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2014 (2) TMI 531 - HC - Service TaxRecovery of Service Tax and Income Tax - Levy of Service Tax on providing of services by telecom operators to various customers - Tax deduction at source on the commission/brokerage paid by the Telecom Service Providers to distributors and by distributors to retailers. - Held that: - the services provided by cellular operators are chargeable to service tax; Pre 2012 and Post 2012; - the entire amount received by the cellular operators from the customer, including the price of SIM card, is the value of taxable service; - in the system in which the prepaid vouchers are sold, either physically or electronically, the price of such vouchers would include processing charges or administration fee, Service Tax and the price of talk time or activation charges, as the case may be; - if the break-up is not given, the entire price should be deemed as gross value inclusive of Service Tax; [see Section 67(2)] - sale of vouchers, i.e. plan vouchers, top up vouchers or special tariff vouchers, either sold physically or electronically, are not counted properly and there is no provision either in the TRAI Regulations or in the Service Tax to ensure that the entire sale of vouchers is accounted for the purposes of levy of Service Tax The Service Tax Department needs to look at the above aspect in respect of all cellular operators to ensure that Service Tax is assessed and levied on all schemes, transactions and plans by whatever name called and under whatever schemes as long as they result in providing of service by Cellular operator to the consumer. Regarding TDS - The commission paid by Cellular Service Providers to the distributors or retailers is thus commission from which the tax is required to be deducted at source under the provisions of Section 194 of the Income Tax Act. - Whether tax is deducted at source on such amount or not is not clear and whether such TDS is reflected in the accounts of cellular operators as well as distributors, needs to be seen. - When the commission is paid by way of additional talk time, how the same has to be treated for the purposes of tax is another angle which needs to be looked into by the Income-Tax Authorities. It the issues which have been highlighted before the Court by the amicus curiae as noted above, would require a closer application of mind and investigation both by the Service Tax authorities and by the concerned Income Tax authorities. - a response both of the Service Tax and Income Tax authorities to the issues which have been raised before the Court would be warranted.
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