Service tax on electricity
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
27 June 2012
Company A enters into an agreement with Company B _ Key features are as under:
1) Company A will setup a plant with in the premises of Company A (at its own cost) for manufacture of item X. All activities with relation to manufacture of product X (including Sales) is done by Co B
2) The benefit to Company A is that its by product Y, which otherwise will go waste will be used as input by Co B
3) Co A sells its by product to Co B and charges Ecise duty on the same.
4) The electricity used by Company B for manufacture of its product X is provided by Company A for which it charges company B on actual utilisation basis
4) Other than this there is no relation in activities of Company A and B
Querry - Whether the electricity provided by Co A to B will entail Service Tax
1) Company A will setup a plant with in the premises of Company A (at its own cost) for manufacture of item X. All activities with relation to manufacture of product X (including Sales) is done by Co B
2) The benefit to Company A is that its by product Y, which otherwise will go waste will be used as input by Co B
3) Co A sells its by product to Co B and charges Ecise duty on the same.
4) The electricity used by Company B for manufacture of its product X is provided by Company A for which it charges company B on actual utilisation basis
4) Other than this there is no relation in activities of Company A and B
Querry - Whether the electricity provided by Co A to B will entail Service Tax
28 June 2012
Dear Friend, the electricity provided by Co A to Co B willnot entail service tax because of the following reasons.
(i) co B is using the machinery of Co A for its own production.
(ii) There is no connection of product of Co A with Co B as the former sold the product to Co B.
(iii) The electricity supply used in the production is billed in the meter of Co A and paid by Co A to electricity department which is subsequently collected from Co B.
(iv) Threfore, in this case, the service receiver is Co. B and the service provider is electricity company. Co A is acting as a "pure agent"
(v) As per Rule 5 of Service Tax valuation Rules, the cost of electricity bill paid by Co A in the capacity of pure agent for above cannot be included under taxable service.
Hence, elctricity bill payable by Co B to Co A does not attract service tax.
(i) co B is using the machinery of Co A for its own production.
(ii) There is no connection of product of Co A with Co B as the former sold the product to Co B.
(iii) The electricity supply used in the production is billed in the meter of Co A and paid by Co A to electricity department which is subsequently collected from Co B.
(iv) Threfore, in this case, the service receiver is Co. B and the service provider is electricity company. Co A is acting as a "pure agent"
(v) As per Rule 5 of Service Tax valuation Rules, the cost of electricity bill paid by Co A in the capacity of pure agent for above cannot be included under taxable service.
Hence, elctricity bill payable by Co B to Co A does not attract service tax.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- CAPITAL GAIN REDEVELOPED FLAT
- Multiple payment of self assessment tax for A Y 2025-2026
- REGARDING ITR FILING QUESTION
- Requirement under FEMA &RBI
- DUE DATE FOR ITR FILING
- ITC BENEFIT ON BROKRAGE PAID
- Correction in TDS return New Traces Portal
- Sale of Mutual Funds In Diffirent Financial Years
- Gst reverse charge mechanism to be claimed in the month of payment
- TDS NOT YET CREDIED
- GST REGISTRATION REQUIRED TO DIAGNOSTIC UNIT
- Concept of Vendor and customner reconciliation
- Mistake in e-invoice identified after 24 hours
- EXPORT PAYMENT
- NRI ITR2 account in 2025-26.
- Query regarding reporting of exempt foreign remuneration in ITR (AY 2026-27)
- FEMA/RBI treatment — Amazon.ca arbitrage (US buy, Canada sell, goods never enter India)
- Goods return by customer
- INWARD REMITTANCE FOREIGN
- CPC and SAC
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
