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In this case also, instead of normal service tax @ 15% on his commission,, money changer has the option to pay service tax as follows

 

Conversion of Amount upto

Service tax Rate OLD

Service tax Rate NEW (From 1.6.15)

Effective Rate of

Swachh Bharat Cess

Effective Rate of

Krishi  Kalyan  Cess

Total  Rate of

Service  Tax

Upto 100000

0.12% Service tax

(Min Rs 30)

0.14% Service tax

(Min Rs 35)

0.005% Service tax

(Min Rs 1.25)

0.005% Service tax

(Min Rs 1.25)

0.15% Service tax

(Min Rs 37.5)

100001-1000000

For first 100000  0.12% i.e. Rs 120

For balance        0.06%

For first 100000  0.14% i.e. Rs 140

For balance        0.07%

For first 100000  0.5% i.e. Rs 5

For balance        0.0025%

For first 100000  0.5% i.e. Rs 5

For balance        0.0025%

For first 100000  0.15% i.e. Rs 150

For balance        0.075%

>1000000

For first 100000  0.12% i.e. Rs 120

For next 900000    0.06% i.e. Rs 540

For balance           0.012%

Max Amt of Service tax is Rs 6000

 

For first 100000  0.14% i.e. Rs 140

For next 900000    0.07% i.e. Rs 630

For balance           0.014%

Max Amt of Service tax is Rs 7000

 

For first 100000  0.5% i.e. Rs 5

For next 900000    0.025% i.e. Rs 22.5

For balance           0.0005%

Max Amt of Service tax is Rs 250

 

For first 100000  0.5% i.e. Rs 5

For next 900000    0.025% i.e. Rs 22.5

For balance           0.0005%

Max Amt of Service tax is Rs 250

 

For first 100000  0.14% i.e. Rs 140

For next 900000    0.07% i.e. Rs 630

For balance           0.015%

Max Amt of Service tax is Rs 7500

 

 

 EXAMPLE

 

Suppose $ 1000 is sold by customer @ 65/$

 

Calculation As per Rule 2B

Assuming RBI Reference Rate is 65.4/$

In this case,

Commission Amount is (65.4-65)*1000=.4*1000=400

Service tax is charged @ 15% on this 400 i.e. Rs 60

Hence,in this case,customer knows commission earned by Money changer Service

 

Calculation As per Rule 7 (b)

 Service Tax is payable @ 0.15% (Minimum 37.5) on conversion upto 1 lacs

Converted Amount=10000*65=65000

Service tax=0.15%*65000=97.5

Hence,in this case,customer is not able to know how much commission is earned by Money changer Service

 

 

Which option to be chosen?

If Service tax is to be recovered from customer, second option is better

 

Note:-

Option to be exercised at beginning of year within 1 month

(i.e.for 2016-17,option to be excercised by 30 April 2016)

The option once exercised cannot be withdrawn during the remaining part of the financial year.

  1. Service Tax
  2. Valuation of Taxable Service
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About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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