Charitable societies and not-for-profit companies may be brought into the service tax net soon as the Central Board of Excise and Customs (CBEC) is considering dispensing with the requirement that a service provider should be a ‘commercial concern’.

If the proposal is implemented, charitable societies and not-for-profit companies providing any of the 81 taxable services would be required to collect from their clients and pay service tax at the rate of 10.2%. However, such entities with a turnover of less than Rs 4 lakh (US $8900) will continue to enjoy the exemption.

Similarly, services provided by an individual whose turnover is less than Rs 4 lakh (US $ 8900) may continue to be exempt. But those with turnover in excess of that may come under the service tax ambit. Past circulars have stated that individuals providing certain services such as commissioning or installation would be exempt from service tax.

Commercial concern as such is not defined in the service tax legislation, but various notifications and circulars issued by the CBEC have attempted to explain term with examples.

Revenue dept officials point out that given the general exemption to small service providers, the requirement that the service provider be a commercial concern would be done away with. As for societies and not-for-profit companies, revenue department officials point out that the tax is anyway passed on to the recipient of the service and therefore there may not be enough reasons to exempt them.