Consideration for service.

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C.SENTHIL KUMAR (Querist)
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07 February 2013 Whether the following is consideration for service? Give reason with example.. Advance forfeited for cancellation of an agreement to provide a service.

Kaushik Vinod

Kaushik Vinod (Expert)
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08 February 2013 Dear Senthil,

Yes advance forfeited to provide the service is also consideration of Service since 66B has also covered agreed to provide the service.
The wordings of charging section 66B are as follows :-
. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.

If you have booked hotel for a future date but not able to stay in the hotel on the booking date the amount shall be taxable and no adjustment under Rule 6(3).

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C.SENTHIL KUMAR

C.SENTHIL KUMAR (Querist)
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08 February 2013 Thank you so much sir. Now i got, because of you example. Again thanks sir!

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Arvind Tiwari

Arvind Tiwari (Expert)
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09 February 2013 Section 65(44) defines “Service” means an activity for consideration including declared services
Section 66E define the Declared service which include service of “Agreeing to refrain from an act”.
To do an act or not do an act is within the purview of Service hence service is taxable. Cancellation of an agreement is classic example of “Agreeing to refrain from an act”.
Further charging section 66B itself include the wording “Provided or agreed to be provided” so once you enter in to contract to provide the specific service, the charging section get triggered & subsequently cancellation will be covered by section 66E declared service hence Taxable .
For clarification, you can call on 9322368699

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C.SENTHIL KUMAR

C.SENTHIL KUMAR (Querist)
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10 February 2013 Dear Arvind Tiwari sir,
Thank you so much for your explanation and contract.

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