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Ranju_9666 (Service)     08 February 2009

Service Tax Applicablility Query


I would be grateful if the following mentioned issue is explained to me with regard to applicablility of service tax.

If a party is contracted to provide some service, same which falls under service taxation, and in the process the party incurs expenses such as air fare, hotel accomodation which, as per contract will be reimbursed at actuals.

 During billing to the client, can the party levy service tax charges on the air fare and hotel accomodation?

Doesnt the air fare and hotel accomodation expenses already have a Service Tax component in their amounts that have been charged to the party? If such is the case, then it would mean that service tax has been paid for the above-mentioned services. 

Then if the party again charges service tax on these expenses to its client, wouldnt that be double accounting w.r.t. the service tax component?

Its a bit confusing to me. I would request for a clarification.





 4 Replies

Mohamed Nawaz Haindaday (Tax and Business Laws Consultant)     10 February 2009

Dear Sir

Your query comes under the service category of Tour Operators.  There are various issues involved in this.  However, I would give a to-the-point reply to your questions. 

Yes, the service provider is required to charge service tax on the total value of the service provided, subject to taking benefit for abatements.

Secondly, to the question whether it means that the service provider has paid the service tax, that is an issue, which the receiver of the service may not be in a position to verify.  So long as the service provider issues an Invoice which mentions his service tax registration details, the service receiver should have no issue on that.  If the service receiver is also registered under Service Tax, he/she can take credit for the input service tax paid based on the invoice.

A V Vishal (Advocate)     12 February 2009

Dear SNL:

It is immaterial what type of service you provide still if you provide taxable service as defined in the Act, you are required to collect the same and remit it to the goverment. However, you can claim the tax payable (Output tax) against the Tax paid (Input tax) while paying the tax. The same has to be mentioned in the service tax return which is filed by you.

Ranju_9666 (Service)     14 February 2009

Dear Mr. Haindaday

Thanks for the reply. It has cleared my confusion somewhat. In going over your explanation,  I understand that the service receiver need not be concerned whether the service tax is being charged more than once or not. The only issue he needs to check, is that  whoever has charged the service tax on him, must have valid service tax registration.

I hope that was what you meant



Mohamed Nawaz Haindaday (Tax and Business Laws Consultant)     06 March 2009

Yes Mr. SNL

You got me right. Thank you for the return message.



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