CHARGE OF SERVICE TAX,TAXABLE SERVICES AND VALUATION
Let us understand this concept of ‘pure agent’ with the help of an example.
Illustration
X
contracts with Y, a real estate agent to sell his house and thereupon Y gives
an advertisement in television. Y billed X including charges for Television
advertisement and paid service tax on the total consideration billed.
In this case,
consideration for the service provided is what X pays to Y. Y does not act as
an agent on behalf of X when obtaining the television advertisement even if the
cost of television advertisement is mentioned separately in the invoice issued
by X. Advertising service is an input service for the estate agent in order to
enable or facilitate him to perform his services as an estate agent
Illustration
In
the course of providing a taxable service, a service provider incurs costs such
as traveling expenses, postage, telephone, etc., and may indicate these items
separately on the invoice issued to the recipient of service.
In
this case, the service provider is not acting as an agent of the recipient of
service but procures such inputs or input service on his own account for providing
the taxable service. Such expenses do not become reimbursable expenditure
merely because they are indicated separately in the invoice issued by the
service provider to the recipient of service.
Illustration
Mr.
A contracts with Mr. B, an architect for building a house. During the course of
providing the taxable service, B incurs expenses such as telephone charges, air
travel tickets, hotel accommodation, etc., to enable him to effectively perform
the provision of services to Mr. A.
In
this case, in whatever form Mr. B recovers such expenditure from Mr. A, whether
as a separately itemised expense or as part of an inclusive overall fee,
service tax is payable on the total amount charged by Mr. B. Value of the
taxable service for charging service tax is what Mr. a pays to Mr. B.
Illustration
Company
X provides a taxable service of rent-a-cab by providing chauffeur-driven cars
for overseas visitors. The chauffeur is given a lump sum amount to cover his
food and overnight accommodation and any other incidental expenses such as
parking fees by the Company X during the tour. At the end of the tour, the
chauffeur returns the balance of the amount with a statement of his expenses
and the relevant bills. Company X charges these amounts from the recipients of
service. The cost incurred by the chauffeur and billed to the recipient of
service constitutes part of gross amount charged for the provision of services
by the company X. That is it is chargeable to service tax.
Follow Us on
No comments:
Post a Comment