We run a small outfit dealing in mailing of bulk mail for clients.
The postage for franking is purchased from post office and the meters of the franking machines are set for the amount. As and when franking is done, the meter reading gets reduced. At the end of the mailing, bill is sent to the client towards the adjustment of amount paid for postage with the "despatch slips" with the seal of the post office as evidence. Separate bill is sent for "service charges" for stuffing/franking on which service tax is collected.
Now the Service tax authorities demand that ST should be levied on the postage franked and billed to the clients. Is it correct? The postage is "goods" and treated as liquid asset in the books of accounts. Further the Post office is exempted from the Service Tax so far as basic mail is considered. Only speed post/money orders attract ST. The post office also franks customers' letters and no Service Tax is charged. Can anybody guide?
S. Krishnamoorthy