Applicability of service tax on free services

[K Balasubramanian]

Whether Service Tax is payable on services rendered free of cost after 18/04/2006?.

[Surender Gupta]

There is no provision in the Service Tax as of now to levy tax on services rendered free of cost. However, changes have been made to levy service tax on the value of consideration received in "kind" besides received in money.

Yes, now service even rendered free of cost is taxable. valuation rules hve been introduced to cover such type of situations

[Madhukar N Hiregange]

As on date the rule on payment of ST only on receipt continues. However the fact that the valuation rules are in place mean that in time thsi would also be amended. Hopefully they would not do so retrospectively.

AI Summary

Taxability of free services: valuation rules now treat consideration in kind as taxable, creating potential service tax liability.
Valuation rules now treat consideration in kind as capable of forming the taxable value for service tax, signalling a possible extension of taxability to services supplied free of charge, while a contrary administrative view maintains levy continues on a receipt basis, keeping gratuitous supplies outside the charge until charging provisions are amended.