abatement in service tax

[rohit varshney]

what is the role of abatements in service tax

[YAGAY and SUN]

There are certain services on while service tax is applicable on abated value on the even if there is no availment of CENVAT credit on Inputs/Input Services and on Capital Goods by the service provider.

[DR.MARIAPPAN GOVINDARAJAN]

Normally service tax is levied on the 100% value of the invoice issued. In respect of abatement some exemption is say if 60% abatement is given the service tax is leviable on 40% of the value of the invoice. In such cases conditions are imposed that CENVAT credit on inputs/input services and on capital goods could not be taken and utilized.

[Ganeshan Kalyani]

Well explained by both the experts. I want to know to enrich my knowledge as to what exactly is the reason that the Government gives abatement to some services and why not to all services. What would be the cause for such benefit. Please discuss.

[KASTURI SETHI]

Sir,

I observe the following reasons for abatements:

(1) Where the value of the goods cannot be segregated easily i.e. Constructions Services (All), Mandap keeper, Restaurant Service, Erection, Commissioning etc.

(2) For the convenience of Assessee : Whether to opt for either Cenvat Credit or abatement ?

Thereafter, trend changed. Govt wanted to reduce rate in the guise (form) of abatement GTA, Tour Operators, Man Power. There was hullabaloo by transporters through out India in 2004.

(3) Ultimately goal was to plug the leakage of revenue by reduction rate in the form of abatements.

(4) Ultimately the burden is to be borne by the consumers, so the Govt. intended to give relief to consumers through assessees.

Why abatement has not been provided to all services ? Govt.requires taxes to run the country. Whatever relief was possible within reasonable limits without hazards to exchequer has been given and, moreover, practically it is impossible to allow the public to turn the exchequer into booty.

Only wearer knows where the shoe pinches. Only Govt. knows how it is difficult to grant relief without hitting the overall interest of the public of all classes.

[Ganeshan Kalyani]

Thanks a tonne to Kasturi Sir for clarification. Your knowledge is impeccable. Salute to you.

[KASTURI SETHI]

Sir,

Oh ! I am not so capable and knowledgeable. There are more knowledgeable and capable persons than me in this forum. Welcome, Sir.

[Ganeshan Kalyani]

Each one of us are unique and different and that makes TMI a best platform for the queriest to rely upon. Thanks Sir.

AI Summary

Abatement in service tax: taxable value reduced to an abated base, with CENVAT credit typically disallowed.
Abatement reduces the taxable base for specified services so service tax is levied on the abated invoice value; where abatement applies providers generally cannot claim CENVAT credit on inputs, input services, or capital goods. Abatements are used when segregating component values is difficult or for administrative convenience, and serve as a policy tool to achieve practical rate reduction while protecting revenue.