Service tax exemptions for SSIs

Last Updated at: January 18, 2020
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Service tax exemptions for SSIs

On March 1, 2003, the government had released an exemption notification for the small scale industry (SSI) under the central excise law. It aims to provide certain relaxations to small scale industries. According to this notification, an incentive is offered to SSI for the growth of the economy, although exemptions to small scale industries cannot be applied to all the products and the benefits are restricted.

A detailed look at the small scale industries exemptions:

Eligibility for SSI exemption     

In order for a business to avail of the Service Tax exemptions, it should have been registered with the State Directorate of industry and it must produce the certificate at the time of obtaining the exemptions. If the turnover of the previous year is to 400 lakhs, and it manufactures the products specified in the notification issued then it is eligible for the exemption.

Rate of duty     

The Indian Government provides an exemption from duty if the turnover is Rs. 150 lakhs in the financial year. It means the excise duty would be payable if the turnover is more than 150 lakhs, similarly, if the SSI entity had started up the business in a current financial year, then it is entitled to the benefit of the exemption for the current year as its previous financial year clearances are NIL, even with the fact that the industry has not started the operations.

The rate of duty would be NIL if the first clearance aggregate value is below Rs. 150 lakhs made on or after the first day of April in any fiscal year.

The rate of duty would be NIL if the clearance of the specified products is used as inputs for further manufacture of any specified goods within the factory for the production of the specified goods in the notification issued for exemption.

Applicability of the Service Tax exemptions

    •  Products manufactured in rural areas
    •  Raw materials required for manufacturers
    • Byproducts, account books, writing pads
    • Manufacture of components
    • Parts of any machinery
    • Products having the brand name of NSIC, KVIC, SSIDC

File Your Taxes & Stay Stress-free

Non-applicability of the Service Tax exemptions

      Some of the products for which the exemptions are not applicable are tea, coffee, ice cream, stainless steel, watches, pistol, tobacco, etc..

Clubbing of clearances

      The primary idea behind this is to avoid the creation of dummy units in order to avail of the benefits under the central excise. This limit will be deliberated by considering the clearances of one manufacturer from a factory or more factories.

Cenvat credit

     A cenvat credit is a credit in respect of central excise on inputs purchased for the manufacture or duty paid for the manufacture of the final product. The service provider shall not avail the cenvat credit of the tax paid on any input or input services used for providing the service for which the exemption has been availed. The service provider will not avail of the cenvat credit on capital goods received during the period in which the exemption has been availed.

The aggregate value of turnover

   The aggregate value not exceeding Rs. 10 lakhs means that the total of first consecutive payments received during a financial year towards the gross amount as prescribed under Section. 67. This does not include payments received which are exempted from the whole of the service tax under any other service tax exemption notification.

 Moreover, if the service provider provides one or more services from one or more premises, the exemption shall apply to the aggregate value of all such services and from all such premises and not separately for each premise or service.

Conclusion

The small scale service provider has the option of availing service tax exemption in case the aggregate turnover value of taxable services does not exceed 10 lakhs in a financial year, hence if the aggregate value of services does not exceed 10 lakhs in the financial year, the service provider can claim the benefit of this service tax exemption and he won’t be required to pay any service tax on such services.  

Service tax exemptions for SSIs

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On March 1, 2003, the government had released an exemption notification for the small scale industry (SSI) under the central excise law. It aims to provide certain relaxations to small scale industries. According to this notification, an incentive is offered to SSI for the growth of the economy, although exemptions to small scale industries cannot be applied to all the products and the benefits are restricted.

A detailed look at the small scale industries exemptions:

Eligibility for SSI exemption     

In order for a business to avail of the Service Tax exemptions, it should have been registered with the State Directorate of industry and it must produce the certificate at the time of obtaining the exemptions. If the turnover of the previous year is to 400 lakhs, and it manufactures the products specified in the notification issued then it is eligible for the exemption.

Rate of duty     

The Indian Government provides an exemption from duty if the turnover is Rs. 150 lakhs in the financial year. It means the excise duty would be payable if the turnover is more than 150 lakhs, similarly, if the SSI entity had started up the business in a current financial year, then it is entitled to the benefit of the exemption for the current year as its previous financial year clearances are NIL, even with the fact that the industry has not started the operations.

The rate of duty would be NIL if the first clearance aggregate value is below Rs. 150 lakhs made on or after the first day of April in any fiscal year.

The rate of duty would be NIL if the clearance of the specified products is used as inputs for further manufacture of any specified goods within the factory for the production of the specified goods in the notification issued for exemption.

Applicability of the Service Tax exemptions

    •  Products manufactured in rural areas
    •  Raw materials required for manufacturers
    • Byproducts, account books, writing pads
    • Manufacture of components
    • Parts of any machinery
    • Products having the brand name of NSIC, KVIC, SSIDC

File Your Taxes & Stay Stress-free

Non-applicability of the Service Tax exemptions

      Some of the products for which the exemptions are not applicable are tea, coffee, ice cream, stainless steel, watches, pistol, tobacco, etc..

Clubbing of clearances

      The primary idea behind this is to avoid the creation of dummy units in order to avail of the benefits under the central excise. This limit will be deliberated by considering the clearances of one manufacturer from a factory or more factories.

Cenvat credit

     A cenvat credit is a credit in respect of central excise on inputs purchased for the manufacture or duty paid for the manufacture of the final product. The service provider shall not avail the cenvat credit of the tax paid on any input or input services used for providing the service for which the exemption has been availed. The service provider will not avail of the cenvat credit on capital goods received during the period in which the exemption has been availed.

The aggregate value of turnover

   The aggregate value not exceeding Rs. 10 lakhs means that the total of first consecutive payments received during a financial year towards the gross amount as prescribed under Section. 67. This does not include payments received which are exempted from the whole of the service tax under any other service tax exemption notification.

 Moreover, if the service provider provides one or more services from one or more premises, the exemption shall apply to the aggregate value of all such services and from all such premises and not separately for each premise or service.

Conclusion

The small scale service provider has the option of availing service tax exemption in case the aggregate turnover value of taxable services does not exceed 10 lakhs in a financial year, hence if the aggregate value of services does not exceed 10 lakhs in the financial year, the service provider can claim the benefit of this service tax exemption and he won’t be required to pay any service tax on such services.  

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