Service tax liability on discounts

[Mr Rao]

Dear experts,

One of our clients is manufacturing steel bars. For manufacturing his final products, he is getting inputs like wire rod coils, pig iron etc., from a steel unit under a discounted price. A doubt was raised that this discount appears to be income to our client and hence attracts service tax liability. However, I am of the opinion that the same is not taxable under service tax. Please clarify whether the discounts received by our client attract liability under service tax or under central excise ?

AI Summary

Steel Bar Discounts Not Subject to Service Tax; Experts Agree No Services Involved in Transaction A client manufacturing steel bars receives discounted inputs from a steel unit, raising a query about potential service tax liability on these discounts. Multiple experts agree that discounts do not constitute taxable income under service tax, as no services are involved. They emphasize that discounts are part of sales transactions and should not be considered income. The discussion highlights differing accounting treatments of discounts, such as being reflected on invoices or through credit notes, which do not inherently attract service tax. The consensus is that service tax is not applicable in this context.