Cashback on commercial credit cards is not taxable service consideration absent any agreement to promote the bank's business.

Cashback or reward incentives received on use of a commercial credit card were treated as outside the service tax net because there was no agreement requiring the cardholder to promote the banks' business or perform any other service in return for the incentive. Mere use of the card to make payments did not amount to a taxable declared service, and the alleged promotional activity was not supported by the notice or the record. The incentive was a bank-funded cashback scheme intended to stimulate card usage and expand the bank's own business, so the essential nexus between activity and consideration was absent. The Board's circular likewise recognised that taxability depends on a specific act, forbearance, or tolerance for consideration.

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Issues: Whether the cashback or reward incentive received on use of a commercial credit card amounted to consideration for a declared service, so as to attract service tax.

Analysis: The arrangement between the assessee and the banks showed no obligation on the assessee to promote the banks' business or to perform any other service in return for the incentive. Mere use of the credit card for making payments did not, by itself, constitute a service rendered to the banks. The alleged promotional activity was not supported by the show-cause notice or by the record. The incentive was only a bank-funded cashback scheme designed to encourage card usage and increase the bank's own business, and therefore lacked the essential nexus between an activity and consideration required for taxation as a service. The Circular issued by the Board also recognised that taxability under the declared service provision depends on a specific agreement to do, refrain from, or tolerate an act, together with flow of consideration for that activity.

Conclusion: The cashback incentive was not consideration for any taxable service, and no service tax was leviable on the assessee.

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