THE LAW : In case of small service provider’s exemption Notification No. 33/2012-ST, “aggregate value shall not include value charged in invoices 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”.
THE ANALYSIS : Thus, If any service is eligible for abatement, then, whole of the amount of value of service would be considered for computing aggregate value without excluding the abatement. For example, renting of hotel is eligible for abatement of 40% under Notification No. 26/2012-ST. In this case, even if rent charged is Rs. 100 and value after abatement is Rs. 60, the aggregate value under Notification No. 33/2012-ST will be computed by including Rs. 100.
Contrary view taken by other authors appears to be wrong :
♦ The judgment in Ashok Kumar Mishra v. CCE 2013 (32) S.T.R. 300 (TRIB. -DEL.) referred to by certain authors to opine that abatement allowed shall not form part of aggregate value for small service providers exemption was a prima facie view rendered on a stay matter. Hence, there is no decision in that regard.
♦ Even otherwise, the notification provides that “aggregate value shall not include value charged in invoices 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”. Therefore, service must be wholly exempt and in that case, entire value charged in invoices is excluded. .
♦ Moreover, abatement is not, generally, a provision for valuation (except in case of hire-purchase services); it is an exemption from payment of service tax on a portion of value. Therefore, even if abatement has been granted, the value (for the purposes of threshold exemption and/or otherwise) is to be computed as per section 67 of the Finance Act, 1994 and the Service Tax (Determination of Value) Rules, 2006 made thereunder.
♦ Any other interpretation does not appear to be correct.
P.S. : The Suggested Answers of May 2016 principally use the approach adopted by Sodhani Sir. The approach of other author was shown an alternate view only without incorporating same in main body of solution. The relevant images are attached.
1. IDT book Edition 7 [year 2015] [excerpt]
2. Suggested Answers IDT May 2016 [excerpt] [page 86] [page 6 of file] [Mandatory Question 1(c)] [Download here]