TaxTMI 
TaxTMI 
We are a small time ecommerce Company selling goods online. We started the business from April 2015 and for the period for Apr 2015 to Mar 2016, we have provided free delivery to all our customers. From April 2016 on wards we started charging Delivery charges separately. Since we started collecting delivery charges separately, we also started paying Service tax on the same from Apr 2016. Now the Service tax department is of the view that we have to pay Service tax from Apr 2015 on wards because we have provided that service to customers. Our view is of that since we have not collected charges from customers, we are not liable to pay. Please help if our assumption is correct, do we need to pay service tax if the service is provided at free of cost?
Service tax on Free Delivery
21 Mar 2017 
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Service tax on free delivery: absence of consideration may preclude liability but supplier must prove nil consideration.
Whether free delivery is taxable depends on whether the delivery constitutes a Service for consideration or truly nil consideration. Supplier must prove nil consideration and that delivery costs were not recovered; if delivery is performed by a third party and merely reimbursed, the pure agent concept may exclude reimbursement, though reimbursement taxability rules and any embedded pricing will be determinative. (AI Summary)
Whether free delivery is taxable depends on whether the delivery constitutes a Service for consideration or truly nil consideration. Supplier must prove nil consideration and that delivery costs were not recovered; if delivery is performed by a third party and merely reimbursed, the pure agent concept may exclude reimbursement, though reimbursement taxability rules and any embedded pricing will be determinative. (AI Summary)