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Doubt in service tax applicable or not (important)

Dilip Kumar (service) (34 Points)

03 January 2012

Hi,

We are business consultants and doing services like VAT Return / TDS / Accounts of our customers. We opened a new account for e-banking online transaction. The party who don't have online e-banking account is depositing amount in our account and we do the online transaction on behalf of them. They are depositing the same amount (rounded) in our account through cash / cheque (mostly cash) and we are doing online transaction for their VAT / TDS etc. We have taken servie tax under 'exemption limit of Rs. 10 lakhs'

My question is:

- Is service tax applicable of these amounts too. As we are just providing a gateway and all the transaction done having their (party's) VAT No. too. Do we need to pay service tax for these amounts.

Thanks
Dilip Kumar

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3 Replies

CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 03 January 2012

Please refer to Section 67 of Finance Act, 1994, as amended. The relevant part is produced below:

"67. Valuation of taxable services for charging Service tax
(1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall,—
(i) 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;"

In my opinion, as the amount deposited in your account is not a consideration for service provided or to be provided, the same shall not form the part of taxable value of the service. Only that part of amount which is received as a consideration for service provided or to be provided would be taxable under service tax. You should have sufficient evidence to prove that nothing out of the amount so deposited constituites the consideration for service provided.