Service tax on advance order booking.

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This query is : Resolved

mtvcamba (Querist)

28 October 2009 We are engaged in the business of storage and warehousing. Also we buy & sell goods. Being the unique nature of products we deal in we take orders in advance for a month or so.

During the booking done at the time there is no consideration received for this.

Now the Service tax dept has issued a SCN stating that the advance booking is nothing but the business support service.

how should be my reply to the scn structured..?

Kindly guide me..

SARATHY RP

SARATHY RP (Expert)

28 October 2009 The liability to discharge Service is upon realisation of services rendered or to be rendered.

If you have booked orders to be executed and received advance from your clients, on advance received to the extent of labour portion, you have to discharge service tax.

Once the above fact is established, you may reply to the SCN, explaining the facts.

Thanks.
Sarathy

Yash Arya

Yash Arya (Expert)

20 December 2009 Liability to discharge Service tax arises only after the receipt of money from the service recipient either as advance or after providing the services. In absence of any receipt of money, service tax is not payable.

You may refer Rule 6 of Service tax Rules, 1994 and can reply the SCN accordingly.

Regards

YDA