Taxable value for imported consultancy services excludes withholding tax paid under income-tax law when it is not part of consideration.

For consultancy services received from abroad, the taxable value under Section 67 of the Finance Act, 1994 read with Rule 7 of the Service Tax Valuation Rules, 2006 is the actual consideration charged for the services. Withholding tax paid under income-tax law over and above the invoiced amount was not shown to form part of the service consideration, so it could not be added to the assessable value for service tax under reverse charge. The Tribunal followed its earlier decision on identical facts and held that service tax was payable only on the billed amount, rendering the demand on the withholding tax unsustainable.

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Issues: Whether withholding tax paid in addition to the invoice amount for consultancy services received from abroad forms part of the value of taxable services for levy of service tax under reverse charge.

Analysis: The appellant had discharged service tax on the full consideration billed by the foreign service provider. The disputed amount was withholding tax paid under income-tax law over and above the invoiced consultancy charges. On the scheme of Section 67 of the Finance Act, 1994 read with Rule 7 of the Service Tax Valuation Rules, 2006, the taxable value for services received from outside India is the actual consideration charged for the services. Since the record did not show that the withholding tax was part of the consideration for the services, it could not be added to the assessable value for service tax. The Tribunal followed its earlier decision on identical facts and held that service tax is payable only on the billed amount.

Conclusion: Withholding tax was not includible in the taxable value, and the demand of service tax on that amount was unsustainable. The issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed.

Ratio Decidendi: For services received from outside India, service tax is chargeable only on the actual consideration charged for the services, and amounts paid as withholding tax under income-tax law do not form part of the taxable value unless they are shown to be part of the service consideration.

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