29 November 2014
hello, free service provided by services centers liable to pay service tax?, I have seen that service centers are charged ST on the amount of consumables used by then, is it correct? thanks in advance
29 November 2014
Free Services have no service Treatment. However, if consideration comes from some other means then rule 3(b) of Service Tax Valuation Rules 2006 becomes applicable.
29 November 2014
This issue was addressed by the Tribunal in a judgement in ASL Motors Pvt. Ltd. Vs. Commissioner of Central Excise (2008 TIOL 114). In this case, the assessee was an authorized dealer of a motor vehicle manufacturer and provided after sale services to its customers. The dealer charged only the material costs relating to these services to the customers and did not charge any labour or service costs to the customers. Further, the motor vehicle manufacturer also did not reimburse these expenses to the dealer.
Nevertheless, the authorities sought to recover service tax on the ground that a part of the dealer's margin, recovered by the dealer from the customer as part of the price of the motor vehicle, was to be attributed towards the provision of the above services. In other words, the charge was that since the price of the product was inclusive of the dealer's margin or mark up, a part thereof was to be necessarily construed as relating to the labour element of the after sales service and hence charged to tax.
The Tribunal held that in case of after sales services, service tax is leviable provided the manufacturer had reimbursed/paid for the expenses incurred for rendering such services. In the absence of such reimbursement/payment, no service tax could be levied on services rendered free of cost to customers. The recovery of the materials cost was not relevant for this purpose.
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