My Opinion regarding threshold limit of Service Tax
I guess you have not clarified the problem very specifically. However on the available info I would like to place my views….
1. A taxable entity needs to pay service tax if such entity exceeds the threshold limit in particular year.
2. Let’s assume that in a particular financial year if a person has exceeded the threshold limit and has paid the tax and if in next year if he falls below the category of threshold limit of taxation then it’s quite evident & clear that as per Service Tax Law he is neither liable collect service tax or to pay the tax.
3. If an assessee falls below threshold limit, then its will & wish of the assessee whether he wants to be on record of Service tax or not. It’s purely optional. I agree with the views of Mr. Azim Khan. But well ahead of time try to guess whether total taxable turnover will fall below threshold limit or not.
4. But what is very important is …….
(i) If an assessee assumes that he will cross the taxable limit and duly collects the service tax from customers and if he doesn’t cross the threshold limit, In such case it’s his duty and it’s mandatory too, to pay the taxes collected and file the Service Tax Returns punctually. He can’t keep service tax collected with him saying that he has not achieved threshold limit. Such an act is untenable in the eyes of law which may lead to severe actions as prescribed in Service Tax Law, because he has only collected monies on behalf of Central Government.
(ii) If an assessee assumes that he will not cross the taxable limit and doesn’t collect the service tax from customers and if he crosses the threshold limit, in such case it’s mandatory to pay the taxes. Here assessee may end up in paying it from his pocket. He can’t keep mum without paying taxes and not filing Service Tax Returns merely on the belief that he has not collected any monies under prevailing law of Service Tax. This act not only attract interest on tax quantum that is payable as per applicable Service Tax Law but may lead to penal action too.
(iii) Hence I opine that if someone feels that his total turnover may come very close to threshold limit in such situation it’s better to collect the taxes to avoid the losses that may arise in case assessee crosses threshold limit by meager amount.
So my dear friend be very cautious and assume/pre-calculate your turnover properly to avoid unpleasant situation and losing your hard earned money.
Thank you
Jb
