The charging section 66B provides that service tax is chargeable on the value of taxable service
In case value of taxable service is zero, service tax on it is also zero
Hence no service tax is payable on free services
Service Tax (Determination of Value) Rules, 2006 are not applicable in this case
as these apply when consideration is not ascertainable
and not when there is no consideration at all
Mr. Vasudevan has conducted a market survey for Mr. Subramanian. However, Mr.
Vasudevan has not charged any fee for such services as Mr. Subramanian happens to be his
best friend. Is service tax payable on such free service? Explain.
Section 67 and Service Tax (Determination of Value) Rules, 2006 make provisions for
valuation even when consideration is not ascertainable. However, these provisions apply only
when there is consideration. If there is no consideration i.e., in case of free service,
section 67 and Service Tax (Determination of Value) Rules, 2006 cannot apply.
Thus, no service tax is payable when value of service is zero. In other words, if the value is
zero, the tax will also be zero even though the service may be taxable. However, this principle
applies only when there is really a ‘free service’ and not when its cost is recovered through
Therefore, service tax is not payable on service rendered by Mr. Vasudevan to Mr.
Subramanian as Mr. Vasudevan has not charged any fee from Mr. Subramanian.