Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: articles on VAT and GST in India :: form 3cd :: ACCOUNTING STANDARDS :: VAT Audit :: ACCOUNTING STANDARD :: list of goods taxed at 4% :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: cpt :: due date for vat payment :: TDS :: empanelment :: VAT RATES :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes
« Service Tax »
 100 Opening GST Profiles- Indirect Taxation- ALL Industries
 New Opening Sr. Manager-Indirect Tax For A Leading Power Company
 Tax Collected At Source Under GST Regime
 India's GST challenge makes Donald Trump's tax overhaul look easy
 What does GST hold for Indian youth?
 GST will help India move towards becoming a commercial union
 Friendly advance ruling mechanism to smoothen ride under GST regime
 GST impact: Small businesses could under-report income initially
 The art of doing business under GST
 GST council to debate tax on services, fitment of items on April 18-19
 Online Services – Changes In Service Taxation

Taxable event in service tax
April, 27th 2009

I am writing this treatise to clear the cobwebs around the concept of taxable event in regard to service tax. From the circulars and judgements I find there are two misconceptions about taxable event of service tax on two issues.

The first misconception is that the taxable event in service tax is the realisation of payment. This is found in the judgement of the Tribunal where the following occurs: whereas in the case of Service Tax the taxable event is not the time of rendering of services but the same is realisation of payment for the services so rendered. If on rendering of service and in spite of raising the bills, no payments are received, liability to pay tax on such services will not arise. As such, it is clear that the tax liability has nexus with the realisation of the payments for such services and the value of such payments.

The above conclusion is defective. It relates the taxable event to the fact that the liability can vanish if no payments are made. Actually, subsequent payment has no relevance to the fact that the service has been rendered and the liability to duty has arisen. Even in the case of Customs after the act of importation (which is the taxable event) has taken place, the liability to tax vanishes if the goods are destroyed before clearance.

In the case of Central Excise also after the act of manu-facture (which is the taxable event) takes place, if the goods are destroyed, then the liability also vanishes. Taxable event does not depend on the subsequent liability to be destroyed, modified or realised. It is basically the act which makes something taxable. The Supreme Court has held that even though the taxable event is the manufacture or the production of an excisable article, the duty can be levied and collected at a later date.,

It is well settled by several Supreme Court judgements that the act of manufacture is the taxable event in excise, the act of import is the taxable event in the case of import duty, the act of exportation is the taxable event in the case of export duty, and the act of sale is the taxable event in the case of sales tax. In the same vein the act of adding value is the taxable event in the case of value added tax. And in the case of service tax the taxable event is the act of rendering service. It cannot be the realisation of payment for service.

The second misconception is that ownership is relevant for the taxable event of service tax. Actually it is not. So long as a service is pro-vided, irrespective of who owns the materials on the basis of which the service is provided, the service becomes a taxable service. This principle has not been properly appreciated in a recent circular No. 92/3/2007-Service Tax dated 12.3.2007. In this circular it has been written that the foreign exchange broker providing foreign exchange broking service does not hold title to the foreign exchange.

Accordingly, board is of the view that service tax is not leviable on money changing per se, as such activity does not fall under the category of foreign exchange broking. This clearly implies that the circular is based on the hypothesis that the brokers not owning the foreign exchange is the cause for his not being the service provider.

The conclusion is that the taxable event in the case of service tax is the act of rendering service and the ownership of the material on the basis of which the service is provided is not relevant.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Website Ranking Website Ranking Company Website Positioning Alexa Ranking Website Promotion Website top 10 ranking website top 10 promotion search engine result promotion Strategic Internet Marketing Website Optimization Website Ranking Factors

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions