Service tax on Compensation, Service Tax

[A Wilson]

Dear Sirs,

Effective date: 1.7.2012

Scope of Declared Service Section 66E (e)

Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an
act.

Analysis:
This is a new category of activity which has been covered into service tax by this entry. It covers
followings activities: Agree to refrain from an act, Agree to tolerate an act, Agree to tolerate a
situation and Agree to do an act. All these activities if agreed upon for a consideration, it will
cover in this entry and will be liable to service tax.

Pls refer the above declared service and give your expert opinion on the following :

1. Applicability of service tax on compensation from the customer for order cancellation for supply of goods
2. Applicability of service tax on Recovery from employee for short notice period

Best Regards,

A.Wilson

Posts / Replies

[Rajagopalan Ranganathan]

Sir,

I do not think the gross amount charged for the above activities during the previous financial year or during the current year will exceed ₹ 10 lakhs. Therefore there will be no need to pay service tax.

[mahim dangi]

Hi A Wilson,

I am not sure about the 1st issue but in 2nd case you have to collect service tax from the employee

[A Wilson]

Dear Sirs,

Thank you very much for your reply. Our total taxable limit already exceeds the basic limit. Pls give your expert opinion for the applicability of service tax on compensation for agreed order cancelled.

Thx.

A.Wilson