Background
As per Section 66D of Finance Act, 1994 as amended by Finance Act, 2012 services provided by government or local authority are not chargeable to service tax, subject to following exceptions:-
· services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government;
· services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
· transport of goods or passengers; or
· support services, other than services covered under clauses (i) to (iii) above, provided to business entities;
As per the recent service tax laws, support services provided by the government or local authority to business entity are taxable without any threshold limit. Moreover these services are also covered under the ambit of 100% reverse charge meaning thereby service recipient is liable to pay service tax to government.
Notification*
In order to provide relief to service recipient, the government has inserted entry No. 48 vide Notification No. 25/2012. Notification hereby provides that where any services provided by government or local authority to any business entity, whose turnover is less than Rs. 10 Lakh in preceding previous year are not chargeable to service tax.
Applicability
This notification is effective from 01 April, 2016.
*Notification No. 07/2016 dated 18th February 2016