Vat charge on inclusive of service tax value

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Dheeraj Joshi (Querist)
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20 August 2014 Hello,

According to which section we charge VAT on inclusive of Service tax/excise amount.

Pls suggest me on that.

thanks

Dheeraj Joshi

Dheeraj Joshi (Querist)
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21 August 2014 Pls suggest VAT charged on inclusive of service tax/excise duty value.

Thanks in advance

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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02 August 2025 Hey! Great question about VAT and service tax/excise duty.

### VAT on inclusive of Service Tax / Excise Duty — What’s the rule?

Generally, VAT is charged on the **value of goods**, which is the **sale price** of the goods. The question is whether the VAT should be charged on the price **including** service tax or excise duty.

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### Key points:

1. **VAT on goods only**:
VAT applies to the sale of goods. Service tax applies to services. Excise duty is a central tax on manufacture of goods.

2. **Value for VAT calculation**:
The VAT value is typically the **transaction value** or **sale price** of the goods **excluding** any service tax on services.

3. **Service Tax and VAT are different taxes**:

* Service tax is on services and charged separately.
* VAT is on goods.

4. **Excise duty and VAT**:
Excise duty is usually included in the price of the goods, so VAT is charged on the **gross price including excise duty** (because excise duty is part of the cost of goods).

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### What about charging VAT on **service tax included value?**

* If service tax is **charged separately** for a **service**, then VAT should **not** be charged on the service tax amount.
* If the invoice shows a **combined amount including service tax for services**, VAT should be on the value of goods **only**.
* If your invoice is **inclusive of service tax for services and VAT for goods**, you need to bifurcate the amounts.

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### Relevant legal provisions (India context):

* **Section 4(2) of the Gujarat VAT Act** and corresponding sections in other states specify VAT is charged on **taxable turnover**, which is the sale price of goods.
* Service tax is governed under the Finance Act, and is separate from VAT laws.
* Excise duty is included in VAT value because it’s part of the goods price.

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### Summary:

| Tax Component | VAT Charged on This? |
| ------------- | ---------------------------------- |
| Excise Duty | Yes, included in VAT value |
| Service Tax | No, VAT not charged on service tax |

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If you want, I can help you draft an invoice format showing how to bifurcate service tax and VAT amounts clearly.

Does that help? Would you like a sample calculation?

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