Introduction on Exemptions and Abatements :

After confirming the taxability of an activity in terms of section 66B of the Finance Act, 1994, the next step is to determine if the service tax is payable on the said service. For that, one needs to ascertain whether the service is eligible for any exemption under the service tax law. Service tax will not be payable on taxable services, if the taxable service is covered under any of the exemption notifications issued under section 93 of the Finance Act, 1994.

There are certain exemption notifications that have been issued under section 93 of which the main exemption notification is Notification No 25/2012 ST dated 20.06.2012 [also referred to as Mega Exemption Notification].

If the service fits into the nature and description of services specified in these notifications then it is an exempted service. Declared services are also covered by these exemptions as all services, whether declared or not, which are covered under section 66B of the Act are taxable, if elements of taxability are present.

Exempted services vs. Services included in the negative list

An exempted service is a taxable service which has been exempted by the Central Government by issuing a notification under section 93(1) of the Finance Act, 1994 whereas a negative list service is not taxable at all as it is outside the scope of the charging sectionsection 66B of the Finance Act, 1994.

Further, any change in the existing exemptions or any new exemption can be granted by the Central Government by issuing a notification in the Official Gazette whereas for amending the negative list of services under section 66D, Finance Act, 1994 has to be amended seeking approval from both houses of the Parliament.

This Chapter discusses in detail the exemptions and abatements available in respect of various services under the negative list regime.