In the Budget the Finance Minister has raised the Service Tax exemption from Rs 4 lakh to Rs 8 lakh. Could you please elaborate on how it works?

- Reseller from Indore

Suhail Nathani: Last year the government had announced Service Tax exemption for small service providers with service revenues of less than Rs 4 lakh (vide Notification 6/2005 dated 1.3.2005), subject to fulfilment of various specified conditions. In this Budget the Finance Minister has further increased the exemption limit to Rs 8 lakh. The corresponding requirement for service providers to register with the tax authorities has also been hiked from Rs 3 lakh to Rs 7 lakh w.e.f. the current financial year.

Suresh Pansari: If your revenues from services during the last fiscal (April 1, 2006 to March 31, 2007) were less than Rs 4 lakh you don't have to pay any Service Tax. If this revenue was above Rs 4 lakh, let's say Rs 8 lakh, you have to pay Service Tax only on Rs 4 lakh. Now this exemption has been hiked to Rs 8 lakh from April 1, 2007. In the next fiscal, when you file your returns you will have to pay Service Tax on service revenue only if it exceeds Rs 8 lakh.