Interpretation of word 'Turnover' for Service Tax Exemption to Advocates
Vikram Khaitan
Dear Divya,
This is with reference to the trailing mail.
With all due-respect, I do not concur with your below-mentioned view that for the purpose of Service rendered by the Advocates to Business Entity, having turnover of less than INR 10 Lakh, to be covered under Mega Exemption Notification [Notification No. 25/2012 dated 20-06-2012], the turnover of taxable service in the preceding Financial Year shall only be considered [although few authors are also of the same view].
In my prima-facie view, the ‘turnover’ for the purpose of Notification No. 25/2012 (Supra) would encompass the entire turnover of the Business Entity including Sales Turnover, which has been disclosed in the P/L Account. My submissions for the same are elucidated here-in-below for ease of reference:
(i) Mega Exemption Notification provides exemption to service provided by Advocates, by way of legal services, to Business Entity having turnover of less than INR 10 Lakh. It is an acknowledged fact that such exemption is provided to enable the Undersized Business Entities to utilize the legal services of advocates without levy of Service Tax.
If your interpretation is considered that the word ‘turnover’ would only include ‘turnover of taxable service’, then services of advocates to Gigantic Manufacturing or Trading Industries, who are not providing any taxable service [i.e. value of the taxable service is less than INR 10 Lakh] would also be exempted, which cannot be the intention of the legislation. The Central Government cannot forego Service Tax on Lakhs [even Crores] of rupees received by advocates from such Colossal Industries.
(ii) Taking recourse to Notification No. 33/2012 – ST dated 20-06-2012 [i.e. Small Service Provider (SSP) Notification] for the definition of ‘turnover’ may not be appropriate since (i) the notification nowhere defines ‘turnover’ but defines ‘aggregate value’ & (ii) but obvious, the aggregate value defined therein would only include taxable services as the exemption under SSP is provided on services only;
(iii) Restricting the natural meaning of ‘turnover’ [which has not been generally defined under Service Tax Law or Excise Law] to ‘turnover of taxable service’, without any specific legislative intent &/or notification &/or clarification, may be against the principle of harmonious interpretation. It is a general rule envisaged by the Apex Courts that the words must say what they mean, nothing should be presumed or implied, they must say so.
It is settled law that words appearing in the statute to be given their natural meaning and not restricted meaning in absence of any particular definition - [CCE Bombay v. Lallubhai Amichand Ltd [1997 (92) E.L.T. 119 (Tribunal)] & CCE, Kanpur v. Krishna Carbon Paper Co. [1988 (37) E.L.T. 480 (S.C.)]. The natural meaning of ‘turnover of Business Entity’ would encompass the entire turnover and not only the Taxable Service Turnover.
However, even I would agree that the aforesaid issue lacks clarity and interference of CBEC in this regard is right away required.
If anyone has a different interpretation to it, kindly enlighten us with the same.
Thanks & Regards,
CA Vikram Khaitan
Director - ARV Advisory Services (P) Ltd.
--------------------------------------------------------------
D: +91-33- 2213 7625 / 3022 4196; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
-------------------------------------------------------------
From: echange-pro...@googlegroups.com [mailto:echange-pro...@googlegroups.com] On Behalf Of Divya
Sent: 17 October 2012 17:13
To: vinodan...@gmail.com; 'vinod goyal'; foru...@googlegroups.com; 'Exchange Prof'; 'CA.RANJEET AGARWAL'; 'P.D.RUNGTA'; 'Sushil Goyal'; 'CA. Shivani Shah'; ds_k...@yahoo.co.in; 'indirecttaxinfo'
Subject: RE: [SPAM]- Re: {CA AGARWAL RANJEET} clarification on availibility of threshhold limit of ten lac to recipient of service under reverse charge
Entry no. 5 in Notification no. 30/2012 provides that in respect of services provided or agreed to be provided by individual advocate or firm of advocates by way of legal services, 100% of the service tax thereon would be payable by the service receiver. Mega Exemption notification i.e. Notification no. 25/2012- ST , dated 26-06-2012 grants exemption to : “Service provided by-
(a) An arbitral tribunal to –
(b) (i) any person other than a business entity; or
(c) (ii) a business entity with a turnover upto rupees ten lakh in the preceding financial year;”
However, the notification does not define “turnover in the preceding financial year”. The exemption relates to payment of service tax. Thus, one may take recourse of Notification no. 33/2012 – St dated 20-06-2012 which exempts provider of service from payment of service tax upto the aggregate value of taxable service of Rs. 10 lakhs subject to compliance with the conditions stipulated therein.
It therefore appears that the turnover of taxable service of business entity in the preceding financial year shall be considered for the purpose of granting exemption under this clause.
FCA Divya Mohta
+9831175439
Partner, SDP & Associates
Chartered Accountants
From: echange-pro...@googlegroups.com [mailto:echange-pro...@googlegroups.com] On Behalf Of vinodan...@gmail.com
Sent: 16 October 2012 12:23
To: vinod goyal; foru...@googlegroups.com; Exchange Prof; CA.RANJEET AGARWAL; P.D.RUNGTA; Sushil Goyal; CA. Shivani Shah; ds_k...@yahoo.co.in; indirecttaxinfo
Subject: [SPAM]- Re: {CA AGARWAL RANJEET} clarification on availibility of threshhold limit of ten lac to recipient of service under reverse charge
Mr Mehta seems to be wrong and Mr Vinod Goyal is correct in saying that threshold limit of Rs 10 lacs is not relevant for payment of service tax under Reverse Charge Mechanism. Regards, Vinod K Dubey.
Sent on my BlackBerry® from Vodafone
From: vinod goyal <vkg_a...@yahoo.com>
Sender: echange-pro...@googlegroups.com
Date: Mon, 15 Oct 2012 16:24:10 +0800 (SGT)
To: foru...@googlegroups.com<foru...@googlegroups.com>; Exchange Prof<echange-pro...@googlegroups.com>; CA.RANJEET AGARWAL<ranjee...@gmail.com>; P.D.RUNGTA<pdru...@gmail.com>; Sushil Goyal<goyals...@gmail.com>; CA. Shivani Shah<shivan...@gmail.com>; ds_k...@yahoo.co.in<ds_k...@yahoo.co.in>; indirecttaxinfo<indirec...@googlegroups.com>
ReplyTo: vinod goyal <vkg_a...@yahoo.com>
Subject: {CA AGARWAL RANJEET} clarification on availibility of threshhold limit of ten lac to recipient of service under reverse charge
dear all,
mr atul mehta has replied that threshhold limit of ten lac will be available to the service recipient in case of reverse charge.
however, in all the cpe seminars and background material on this topic it was clarified that under reverse charge no threshhold limit benefit is available to recipient.
hence this needs to be resolved.
vinod kumar goyal, F.C.A.,P.G.D.In A.D.R.
From: atulmehta55 mehta <atulm...@yahoo.com>
To: foru...@googlegroups.com
Sent: Monday, 15 October 2012 11:00 AM
Subject: Re: [CA RUNGTA P D]
Dear Mr Kanoria
In case of Payment to Lawyer - You have to get your self Registered With Service Tax Department, Pay Tax and File Return Too.
In Case of Payment to Lawyers - Reverse Charge Operates Even Receiver of Service is Non Corporate, only Relief is the Receiver of Service has Turover less than Rs 10 Lakh.
Regards
CA ATUL MEHTAA.P.MEHTA & ASSOCIATES39, Chakraberia Road (South)Kolkata - 700 025Mobile : 9830027784Office : +91+33+24741584
--- On Sat, 10/13/12, D Kanoria <dkan...@gmail.com> wrote:
From: D Kanoria <dkan...@gmail.com>
Subject: [CA RUNGTA P D]
To: foru...@googlegroups.com
Date: Saturday, October 13, 2012, 1:27 PMA small limited company has availed the services of a lawyer seeking legal opinion on a issue. As per the new lay this company has to pay service tax on this bill. It is happy to pay the service tax. The question is whether the company needs to register itself as an assessee for making this payment and whether it has to file returns periodically even though this may be a one off transaction.
What happens if the recipient is an individual rather than a company?
D. Kanoria--
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Divya
Dear Vikram
Your logic and understanding seems quite acceptable. But then there is another important clarification- what is the meaning of turnover: whether business turnover would only be included or other income would also form art of turnover? Suppose, a business entity earns rental income and shows it as house property income and it is not a business venture. It does not get tax audit done, though the rental income is more than 60lakhs, becoz such income is part of other income and not business income. It has no other business income. Then in such a case, whether it would be liable to pay service tax under reverse charge on lawyer services or not? Please throw some light.
FCA Divya Mohta
+9831175439
Partner, SDP & Associates
Chartered Accountants
atulm...@yahoo.com
KIRTI TULSYAN
Dear Divya,
This is with reference to the trailing mail.
Item No. 6 of Notification No. 25/2012 dated 20-06-2012 grants exemption to services provided by advocates to any business entity with turnover of upto INR 10 Lakhs in the preceding Financial Year. The notification does not uses the word ‘Business Turnover’ instead has used the word ‘Business Entity with Turnover’. Hence, in my view, from the plain reading of the notification and understanding of word ‘turnover’, it appears that the entire proceeds of the business entity has to be considered, irrespective of the fact that whether the same has arisen out of business activity or not.
Considering the conservative view & the intention of the Service Tax Department to exempt only the Undersized Business Entities, the entire turnover as appearing in the Profit & Loss Account of the Business Entity would be considered for the purpose of Notification No. 25/2012 (Supra). The same would also include other incomes arising out of ‘non-business’ activities.
Hence, in your illustration, the exemption from legal services may not be available, since the proceeds earned by the business entity exceeds INR 10 Lakhs.
However, I re-iterate that the issue lacks clarity and interference of CBEC is required.
If you require any further clarification, please let me know.
Thanks & Regards,
CA Vikram Khaitan
Director - ARV Advisory Services (P) Ltd.
--------------------------------------------------------------
D: +91-33- 2213 7625 / 3022 4196; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
-------------------------------------------------------------
Dear Vikram
Your logic and understanding seems quite acceptable. But then there is another important clarification- what is the meaning of turnover: whether business turnover would only be included or other income would also form art of turnover? Suppose, a business entity earns rental income and shows it as house property income and it is not a business venture. It does not get tax audit done, though the rental income is more than 60lakhs, becoz such income is part of other income and not business income. It has no other business income. Then in such a case, whether it would be liable to pay service tax under reverse charge on lawyer services or not? Please throw some light.
FCA Divya Mohta
+9831175439
Partner, SDP & Associates
Chartered Accountants
Dear Divya,
This is with reference to the trailing mail.
With all due-respect, I do not concur with your below-mentioned view that for the purpose of Service rendered by the Advocates to Business Entity, having turnover of less than INR 10 Lakh, to be covered under Mega Exemption Notification [Notification No. 25/2012 dated 20-06-2012], the turnover of taxable service in the preceding Financial Year shall only be considered [although few authors are also of the same view].
In my prima-facie view, the ‘turnover’ for the purpose of Notification No. 25/2012 (Supra) would encompass the entire turnover of the Business Entity including Sales Turnover, which has been disclosed in the P/L Account. My submissions for the same are elucidated here-in-below for ease of reference:
(i) Mega Exemption Notification provides exemption to service provided by Advocates, by way of legal services, to Business Entity having turnover of less than INR 10 Lakh. It is an acknowledged fact that such exemption is provided to enable the Undersized Business Entities to utilize the legal services of advocates without levy of Service Tax.
If your interpretation is considered that the word ‘turnover’ would only include ‘turnover of taxable service’, then services of advocates to Gigantic Manufacturing or Trading Industries, who are not providing any taxable service [i.e. value of the taxable service is less than INR 10 Lakh] would also be exempted, which cannot be the intention of the legislation. The Central Government cannot forego Service Tax on Lakhs [even Crores] of rupees received by advocates from such Colossal Industries.
(ii) Taking recourse to Notification No. 33/2012 – ST dated 20-06-2012 [i.e. Small Service Provider (SSP) Notification] for the definition of ‘turnover’ may not be appropriate since (i) the notification nowhere defines ‘turnover’ but defines ‘aggregate value’ & (ii) but obvious, the aggregate value defined therein would only include taxable services as the exemption under SSP is provided on services only;
(iii) Restricting the natural meaning of ‘turnover’ [which has not been generally defined under Service Tax Law or Excise Law] to ‘turnover of taxable service’, without any specific legislative intent &/or notification &/or clarification, may be against the principle of harmonious interpretation. It is a general rule envisaged by the Apex Courts that the words must say what they mean, nothing should be presumed or implied, they must say so.
It is settled law that words appearing in the statute to be given their natural meaning and not restricted meaning in absence of any particular definition - [CCE Bombay v. Lallubhai Amichand Ltd [1997 (92) E.L.T. 119 (Tribunal)] & CCE, Kanpur v. Krishna Carbon Paper Co. [1988 (37) E.L.T. 480 (S.C.)]. The natural meaning of ‘turnover of Business Entity’ would encompass the entire turnover and not only the Taxable Service Turnover.
However, even I would agree that the aforesaid issue lacks clarity and interference of CBEC in this regard is right away required.
If anyone has a different interpretation to it, kindly enlighten us with the same.
Thanks & Regards,
CA Vikram Khaitan
Director - ARV Advisory Services (P) Ltd.
--------------------------------------------------------------
D: +91-33- 2213 7625 / 3022 4196; M: +91-98315 86568
Email: vik...@arvsolutions.co.in / in...@arvsolutions.co.in
-------------------------------------------------------------
Entry no. 5 in Notification no. 30/2012 provides that in respect of services provided or agreed to be provided by individual advocate or firm of advocates by way of legal services, 100% of the service tax thereon would be payable by the service receiver. Mega Exemption notification i.e. Notification no. 25/2012- ST , dated 26-06-2012 grants exemption to : “Service provided by-
(a) An arbitral tribunal to –
(b) (i) any person other than a business entity; or
(c) (ii) a business entity with a turnover upto rupees ten lakh in the preceding financial year;”
However, the notification does not define “turnover in the preceding financial year”. The exemption relates to payment of service tax. Thus, one may take recourse of Notification no. 33/2012 – St dated 20-06-2012 which exempts provider of service from payment of service tax upto the aggregate value of taxable service of Rs. 10 lakhs subject to compliance with the conditions stipulated therein.
It therefore appears that the turnover of taxable service of business entity in the preceding financial year shall be considered for the purpose of granting exemption under this clause.
FCA Divya Mohta
+9831175439
Partner, SDP & Associates
Chartered Accountants
Mr Mehta seems to be wrong and Mr Vinod Goyal is correct in saying that threshold limit of Rs 10 lacs is not relevant for payment of service tax under Reverse Charge Mechanism. Regards, Vinod K Dubey.
Sent on my BlackBerry® from Vodafone
dear all,
mr atul mehta has replied that threshhold limit of ten lac will be available to the service recipient in case of reverse charge.
however, in all the cpe seminars and background material on this topic it was clarified that under reverse charge no threshhold limit benefit is available to recipient.
hence this needs to be resolved.
vinod kumar goyal, F.C.A.,P.G.D.In A.D.R.
In case of Payment to Lawyer - You have to get your self Registered With Service Tax Department, Pay Tax and File Return Too.
In Case of Payment to Lawyers - Reverse Charge Operates Even Receiver of Service is Non Corporate, only Relief is the Receiver of Service has Turover less than Rs 10 Lakh.
Regards
CA ATUL MEHTAA.P.MEHTA & ASSOCIATES39, Chakraberia Road (South)Kolkata - 700 025Mobile : 9830027784Office : +91+33+24741584
--- On Sat, 10/13/12, D Kanoria <dkan...@gmail.com> wrote:
From: D Kanoria <dkan...@gmail.com>
Subject: [CA RUNGTA P D]
To: foru...@googlegroups.com
Date: Saturday, October 13, 2012, 1:27 PMA small limited company has availed the services of a lawyer seeking legal opinion on a issue. As per the new lay this company has to pay service tax on this bill. It is happy to pay the service tax. The question is whether the company needs to register itself as an assessee for making this payment and whether it has to file returns periodically even though this may be a one off transaction.
What happens if the recipient is an individual rather than a company?
D. Kanoria--
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