Declared Services - 66E

[CA AJAY KUMAR AGRAWAL]

In many cases, companies are collecting fines, penalties and liquidated damages from their customers for any deficiency of performance or shortfall of supply/contract. These situations are very common and the amount so collected will form part other revenue of the company. My question is:-

1. In such case whether Company has to pay Service Tax u/s 66E(e) ?

2. If yes, whether Company has to get / endorsed Sec 66E(e) on registration certificate ?

AI Summary

Declared service under Section 66E(e): fines, penalties and liquidated damages can be taxable, subject to contract terms.
Declared service under Section 66E(e) includes agreeing to tolerate, refrain from, or perform an act and prima facie covers fines, penalties and liquidated damages collected for contractual shortfall; taxability depends on contract terms and applicable exemptions. The registration certificate does not require an explicit endorsement of Section 66E(e); registrants should use the broader "Other Than Negative List" category and appropriate accounting code.