TaxTMI 
TaxTMI 
In case of retail store, gift packing is also done for which packing chages are also recovered. Will this amont to taxable service under category "Packing servives[vide sec65(76b)]". vat is paid on 80% of charges as per vat law. If s.tax is to be levied, whether on full amt charged or net of cost of packing material(material cost not disclosed in invoice but vat is pd on 80% value))
Service tax applicability on gift packing
05 Feb 2010 
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Packing services incidental to sale may be non-taxable, but a residual portion treated as service can attract service tax.
Retail gift packing done by a shop is typically incidental to the sale of goods and not a separate taxable service. However, when VAT treatment excludes a residual portion of packing charges from sale consideration, that excluded portion may be treated as consideration for a distinct packing service and could attract service tax; this requires factual assessment of the nature of packing, ancillary activities, the parties' relationship, and the apportionment of charges. (AI Summary)
Retail gift packing done by a shop is typically incidental to the sale of goods and not a separate taxable service. However, when VAT treatment excludes a residual portion of packing charges from sale consideration, that excluded portion may be treated as consideration for a distinct packing service and could attract service tax; this requires factual assessment of the nature of packing, ancillary activities, the parties' relationship, and the apportionment of charges. (AI Summary)