Service will be applied or not ??

[Asked by 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.

AI Summary

Service tax not applicable to debit note reflecting a quantity discount; separate transporter charges remain taxable.
The debit note records a quantity discount and does not include transportation charges; because it reflects a price adjustment on the sale/purchase of goods and lacks a service component, service tax is not attracted on the debit-note amount. Transportation charges billed and paid separately by the dealer remain subject to service tax and are unaffected by the debit-note treatment. A factual audit of accounts is advisable for a definitive view.