Exemption - Cost of Goods or Material Sold by the provider of service - Service Tax Practice Manual / Ready Reckoner - Service Tax

Exemption - Cost of Goods or Material Sold by the provider of service A. Services where value of goods and material supplied is separable The goods or materials which are sold along with the services provided, if identifiable and under an independent contract of supply, than no service tax will be leviable thereon and there is no question of exemption from the same would arise. Section 67 of the Act provides the provisions for valuation of taxable services. As per section 67 , The value of any taxable service shall be gross amount charged by the service provider for such services provided or to be provided by him. Therefore, section 67 , is also unambiguous and clear that only the value of service shall be taken as the assessable value. B. Services where value of goods and material supplied is inseparable On the other side, where the value of goods or material supplied along with services provided is integral part of such services, which is inseparable but having a heavy burden on the value of services that it is always demanded that there must be appropriate exemption from the value of such services having regard to the nature and component of such goods or material involved into the value of such services. Earlier notification no. 12/2003-ST dated 20-06-2003 [as effective up to 30-6-2012] was granting an exemption for the value of material sold in course of services provided. However, after introduction of negative list, above notification has been withdrawn. Now there are various provisions for deduction of value of goods / material from the gross value or value of an activity which is not subject to service tax. For separate discussion on various services See: Abatement, Composite Rate of Tax, and Valuation Scheme for specified services