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One of my client receives earnest money deposit from contractors and in some cases such deposits are forfeited. Will such forfeiture amount to consideration for an activity liable for service tax payment?
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Earnest money deposit transferred to income
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Since service becomes taxable on an agreement to provide a service such forfeited deposits would represent consideration for the agreement that was entered into for provision of services. Hence forfeiture would amount to to consideration for an activity liable for service tax payment.
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