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

Service tax applicability on supplier discounts: discounts lack service element and are not taxable as services.
Discounts from suppliers for inputs lack a service element and do not attract service tax. If shown on the invoice, the discount reduces the purchaser's expense; if issued by credit note, the adjustment should similarly reduce expense rather than be treated as taxable income. The matter falls within valuation and accounting adjustment, not a service charge or central excise liability.