Setting aside of Rule 5(1) of Service Tax (Determination of Value) Rules, 2006 by High Court upheld: Supreme Court

The decision of the HC relates to incidental expenses like hotel accommodation, travel etc. However, it is felt that the decision cannot be applied where the cost of the service itself is split in the contract. If a supplier of manpower gets reimbursement for the salary of the employee from the service receiver separately then Section 67 itself takes care of the valuation when it says gross amount charged for the service. Since having personnel on the rolls is pre-requisites to provide manpower service, the salary becomes cost to the service provider and it should be charged to the service receiver to avoid any loss. Hence amount charged should include such costs which essentially form part of the cost of the service.

sujisham sham 09/03/2018