Saravanan (Consultant) 28 August 2008

Base Amount of Service Tax

Hi,

One of my client is doing the services which comes under the service tax. The sale details are as given below.

Service Cost - Rs 25000
Discount (10%) - Rs 2500
Agent commission for money collection - Rs 500
Final Revenue for the company = 25000-2500-500 = 22000
Now Service tax should be calculated on which amount? Is it 25000 or 22500 or 22000?

Thanks, Sara

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3 Replies

Guest (n/a) 29 August 2008

service tax chargeable amount may be 22500/- because the commission amount will be booked separately in profit and loss account.

Guest (n/a) 29 August 2008

Please specify the exact nature of service rendered by your client. As per the provisons prevailing today, service tax is leviable on the value received from the client. In this case the value received from your client is Rs.22500/- and not Rs.22000/-. The amount of Rs.500/- being the commision paid to your agent is your operational expense which will not be excluded from the Taxable Value. Hence, Service Tax is to be paid on Rs.22,500/-,

M.Deivanandam (consultant/advocate) 31 August 2008

Hello sara!

In terms of section 67 of Finance Act, 1994, which deals with the provisions of service tax, value is primarily defined as :-

"(i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him;"

Therefore the gross amount charged in your invoice and realised after discount shall be the value for the purpose of payment of service tax. Since agency commission is paid by you out of your realisation from your customer, it is not available for any abatement and the value shall include the agency commssion also. therefore in the case cited the taxable value shall be Rs.22500/- only.