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Whether service tax is leaved on free service.

Sumit Rathod (CA Final) (63 Points)

17 March 2015

Sir, i am working in bank, Bank has provide to free service to his customer if customer has maintain sufficient balance on his account.

if customer has not maintain sufficient balance, bank has take to charges on above service to his customer. all service fall in service tax act.

So My question is bank has liable to pay service tax on those services which is provide free to his customer.

Kindlly give your valuable advice.

Regards,

Sumit Rathod

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8 Replies

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 17 March 2015

As per Sec 67 of Finance Act,1994 Service tax is chargeable on gross amount charged...so in free services gross amt charged will be zero, so ST also zero.

1 Like

krishna chaitanya (9177892565) (30 Points)
Replied 17 March 2015

service is taxable only when we receive consideration in the form of money according to the charging section. therefore, if the service is provided for free of cost we are not required to pay service tax because there is no concept of consideration received in the form of money. we need not pay service tax for free services.

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Sumit Rathod (CA Final) (63 Points)
Replied 17 March 2015

but Saurabh sir,

in section 67 if service free of cost the valuation shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the the gross amount charged is the sole consideration.

so whether above rule is applicable or not.

Kindly advice us.

Sumit Rathod (CA Final) (63 Points)
Replied 17 March 2015

but Saurabh sir in section 67 if service free of cost the valuation shall be equivalent to the gross amount charged by the service provider to provide similar service to any other person in the ordinary course of trade and the the gross amount charged is the sole consideration.

so whether above rule is applicable or not.

Kindly advice us.

akshita bhatia (article) (51 Points)
Replied 17 March 2015

Section 67 and service tax determination rules makes provision for valuation when consideration is not ascertainable but consideration is there..... If there is no consideration i.e. In case of free service sec 67 and service tax detemination rules cannot apply... Thus no service tax is payable when value of service is zero.....

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Appasaheb Subhash Savant (article) (29 Points)
Replied 17 March 2015

Sir as per my view act consider banking service special other than else As per my view banks Servises also consider in transection in money also, hence only those transcripttions considered in money are exempt (i.e. all the transcripttions like loans deposits an normal transactions done in bank as banking business )and all other transactions specially where bank charge some penal interest , processing fees,other commissions received from customers are liable for service tax In your case even bank provide other service s to customer free of cost bank has liable to pay service tax on penalty charges charged to customer on non mentioning of account balance.

Manish Sadhnani (Chartered Accountant) (35 Points)
Replied 17 March 2015

Section 65B(44) clearly defines service as an activity provided by one person to another for consideration. Therefore one of the basic conditions which need to be fulfilled to call it a service would be 'consideration'. No consideration = No service

1 Like