Meaning of Consideration for service tax

[paresh ayadi]

dear experts,

We have hie bus for transportation of our employees

as per terms of contract we are reimbursing passenger tax to service provider apart from rent

i want know whether service tax is payable on passenger tax also (under RCM) ?

i have read definition of consideration as per explanation (a) to section 67 and relevant judgment but could not arrived at conclusion as sometimes reimbursement is included and sometimes not..

[KASTURI SETHI]

Sh.Paresh Ayadi Ji,

All kinds of reimbursable expenditure do not form part of consideration for determination of taxable value for the purpose of payment of Service Tax. Taxes are to be deposited with the concerned Govt. whether State or Central Govt. The assessees do not retain taxes with themselves. Hence such reimbursed amount is not taxable.

[Rajagopalan Ranganathan]

Sir,

It is clarified by CBEC in its circular No. 139/8/2011-TRU dated 10.5.2011 that for the purpose of service tax the luxury tax imposed by States has to be excluded from the taxable value (vide Sl. No. 4 under the heading Short Term Accommodation Service). Similarly vide Sl. No. 4 under the heading Services Provided by Restaurants, it is clarified that for the purpose of service tax, value added tax imposed by States has to be excluded from the taxable value. On the same analogy you need not include passenger tax in value of service to calculate the service tax payable by you.

[KASTURI SETHI]

Sh.Paresh Ayadi Ji,

Though Board's circular dated 10.5.2011 mentioned by Sh.Ranganathan, Sir, pertains to the period prior to the amendment of term, 'Consideration' under Explanation (a) to Section 67 of the Finance Act, 1994 (amended w.e.f. 14.5.2015), yet this circular has its significance as it makes the concept of inclusion or exclusion of taxes from the taxable value very much clear. This circular is still in force. In this way, I endorse the views of Sh.Ranganathan, Sir

[Ganeshan Kalyani]

Sir, reimbursement of tax is not subject to tax again. Thanks.

[paresh ayadi]

Thanks a lot experts...

AI Summary

Consideration for service tax: reimbursed passenger taxes excluded from taxable value and not subject to service tax. Reimbursed taxes collected and paid to government do not form part of consideration for service tax valuation and must be excluded from taxable value. CBEC circulars excluding State levies from taxable value in analogous services support treating passenger tax reimbursements as not subject to service tax.