Service tax on credit card service

This query is : Open

Chinmay Kamat (Querist)
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06 August 2009 my client in retail has a swiping machine. whenever he makes a sale through the credit card, the bank charges him a 1.7% commission on the amount that is credited to his account. they also used to charge service tax on the commission amount.

however, now the bank has started charging commission on the total amount credited. since ST rate is 10.3%, this makes a total cost of selling 12%, which is eroding the margin...

my query is whether the value adopted by the bank is proper.

thanks

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
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06 August 2009 This depends on the business practice so unable to say it is proper or not

Chinmay Kamat

Chinmay Kamat (Querist)
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06 August 2009 S.67(1)(i) says simply that:

Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall, in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him.

the gross amount charged is the commission, and not the amount credited to the account. the consultant for the bank has misinterpreted the word 'gross' and calculated 10.3% on the total credit amount.

how can one charge service tax on something which is credited to the account, it can be charged only on an amount that is debited.

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