Chargiability of service tax

[DEVKUMAR KOTHARI]

One of essential condition for levy of service tax is that there should be a sperivce provided by one person and the service should be received / availed by another person.When ther is no service provided and received, any charge cannot be subject to service tax. For example damages for breach of service contract,damages for non execution of contract, damages for late payment of service charges, late payment charges charged by bank or card issuers,interest charged by bank or card issuer are some examples of such charges, which are levied as per contract but which are not in consideration of any service rendered. There is no service rendered and there is no service received. Therefor, there should nto be service tax on such charges. Similarly any charge which is in lieu of interest on money lent or credit facility provided should not be subject to service tax. Unfortuantely credit card issuers are levying service tax on such charges, although there is complete lack of service rendered. Views of readers are welcome. Readers can also make complaints to card issuers if they have also faced levy of similar charges wit service tax.

AI Summary

Debate on Service Tax Applicability: Charges for Contract Breaches and Late Fees Not Considered Service Rendered A participant raised a query about the applicability of service tax, emphasizing that service tax should only apply when a service is provided and received. They argued that charges like damages for contract breaches or late payment fees should not incur service tax as they do not involve services rendered. A respondent clarified that credit card issuers should only apply service tax on charges other than interest. They acknowledged that while service tax is not applicable to interest, it may be justifiable on levies related to the nature of services provided, such as those arising from contractual breaches.