Law prior to 1.7.2012 
Exemption Scheme for Small
Service Providers was covered by the following Notifications – 
No. 06/2005-ST dated
    Threshold limit Rs. 4 lakhs. 
No. 04/2007-ST dated
Threshold limit Rs. 8 lakhs. 
No. 08/2008-ST dated
Threshold limit Rs. 10 lakhs.
Law w.e.f. 1.7.2012 
Exemption Scheme for Small
Service Providers is governed by Notification No. 33/2012-ST dated 20.06.2012
and the exemption limit is Rs. 10 lakhs. 
Amendments in Exemption
Amendments w.e.f. 1.4.2007
The threshold exemption limit of
Rs. 4 lakhs was raised to Rs. 8 lakhs w.e.f. 1.4.2007 vide Notification No.
04/2007-ST dated 1.3.2007 amending the exemption Notification No. 06/2007-ST
dated 1.3.2007. Thus, w.e.f. 1.4.2007, the limit of Rs. 4 lakhs was raised to
Rs. 8 lakhs with all other conditions of Notification No. 06/2005-ST remaining
Amendment made w.e.f. 1.4.2008
W.e.f. 1.4.2008, vide
Notification No. 8/2008-ST dated 1.3.2008, threshold exemption limit for
service tax exemption was increased from Rs. 8 lakhs to Rs. 10 lakhs. For
financial year 2008-09, if service providers aggregate value of taxable
services was not more than Rs. 10 lakh in 2007-08, such assessees could opt for
exemption scheme.

Amendment w.e.f. 1.4.2012
Vide Notification No. 5/2012- ST
dated 17.3.2012, w.e.f. 1.4.2012, amendment was made in the meaning of
aggregate value to the effect that first clearances up to Rs. 10 lakhs would be
constituted in terms of invoices raised or to be raised and not on the basis of
payments received to determine the aggregate value.
Amendment w.e.f. 1.7.2012
Vide Notification No. 33/2012-ST
dated 20-6-2012, Notification No. 06/2005-ST has been superceded. W.e.f.
1-7-2012, aggregate value means the sum total of value of taxable services
charged in the first consecutive invoices issued during a financial year but
does not include value charged in invoice issued towards such services which
are exempt from whole of service tax leviable thereon under section 66B of the
said Finance Act under any other notification.
Receiver cannot avail the benefit
of exemption scheme
The exemption scheme is meant
only for service providers. The exemption cannot be availed by service
providers who are not liable to pay service tax on the services rendered by
them. Similarly, service receivers who avail the services but are person liable
to pay the tax under Section 68(2) as a special case are not the service
providers. As such, service receivers cannot claim the benefit of exemption
scheme. Thus, this scheme will not be of any benefit to either the service
receiver or the service provider in such cases. These will include mutual fund
distribution, services rendered from outside India, life insurance and general
insurance auxiliary services etc.
The exemption scheme does not
apply to person liable under section 68(2) of the Finance Act, 1994 or person
other than service providers as specified under rule 2(1)(d) of Service Tax
Rules, 1994. To avail the exemption, the person should be a service provider
only. However, Cenvat credit can be taken as per rules subject to fulfilment of
the specified conditions of being on input service.
The reverse charge mechanism has
been expanded w.e.f. 1 July 2012. As such, the service recipients of services
such as arbitral tribunal, legal services, support services provided by the
Government, renting of vehicles, works contracts, manpower supply, security
services, directors service etc covered under reverse charge as per
Notification No. 30/2012-ST dated 20.6.2012 shall have to pay service tax and
in such cases, benefit of exemption scheme will not be available to service
The service receiver is only
liable to pay service tax and by doing so, he does not become service provider.
The liability to pay service tax has only been shifted.
Franchise / Brands excluded
Explanation (A) to the
notification defines brand name or trade name to mean a brand name or a trade
name, whether registered or not, say, a name or a mark, such as symbol,
monogram, logo, label, signature, or invented word or writing which is used in
relation to such specified services for the purpose of indicating or so as to
indicate a connection in the course of trade between such specified services
and some persons using such name or mark with or without any indication of the
identity of that person.
In CCE, Madurai v. Aquanet 2010
(11) – CESTAT, CHENNAI, penalty was waived invoking section 80 where assessee
was under a bonafide belief on entitlement to small scale service provider
exemption and was not aware of bar on use of others brand name.
Small service provider scheme
does not apply to taxable services provided by a person under a brand name or
trade name whether registered or not. Brand name may or may not be registered.
In CCE v. Grasim Industries Ltd 2005 (4) – SUPREME COURT OF INDIA, it was held
that even a name of the company can be a trade name if the context so permits.
It can be said that a mere use of brand name of other person would not
disentitle the exemption benefit. The brand must have nexus with service
provided. The brand should have nexus with services, not the goods. Mere
mention of brand name on invoice will not imply that such a note comprised in
bill is a brand name usage for a service.
In Peoples Automobiles Ltd v.
CCE, Kanpur 2011 (8) – CESTAT, NEW DELHI, it was held that Notification No.
6/2005- ST, dated 1-3-2005 does not put restriction with reference to use of
brand name of service recipient, but same debars the benefit of exemption to
small service provider on use of brand or trade name of another person. Therefore,
exemption cannot be denied in case where services provided by direct sales
agents to banks or other non- banking financial institution, under their own
name and not by using the recipients i.e. the banks brand name. 
In Shree Balaji Garments Ltd. v.
CCE, Jaipur I 2011 (2) – CESTAT, NEW DELHI , where the assessee ( a franchise
engaged in brand promotion) had misinterpreted eligibility for the exemption
under the Notification No. 6/2005 ST, it was held that the benefit of
notification, prima facie, was not available as brand name of another was used
by the assessee. 
No refund permissible 
In Re : Cancio E.P. Mascarenhas
2009 (8) – COMMISSIONER OF CENTRAL EXCISE (APPEALS), GOA, where refund was
claimed by small assessee under exemption limit, it was held that there is no
provision to change option once the exemption under Notification No. 6/2005-ST
is availed or opted to pay service tax without exemption and refund was not
In S. Nagaraj v. CCE, Tiruchirapalli
2010 (10 – CESTAT, CHENNAI, it was held that Notification No. 6/2005-ST dated
1-3-2005 provided service provider of taxable service with an option not to
avail the exemption contained in notification and pay the service tax on
taxable services provided by him, but such option once exercised in a financial
year could not be withdrawn during the remaining part of financial year.
Therefore, the benefit of exemption was to be denied as assessee initially paid
service tax for service provided and then claimed exemption in same financial

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