Legal Question in Tax Law in India

Re: service tax

Service Tax should not be levied on bounce cheque charges recovered from the customers of telephone

As per the provisions of Finance Act, 1994 relating to Service Tax leviable on the service provided by the telegraph authority(telephone services) to a subscriber, the value of taxable services has been defined to include only the amount charged for the services provided by the Telegraph authority to a subscriber.

On interpretation of the relevant provisions cheque bouncing charges collected from the customer do not alter the value of taxable services in any way.Thus service tax is not leviable on the amount of cheque bouncing charges collected from the customers.

The above position is also clear from the perusal of boards circular dated 20th December 2000 in which the CBEC took a similar view in respect of surcharge on delayed payment.

The said ciruclar is as under:-

===========================

"Service Tax not leviable on surcharge collected on delayed payment of telephone bill

Service Tax Circular No. 32/3/2000-CX, dated 20-12-2000

I am directed to say that it has been brought to the notice of the Board that divergent practices exist in respect of levy of service tax on `surcharge� collected for delayed payment of telephone bills.

2. The matter has been carefully examined by the Board. As per the provisions of Section 65(48)(b) of Chapter V of the Finance Act, 1994, service tax is leviable on the service provided by the telegraph authority to a subscriber, in relation to a telephone connection. Further, under Section 67(b) of the said Finance Act, the value of taxable services has been defined to include only the amount charged for the services provided by the Telegraph authority to a subscriber. On a harmonious interpretation of the above provisions and also taking note of the fact that the amount of surcharge on delayed payment of a telephone bill does not alter the value of taxable services, it is hereby clarified that service tax is not leviable on the amount of surcharge collected for delayed payment of telephone bills. Consequently, Board�s Service Tax Circular No. 29/3/99, dated 15-7-1999 [See 1999 (112) E.L.T. � T29] (issued from file F. No. 149/5/97-CX. 4) which is contrary to the above position stands withdrawn.

3. It is desired by the Board that pending disputes, if any, be finalised as per the instructions contained herein. Trade and field formations may also be informed suitably.

Receipt of this circular may kindly be acknowledged."

=======================

Hope the above is clear.

Best Regards

Srinivas Kotni

#9811282863