Service will be applied or not ??

[Guest]

Hi All,

Need your guidelines if service tax will apply on DEBIT NOTE as per the below transaction or not.

In the total transaction two companies naming it Y & Z & one dealer & one transporter is involved

Company Y selling a product 'A' which he is selling in negative price: means company 'Y” gives money for buying that product from them, the dealer buys from company Y & sell it to company Z and the transporter bills the dealer

Below is the how the billing has happened

1. “ Y” Billing the dealer 10rs per ton for material sold.
2. Dealer selling the material to “ Z “ at 10rs per ton same rate as bought.
3. Dealer prepares a separate debit note to company “ Y “ of rs 2000/- per ton showing as quantity discount for purchase of the material.
4. Dealer pays the transporter bill of rs 1200 per ton & also pays service tax on the transporter bill amount.

Now the question is: Dealer is already paying service tax on transporter bill, than does he also how to pay service tax on the DEBIT NOTE amount which he has debited to company “ Y “??

NOTE : Dealer has not charged service tax in the debit note to company 'Y'

Thank you in advance for the help.

[KASTURI SETHI]

Dear Querist,

Dealer has got discount of ₹ 2000/- by way of debit note issued to 'Y'. Does the amount of Debit Note issued by dealer to Company 'Y' include transportation Charges ? What I think transportation charges are not part of debit note issued on account of discount. If my presumption is right, no service tax is applicable. Pl. confirm the factual position so that correct reply be posted.

[Himansu Sekhar]

Question is very complicated. The debit note is in respect of sale of goods. No service component is here. S.tax leviability is not applicable. You can put the question in a simple manner

[Ganeshan Kalyani]

I think querist want to ask whether the amount in debit note would tentamount to commission and whether service tax is applicable on commission income. How can a dealer be doing the activity without any interest, without any income. However in present situation service component is missing hence no service tax liability. Thanks.

[KASTURI SETHI]

I agree with both experts. Question has also not been properly drafted. I have read it thrice to understand what Querist wants to say. Anyhow Querist's purpose has been solved.

[Guest]

Hi Kasturi Sethi ji, Himansu Sha ji & Ganesh Kalyani ji.

Sorry for complicating it, I just wanted to describe in detail & also have the billing is done.

In Short : Dealer buys a material from company "Y" at minus 2000rs per ton (means Y pays the dealer) & dealer sells it to company Z at 10rs per ton

& the transportation cost 1200 per ton is paid by dealer & also the service tax on transport bill amount.

hope now it is simple to understand, my question was will dealer have to pay service tax on Debit Note amount ?

Dear Kasturi Sethi : Yes transportation is not a part of debit note. Debit note to company 'Y' by dealer only includes 2000rs per ton as quantity discount for purchase of the material

-*** mentioning it again "Below is the how the billing has happened"

1. “ Y” Billing the dealer 10rs per ton for material sold.
2. Dealer selling the material to “ Z “ at 10rs per ton same rate as bought.
3. Dealer prepares a separate debit note to company “ Y “ of rs 2000/- per ton showing as quantity discount for purchase of the material.
4. Dealer pays the transporter bill of rs 1200 per ton & also pays service tax on the transporter bill amount.

thanks for the guidelines

Regards,

Jubin

[KASTURI SETHI]

100 ℅ correct reply is possible only through a scrutiny of your books and accounts and other records. Better option is to engage an advocate, C.A or CMA.

[Ganeshan Kalyani]

Yes i agree with Sri Kasturi Sir. You should consult a practising consultant whom you can approach personally and explain the situation to seek the solution.

You can find such expert in TMI or nearby your area.

AI Summary

Service Tax Applicability on Debit Note in Multi-Party Transaction Questioned; Professional Advice Recommended A discussion forum addressed whether service tax applies to a debit note in a transaction involving two companies, a dealer, and a transporter. Company Y sells a product to a dealer at a negative price, who then sells it to Company Z. The dealer issues a debit note to Company Y for a quantity discount and pays service tax on the transporter's bill. Respondents suggest that since the debit note does not include transportation charges and lacks a service component, no service tax is applicable. They recommend consulting a professional for a definitive answer.