Service tax on Compensation

[A Wilson]

Dear Sirs,

Effective date: 1.7.2012

Scope of Declared Service Section 66E (e)

Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an
act.

Analysis:
This is a new category of activity which has been covered into service tax by this entry. It covers
followings activities: Agree to refrain from an act, Agree to tolerate an act, Agree to tolerate a
situation and Agree to do an act. All these activities if agreed upon for a consideration, it will
cover in this entry and will be liable to service tax.

Pls refer the above declared service and give your expert opinion on the following :

1. Applicability of service tax on compensation from the customer for order cancellation for supply of goods
2. Applicability of service tax on Recovery from employee for short notice period

Best Regards,

A.Wilson

AI Summary

Debate on Service Tax Applicability for Order Cancellations and Employee Recoveries Under Section 66E(e) A forum participant, A. Wilson, inquired about the applicability of service tax on compensation for order cancellations and employee recovery for short notice periods, referencing the declared service under Section 66E(e) effective from July 1, 2012. Rajagopalan Ranganathan suggested that if the gross amount charged did not exceed 10 lakhs, service tax might not apply, while Mahim Dangi was uncertain about the first issue but advised collecting service tax from employees in the second case. A. Wilson clarified that their taxable limit already exceeds the basic threshold, seeking further expert opinions.