SERVICE TAX ON LIQUIDATED DAMAGES

[VINOD KUMAR]

DEAR EXPERT, PLEASE REPLY WHETHER SERVICE TAX UNDER SECTION 66E IS LEVIABLE ON LIQUIDATED DAMAGES ON ACCOUNT OF LATE SUPPLY OF MATERIAL.

AI Summary

Debate on Service Tax Applicability to Liquidated Damages Under Section 66E of Finance Act, 1994 Shows Diverging Views A discussion on whether service tax is applicable to liquidated damages under Section 66E of the Finance Act, 1994, reveals differing opinions. Some experts argue that liquidated damages, being penalties for late supply, do not constitute consideration for a service, and thus are not subject to service tax. Others contend that liquidated damages represent a declared service as they involve tolerating a breach of contract, thereby attracting service tax. The debate references legal provisions and past judgments, highlighting the complexity and evolving nature of the issue. The consensus leans towards applicability of service tax on liquidated damages.