CHARGE OF SERVICE TAX, TAXABLE SERVICES AND VALUATION

CHARGE OF SERVICE TAX, TAXABLE SERVICES AND VALUATION

AS GIVEN IN ICAI MODULE

Section 67 deals with valuation of taxable services.

(1) If the consideration for a taxable service is in terms of money, the value of such

service shall be the gross amount charged by the service provider for such service

provided or to be provided by him.

Example : If a chartered accountant charges Rs.50,000 as audit fee from its client, the value of the taxable service rendered by the chartered accountant will be Rs.50,000 and service tax shall be payable on this amount.

(2) If the consideration for a taxable service is not wholly or partly in terms of money, then the value of such service shall be such amount in money, with the addition of service tax charged, is equivalent to the consideration.

In other words, where the service rendered is for a consideration not wholly or partly consisting of money, the value of the taxable service is equivalent to the total value of the consideration. However, the total of such money and non-money value of the consideration has to be treated as inclusive the service tax payable thereon.

Example: Mr. X, a company secretary provides taxable professional services to one of its clients. In lieu of rendering such services, Mr. X charges Rs.10,000 in lump sum from its client and also asks its client to give him a Law book worth Rs.1,030. The total consideration in this case will be Rs.11,030 and the value of the taxable service shall be Rs.10,000 [11030/110.30x100] and Rs.1,030 shall be the service tax payable.

(3) If the consideration for a taxable service is not ascertainable, the value of such service shall be the amount as may be determined in the prescribed manner.

(4) Consideration includes any amount that is payable for the taxable services provided or to be provided. Thus, an advance received for providing any taxable service shall also form part of the consideration.

Example: Mr. A, an architect receives an advance of Rs.1,000 for providing architectural services. He gets Rs.6,000 on completion of provision of such services. The consideration in this case would be Rs.7000, i.e. it would include the amount that is payable for the taxable service provided or to be provided.

(5) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged.

Example : Mr. B, a management consultant charges a lump sum amount of Rs.11,030 as professional fee for rendering taxable services (i.e., he does not charge service tax separately). The value of taxable service in this case would not be Rs.11,030 but Rs.10,000 [11030/110.30x100] and Rs.1,030 shall be the service tax payable.

(6) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after the provision of such service. Thus, not even advance but any other amount recovered after the completion of provision of service shall form part of the gross amount charged for the taxable service.

For example, ABC Co., a security agency receives Rs.10,000 as advance while signing a contract for providing taxable service. It receives Rs.50,000 while providing the service and another Rs.20,000 after completion of service. Thus, value of taxable service shall be Rs.80,000 and service tax shall be payable on it.

(7) Subject to the provisions mentioned in points (1), (2), (3), (5) and (6) above, the value of a taxable service shall be determined in such manner as may be prescribed.

(8) Money includes any currency, cheque, promissory note, letter of credit, draft, pay order, traveler’s cheque, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value.

(9) “Gross amount charged” includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment, and any amount credited or debited, as the case may be, to any account, whether called “suspense account” or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.