Service tax payable on short payment?

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Ved Bisht (Querist)
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07 June 2016 A company is availing service of contractor for cotton loading & unloading at piece rate system. For example, A piece rate of ₹10 per cotton bale is decided. In a particular period, contractor made an invoice of ₹114500 (10000 cotton bale @₹10 each + S.tax @14.5%). Out of total bill amount, company deduct ₹10000 due to non completion of work within scheduled time & deducted ₹20000 of diesel cost, which is provided by company to contractor for running his tractor (which was otherwise purchased by contractor, if not provided by company). Now after deduction of ₹30000, company made payment of ₹84500. Now my question is whether company is liable to pay service tax on ₹100000 or ₹70000 (100000-30000). Please advise with reference of act.

Vivekanand Kushwaha

Vivekanand Kushwaha (Expert)
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07 June 2016 As per provision of valuation under section 67 of Finance Act 1994:
1)Service tax is payable on gross amount charged by service provider for service provided or to be provided
2) Consideration includes reimbursement expenditure or cost incurred by service provider and charged(except where condition of pure agent are satisfied).

Therefore, Service tax will be applicable on Rs. 1,00,000.

Vivekanand Kushwaha

Vivekanand Kushwaha (Expert)
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