SOLVED QUESTION & ANSWERS

SOLVED QUESTION & ANSWERS

Question

Calculate the net service tax payable form the following particulars :

Gross amount for the works contract (excluding VAT)	Rs.1,00,000
Value of goods and materials sold in the execution of works contract	Rs.70,000
CENVAT credit on Rs. 70000 (Value of goods and materials sold in the execution of works contract)	Rs. 1,000
Service tax paid on input service	Rs. 1,000
CENVAT credit on capital goods issued in the provision of works contract service	Rs. 1,000
Service tax rate	10.3%

Make suitable assumptions and provide explanations where required.

 Answer

The value of taxable service and service tax payable thereon is computed as follows –

Gross amount for the works contract (excluding VAT)		100000
Less : Value of goods and materials sold in the execution of works contract	70000
Value of works contract service	30000
Gross amount of service tax @ 10.30%		3090
Less : CENVAT credit of service tax paid on inputs service	1000
CENVAT credit of duty paid on capital goods (available only to the extent of 50% of duty paid on capital goods in the year of purchase; the balance shall be available in the next financial year only.)	1000	2000
Net service tax payable		1090

Question

A beauty parlour charges Rs. 10000 from a client for providing beauty treatment service, the breakup of the bill is as follows :

Labour and facility charges	Rs. 6000
Value of cosmetics and toilet preparations consumed in Providing the service	Rs.3000
Value of cosmetics and toilet preparations sold to the client	Rs.1000

Compute the amount of service tax to be charged from the client.

Answer

The labour and facility charges are liable to service tax. The value of cosmetics and toilet preparations consumed in providing the service forms internal part of the value of service. The materials consumed during the provision of service form part of the cost of that service. So, the value of consumed materials will be included in the value of service.

However, the value of cosmetics and toilet preparations sold to client will be exempt under Notification No. 12/2003 on the fulfillment of conditions specified therein.

Hence, the value of taxable service = 6000 + 3000 = Rs. 9000, the service tax on which at the rate of 10.3% amounts to Rs. 927, which should be charged in the bill.

Question

 Give due dates for payment of service tax in following cases:

(a) M/s. X & Co., a individual concern, receives payment of services provided or to be provided:

Month in which payment received	Amount
July of Financial Year	10% payment
8th August of Financial Year	20% payment
1st January of Financial Year	60% payment
25th April of next Financial Year	Remaining

Payment received in - partly

On 2009, partly on 2010 and balance on 2010.

(b) M/s. XY & Co., a partnership concern, receives payment for services which are still not provided. This payment was received due in April, current F.Y. howsoever paid by client on 28 February, next year.

(c) M/s. X Ltd., a company, receives payment for services which are still not provided. This payment was received due in April, current F.Y. howsoever paid by client on 28 February, next year.

 Answer

The relevant due dates are as follows –

Month in which payment received	Amount	Due date for payment of service tax\
July of Financial Year	10% payment	5th October of Financial Year
8th August of Financial Year	20% payment	5th October of Financial Year
1st January of Financial Year	60% payment	31st March of Financial Year
25th April of next Financial Year	Remaining	5th July of Next Financial Year

• 31st March, next year.
• 5th March, next year

Question        

For providing beauty treatment services, a parlour uses materials such as cosmetics and toilet preparations.

(a)       Will the cost of such materials be included in the value of the taxable service?

(b)       Is any abatement is admissible on account of the value of materials consumed in providing the service?

Answer

(a)       Cost of material such as cosmetics and toilet preparations is includible in the value of taxable service. The service provider cannot provide the output services without using these materials. Hence, these shall form part of value of taxable services.

(b)          No abatement is allowed because material like cosmetics and toilet preparations are essential for rendering output services.

Question

The service provider is located abroad. He renders service to a subsidiary of an Indian Company located abroad. Payment to him is done by the Indian holding Company. Does this attract service Tax?

Answer:

Service Tax is not attracted as services are rendered outside India which is not subject to service tax in India. Since, the place of rendering service is important rather than from where the services are rendered.

Question              

Alpha Ltd, an Indian Company, has one more place of business in the United States of America. Beta Ltd. another Indian company exported services to a unit of Alpha Ltd which is situated in the USA. What is the legal position relating to service tax?

(a)       If the order for services emanated from the US office of Alpha Ltd?

(b)       If the order for services not emanated from the US office of Alpha Ltd?

Answer:

In both the cases (a) and (b), services are rendered outside India, which can be considered as export of services. Hence, not come under the value of taxable services.

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