We know that
Amount * Rate=Tax
Determining such amount on which tax is charged is called Valuation
This valuation is done in Service tax
using Section 67 of Finance Act
as read with Service tax (Determination of Value Rules,2006)
Lets study these rules in detail
Exam Questions
Question 1
ABC Architects entered into a contract with BTC Group of Hotels to design the architecture of
one of its hotels at an agreed consideration of Rs. 20 lakh. Out of the total consideration, it
asked BTC Group of Hotels to pay Rs. 12,50,000 to its material supplier-Khanna Manufacturers.
Will the payment of part of consideration by the service receiver to a third party on behalf of
the service provider be included in the value of taxable services?
View answer
Service tax chargeable on any taxable service is on the basis of gross amount charged by
service provider for such service provided or to be provided by him. It is not necessary that
the service receiver should pay the consideration only to the service provider; any money paid
to the third party is also includible. Hence, payment made to Khanna Manufacturers would be
includible in the value of taxable services.