Whether Trade Discount & Cash Discount recd on Purchase of goods for resale liable to service tax?
3 Replies
CA Pooja Agarwal
(Chartered Accountant)
(3228 Points)
Replied 11 October 2012
no they are not liable for service.,ST is charged on gross bill value(excluding discounts ,if any)
ANJALI NEGI
(Chartered Accountant)
(1263 Points)
Replied 11 October 2012
yes service tax is to be charged on the gross value of bill
Sunil
(Trader)
(2611 Points)
Replied 11 October 2012
You have to make a test:-
On Trading of Goods there is no service tax. If you have received a trade discount say of 10% or a volume discount it is effectively a reduction in purhase price. There is no activity of service. There is no declared service. The consideration is a discount and the predominant activity of yours is trading for which there is no service tax leviable. You are not providing a service or declared service for which you are receiving a discount. Receiving goods at discount for consumption will also not attract the tax.
However, if the discount is given to you for a service provided by you to the seller, it can be taken as an activity for consideration. Ditto for a declared service provided by you, i.e. if discount is given to you for an act of forbearance or negative covenant by you or even for an agreement of such act.
If you get discount for large volume there is no forbearance or negative. You are agreeing to buy a huge quantatity and that is not a service. For early payment also there is no service or declared service for which it can be a consideration.
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