Service tax on beauty parlor - exemption notification no. 12/2003 for goods supplied / used

[Shama Sarin]

If a Beauty Parlour purchases products(inputs consumed) in bulk & consumes it on to its customers during the course of providing the services in parts,can he opt to segregate his total bill into 1-consumption/sale of goods & pay VAT if required 2-Rendering of Services under notification 12/2003-ST dated 20th June 2003....Please note that he doesnot wish to claim the Cenvat Credit on inputs.

[Rama Krishana]

Yes, technically you are right. The cost of the goods sold in the course of provision of services is exempt from service tax under notification no. 12/2003. Payment of VAT on sale of goods in an additional evidence to prove its value apart from any other documentary evidence. But, the important question is that how to prove it as a sale? Whether the beauty parlor is showing the amount of sale on its invoice issued to customer?

AI Summary

Service tax exemption for goods supplied during services depends on proving the goods component as a sale through invoicing and records. Under notification no. 12/2003 the cost of goods sold in the course of providing services is exempt from service tax; payment of VAT on those goods can serve as additional evidence of their value when the provider does not claim Cenvat credit. The key practical issue is whether the supplier can prove the goods component as a sale-for example by showing the sale amount on the invoice and maintaining supporting documentary records-to substantiate exclusion of that component from service tax.