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Applicability of service tax on purchase rebate/incentives

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HITESH GORI

CA in practice

96 Points Posted on 20 December 2012

Hi Friends,

I hope many of u know about the incentive/backend practive in software industry.

in this situation we are purchasing the software at Rs. 100/- and we are selling it in Rs. 90/-. aftert that if we have purchased certain no. of units or certain amount we will receive cheque from software co. of Rs. 15/-. it means our profit is Rs. 5/-

now my question is " if my backend/incentive receipt is more than 10 lakhs we need to pay service tax or not ?

in my opinion it is a purchase rebate only on the basis of volume, what is ur view on it ? whether we need to collect service tax ?

please support ur answer with relevant proof or cases.

Replies (1)

Rakshit

practising

426 Points Posted on 21 December 2012

As per the defintion of goods defined under Section 65B (25) of the Finance Act, 1994, the software falls under the definition of 'goods' being a movable property. In the present case, since, you are involved only in purchase and sale of software without providing any service, the same will fall under the term 'Trading of Goods'. Since, the trading of goods specifically mentioned under the Negative List i.e. Section 66D of the Finance Act, 1994, the activity undertaken by you will not be leviable to Service Tax.

Raksh*t Verma

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