22 December 2009
The Finance Act, 2006, has brought about major changes in the principles of determination of the value of taxable services. Valuation of taxable services is now governed by the newly substituted Section 67 of the Finance Act, 1994, read with the Service Tax (Determination of Value) Rules, 2006 (hereinafter referred to as Valuation Rules).
As per Rule 5 of the Valuation Rules, whenever any expenditure or costs are incurred by the service provider in the course of providing taxable services, all such expenditure or costs shall be treated as consideration for the taxable services so provided or to be provided and shall be included in the value for the purpose of charging service tax on the said services.
This would mean that out-of-pocket expenses incurred by the service provider for the provision of services and charged to and recovered from the recipient of the services will be part of the value of taxable services and will be charged to service tax.
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