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What is Abatement?

We know that normal rate of service tax is 15%

However, sometimes service tax is charged at lower rate.

This is because abatement has been notified by government.

Abatement means discount or reduction on service tax rate as notified by governmenttement

 

Example

General Rate of Service tax is 15%

Suppose there is 60% abatement notified by government it means

Service tax  is calculated as follows

 

Normal Rate Normal Rate with 60% Abatement
 Procedure   Method 1  
Value of Service 100000 Value of Service 100000
Service tax 15% 15000 Less  
Total Bill Amount 115000 Abatement 60000
                     Abated Value 40000
Service tax  6000
(15% on Abated Value)
Total Bill Amount 106000
   
Method 2  
Value of Service 100000
Service tax 6% 6000
(15*40%=6%)  
Total Bill Amount 106000

 Difference between Exemptions and Abatements - Important Exemptions

What are Exemptions?

While in case of abatement, Service tax is levied at lower rate,

in case of exemption,service tax is not charged at all

Hence exemption is scheme of government through which Service is made tax free

Both ABATEMENT and EXEMPTIONS are notified by Government by issuing notifications

 

Normal Rate   Normal Rate With Exemption
Value of Service 100000   Value of Service 100000
Service tax 15% 15000   Service tax (Exempt) 0
Total Bill Amount 115000   Total Bill Amount 100000

 

 

Difference

Abatements Exemptions
Service tax is charged at lower rate Service tax is not charged at all
It is introduced by government by issuing Abatement notification  It is introduced by government by issuing Exemption notification 
   

 

Lets study abatements first in detail

 

 

 

 

 

 

  1. Service Tax
  2. Exemptions and Abatement
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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 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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