax exemption

Normally, Service Tax is paid by service providers whatever service they offer. But they are not paying their own money. They are getting money from the consumers and pay it to the government. But some services get an exemption from this tax. Services, those are in the Negative List get an exemption from service tax. Small Scale Providers who do not earn 10 lac per year, need not to pay service tax. Some Common Services are also exempt from service tax.

Common services

  1. Small Service Providers who are earning within 10 lac per year, need to pay service tax.
  2. Prefer any services to United Nations and International Organisations, need not to pay service tax.
  3. Doing some services officially to their family is exempt from service tax.
  4. Service that is offered to Special Economic Zones or to Special Economic Zone developers needs not to pay service tax.
  5. Services those are provided to Diplomatic Missions for official purpose.
  6. Service that is provided free of cost is exempt from service tax.
  7. Service that is offered formerly it was considered as a taxable service, but the payments took place later, get exempt from service tax.
  8. CENVAT credit is exemption from service tax.

E.g Harish is a painter. He did a painting for someone. He got 20,000 thousand for that. And he spent 3,000 for buying brush and paint, spent 2,000 thousand for traveling. Totally he spent 5,000. Now he has 15,000. He doesn’t need to pay service tax for 5,000. That 5,000 is called cenvat credit.

Negative list services

“Negative list” services come under section 66D of the Finance Act 1994.

  1. Agriculture related services such as
  • Plant defense and testing
  • production
  • Cultivation
  • Harvesting
  • Threshing ( separate grains from their plants by person or by machine)
  • Supplying labours to farms
  • Warehousing and storage
  • Agent (broker) services
  • Doing any process on agricultural land such as trimming, drying, cutting, sorting (arranging), curing, fumigating, tending, packing, loading, unloading, etc.
  • Leasing or renting of equipment or land.
  1. Services, that are provided  by a Government or Localised Authority to any business organization such as
  • Postal service
  • Transportation service
  • Aircraft service
  • Vessel service
  1. Educational services such as
  • Security service
  • House-keeping service
  • Cleaning service
  • Transportation of staff, faculty, and students
  • Vocational education course
  • Catering service
  • Conducting examinations
  • Services relating to Admission
  • Pre-school education and education up to higher secondary school
  • Knowledge developing activity such as seminars, quiz programs, conference.
  1. Transportation services relating to  goods (If we export) such as
  • Transport by roadways
  • Transport by ship or airplane
  • Transport by waterways or canals
  1.  Funeral services such as
  • Mortuary service
  • Ambulance service
  • Crematory services
  • Burial service
  1.  Services provided by the RBI (Reserve Bank of India)
  2. Service offered by a diplomatic mission of foreign Foundation located within the country. (in India)
  3.  Need not to pay Service Tax on Export of Services.
  4.  Insurance Agents and Mutual Fund Agents need not to pay service tax.
  5. Some manufacturers are also getting an exemption from service tax.
  6.  If you win a large amount of money from betting or lotteries or gambling, need not to pay service tax.
  7. Services related to dealing with products or goods
  • Goods transport agency
  • Courier agency
  1. Toll fees for bridges or roads.
  2. Services those are connected to the distribution and transmission of power and electricity.
  3. Selling of space and time for advertisements in different medias such as Newspaper, Internet, Radio, and Television.
  4. Any service that offered by a veterinary clinic to take care of the health of animals and birds.
  5. Banking services such as
  • Fixed deposits/saving deposits/any other deposit to get an interest.
  • Offering a loan
  • Mortgage or pledge something to get a money
  • Corporate deposits
  • Intersale or purchase foreign currency
  1. Transport services to passengers such as
  • Transport  by train (A Class or B class)
  • Transport by waterways or inland canals
  • Transport by metro, monorail or tram
  • Transport by taxi, auto, and other vehicles which are not used for the purpose of tourism.
  1. Sport related services such as
  • Coaching and
  • Training.
  1. Services offered by blood banks.
  2. Slaughtering of animals.
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