Service tax on credit card commissions dismissed in appeal, pre-June 1, 2005 transactions exempt

The Revenue's appeal against dropping service tax demands on commission from credit card transactions was dismissed. The Commissioner held that the commissions did not constitute taxable service value, supported by the Finance Act, 2006 introduction of a comprehensive definition for credit card services. The Banks' argument that transactions prior to June 1, 2005, were not subject to service tax was accepted. The commissions retained by the Banks were not considered consideration for credit card services, leading to the upholding of the impugned orders and the dismissal of Revenue's appeals.

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Issues:
Revenue's challenge against dropping service tax demands on commission from credit card transactions.

Analysis:
The Revenue challenged an order dropping service tax demands on commission from credit card transactions. The Banks provided credit card services and received commissions from merchant establishments. The Revenue contended that service tax should be levied on the commissions. The Commissioner held that the commissions did not constitute taxable service value. The Banks argued that credit card services were separately categorized only from June 1, 2005, and relied on a decision by the Larger Bench in their favor. The Larger Bench held that the Finance Act, 2006 introduced a comprehensive definition for credit card services, and transactions prior to this were not subject to service tax. The Bench clarified that the commissions retained by the Banks did not constitute consideration for credit card services. Consequently, the impugned orders were upheld, and Revenue's appeals were dismissed.

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