Shd I pay excess Service Tax by reducing my genuine Profit

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Anurag (Querist)
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02 April 2009 I agree that as per Service Tax rules if Abatement is claimed, Cenvat Credit can not be availed.

However I have a genuine query, which I would like to clarify, with the following example-

Suppose I provide a Tour Package worth Rs. 1 Lac, for which I charge my clients Service Tax/ Cess @ 2.58% of the Package Value (Rs. 2580/-). (Means my total Invoice Amount is Rs. 102,580)

Now, I take some of the Ground Services from my Sub Agent (worth Rs. 50,000/-), for which he issues an Invoice in favour of our company and charges Service Tax/ Cess @ 2.58% of the value of Service provided (in this case- Rs. 1290/-).

Now my question is that I have charged my client Rs. 2580 as Service Tax/ Cess. Out of which I have already paid Rs. 1290/- to my Sub Agent as Service Tax/ Cess.

So the remaining amount of Service Tax/ Cess with me is only Rs. 1290/-.

Now as per your reply, because I have claimed the Abatement, I should pay the full amount of Rs. 2580 as Service Tax/ Cess (whereas I'm left with only Rs. 1290).

SO SHOULD I PAY RS. 1290/- OUT OF MY OWN POCKET (Reducing my Genuine Profit Margins)???

KINDLY ADVISE !!

Regds....Anurag

CA LOKESH KASAT, FCA, M.Com

CA LOKESH KASAT, FCA, M.Com (Expert)
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02 April 2009 You have to pay 2580 only, as you have claim abatement.

Here no question of out of Pocket, the same is collected from client.

and when you receive service, treat 51290 as your cost