Service tax on a non taxable item purchased for a client

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harry mann

Owner

25 Points Joined March 2015

There is a product which has no service tax applicable and I am buying that product for my client. I raise an invoice to the client from my company. Now, do I have to charge service tax to client despite the fact that I am not paying any service tax for that product.

The commission charged to client for such services will attract service tax that I know but what about the product itself.

Actual case: I made a payment of 1500 to facebook om behalf of client and charged a commision of 150. I raised an invoice of (1650 + service tax) but client is saying that invoice should be of 1500 + (150 +service tax) and no tax should be charged on actual purcase amount because it is exempted.

Pelase help !!!

Replies (2)

Rahul Agarwal

Chartered Accountant

213 Points Joined February 2010

I think the client is right. Service Tax is payable on the charges for services. On purchase or sale of items, service tax is not attracted. In your case, it will be reimbursement of the cost of purchase. Here is the definition: "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include— (a) an activity which constitutes merely,–– (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force.

harry mann

Owner

25 Points Joined March 2015

Originally posted by : Rahul Agarwal

I think the client is right.
Service Tax is payable on the charges for services. On purchase or sale of items, service tax is not attracted.

In your case, it will be reimbursement of the cost of purchase.

Here is the definition:
"service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include—

(a) an activity which constitutes merely,––

(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

(ii) a transaction in money or actionable claim;

(b) a provision of service by an employee to the employer in the course of or in relation to his employment;

(c) fees taken in any Court or tribunal established under any law for the time being in force.

But that amount is going to be counted on my books because I am raising the invoice from my company. So don't I have to pay the service tax on the invoiced amount to governemnt because I purchased a tax free product for amy client and raised an invoice from my company.