Service tax on discount allowed

[sunil mehta]

A service provider prepares bill and charges service tax on 'Gross amt.' less 'discount allowed'(disccount allowed(say &5% or 10%) is as per the terms of the work order.The payment is recd. on amt. including ser.tax charged .But the ser.tax authorities says that service provider has defaulted in not collecting service tax on discount amt. Now, as per service tax provisions ser.tax is payable on amount actually recd. ,which he has paid to ser.tax dept. Whether there is any supporting case law /clarification were service tax is not liable to be paid on discount allowwed on bilss(on face of bills) by service provider?

[Madhukar N Hiregange]

There is no such liability. It is improbable that case laws are there on such clear issues. Ask the officer to issue a written communication and send the same to the CBEC + TRU + local Comm of CE or ST for clarification.

[Mukesh Kumar]

It is the job of the service tax department to find fault into the acts of the assessee. Some time there job is not appreciable and some times there job is excellent. However, if they are not satisfied with your arguments and discussions, let the matter go the higher level of appellate authorities. I think the matter would be solved at the appropriate forum. Personally I believe, that let us assume that department is correct, but on what amount they would raised a demand. The amount which is not collected? How? Let them do there job!

[Surender Gupta]

you can also put a reference to the FAQ dated 5-2-2009 in which in para 7.1, CBEC has clarified that: 7.1. Is the Service Tax payable by the assessee even in cases where his clients [recipient of service] do not pay for the service(s) rendered or when the client pays only a part of the bill raised in this regard? Service Tax is required to be paid at the rate in force (at present 12.36%) only on the value/amount of taxable service received in a particular month or quarter as the case may be, and not on the gross amount billed to the client. [Refer to sub-section (2) of Section 67 of Finance Act,1994 / Rule 6(1) of Service Tax Rule 1994].

AI Summary

Service tax on amount received: tax attaches to the value actually received, not the gross billed amount. Service tax is payable on the value of taxable services actually received in the relevant tax period, not on the gross amount billed; CBEC guidance confirms tax liability attaches to amounts received and not to discounts shown on invoices that are not collected.