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Kindly Answer at the Earliest

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Hello All,

                Want to know the calcualtion of  Service tax when there is a abtament for  a service:

1.Option 1: When there is a 50% abatement for a service 

Service Value: Rs.1000/-

Can i calculalte 5% on Rs.1000/- (Directly then Add Education and Secondary Education Cess)

 

Or

2. Option 2: Rs.1000/-

Calculate 50% on the above Value then on Rs.500/- calculate 10 % and 2% , 1%.

 

Kinldy comment on the above options

Replies (17)

I will go with Option-2.................... Which is right way !!!!!!!!!!!

 

But in the both option Service tax libility will remain same

Hi! I will go with option B as technically abatement is provided in respect of VALUE OF TAXABLE SERCICES and not for TAX RATE. Tax rate is uniform for all taxable services.

abatement @ 50% is calculated on gross service value i.e. rs.1000 . ST @ 10.3% is applied on net taxable service i.e on rs 500.

1st take abatement on amount then only calculate the tax liability. 

not able to under 

Since Service tax is applicable only on Taxable service, that is only after abatement, so Option "B" will be more appropriate

As per the essense of the text of law ..abatement has been introdued on the value...no where in the law it is written that tax rate can be abated. so tax rate being fixed and value has to be abated.

Option 2 is Best.

option 2 is the better way... 

Option 2 is the correct way

Originally posted by : Kunal Agrawal
Hi! I will go with option B as technically abatement is provided in respect of VALUE OF TAXABLE SERCICES and not for TAX RATE. Tax rate is uniform for all taxable services.

agreed with kunal

Option No. 2 is Correct.

As per Service Tax Rules, Abatement is on the VALUE of TAXABLE SERVICE.

It is NOT on the RATE of Tax.
 

Originally posted by : Karan Gosain

Option No. 2 is Correct.

As per Service Tax Rules, Abatement is on the VALUE of TAXABLE SERVICE.

It is NOT on the RATE of Tax.
 

I also concur with everyone.also u ll get the same answer by applying both the methods. In the present example it was easy because it was 50%. In case of some other figures like 67% etc u have to apply the percentage to the Service tax rate then that rate to the value. Hence the first option may be cumbersome at times. Finally,for clarity and as per the provisons u have to apply the 2nd option in all the cases.

2nd is currect.


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