Chargiability of service tax, Service Tax

[DEV KUMAR KOTHARI]

One of essential condition for levy of service tax is that there should be a sperivce provided by one person and the service should be received / availed by another person.When ther is no service provided and received, any charge cannot be subject to service tax. For example damages for breach of service contract,damages for non execution of contract, damages for late payment of service charges, late payment charges charged by bank or card issuers,interest charged by bank or card issuer are some examples of such charges, which are levied as per contract but which are not in consideration of any service rendered. There is no service rendered and there is no service received. Therefor, there should nto be service tax on such charges. Similarly any charge which is in lieu of interest on money lent or credit facility provided should not be subject to service tax. Unfortuantely credit card issuers are levying service tax on such charges, although there is complete lack of service rendered. Views of readers are welcome. Readers can also make complaints to card issuers if they have also faced levy of similar charges wit service tax.

Posts / Replies

[Mukesh Kumar]

As per my knowledge, the amount collected by the credit card issuing banks / companies service tax is collected only on charges or levies other than interest. It is unfortunate that sometimes they show interest portion as charges for late payment and hence levy interest on the same. It is settled that no service tax is payable on interest. On the other side, you are correct that no service tax should be payable on an amount paid for breach of contract. But, since the main contract itself is in the nature of service, the amount collected becomes in the part of levies in the course of services being provided. Therefore, on the portion of such levies, the levy of service tax may be correct.