By TIOL News Service

NEW DELHI, FEB 28, 2015: IN case of Intercontinental Consultants And Technocrats Pvt Ltd case, reported in 2012-TIOL-966-HC-DEL-ST, the Delhi High Court held that of Rule 5(1) of the Service Tax ( Determination of Value) Rules, 2006 which provides for inclusion of the expenditure or costs incurred by the service provider in the course of providing the taxable service in the value for the purpose of charging service tax is ultra vires Section 66 and 67 of the Finance Act, 1994 and travels much beyond the scope of those sections.

In this budget, Section 67 of the Finance Act, 1994 is proposed to be amended to undo the above ratio.

In section 67 of the 1994 Act, in the Explanation, for clause (a), the following clause is proposed to be substituted:

(a) "consideration" includes-

(i)  any amount that is payable for the taxable services provided or to be provided;

(ii)  any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed;

(iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.'.

This amendment is explained in TRU letter as under:

Section 67 prescribes for the valuation of taxable services. It is beingprescribed specifically in this section that consideration for a taxableservice shall include:

all reimbursable expenditure or cost incurred and charged by theservice provider. The intention has always been to includereimbursable expenditure in the value of taxable service. However,in some cases courts have taken a contrary view . Therefore, theintention of legislature is being stated specifically in section 67.

Will thisnot mean that before this amendment, Delhi High Court judgement prevails?

Mercifully, in tune with the Finance Minister's stated policy, this is not made effective retrospectively.