Service Tax on Photography Services - yet another salvo from DGST
A little recap - Board had in F.No.B.11/1/2001-TRU) dated 9th July, 2001 clarified,
The value of taxable service is the gross amount charged from the customer for the service rendered. However, the cost of unexposed photography films sold to the customer is excluded. The service provider claiming benefit of the cost of film should be advised to show them clearly on the invoices along with description and particulars of the film. Otherwise, the claim will not be considered as admissible. No other cost (such as photographic paper, chemicals, etc.) is excluded from the taxable value.
This circular was unsuccessfully challenged in the Kerala High Court and the Supreme Court. In the meantime Board had, in a letter addressed to the Punjab Colour Lab association, clarified that the input material consumed/sold is not includable in the value of taxable services. However recently Board had decided that the clarification is wrong and so it is withdrawn. Now DGST enters the picture and clarifies that the provisions of the notification will prevail over the clarification given by the Board and so he wants his boys to attack the photo studios immediately and recover the arrears - Perhaps with interest and penalty. The photographers can be charged with suppression and collusion in not understanding that the Board clarification was patently illegal and not bringing it to the notice of the authorities that the clarification was wrong. With so many clarifications and disputes, may be a time will come when we will have to handover the Service Tax administration to the Indian Army. On this issue DDT 237 on 9.11.2005 had asked
"Now what prevails? Board clarification or Supreme Court judgement? Board's letter to the Association is extracted here for your perusal. The least that is expected of the Board is to give a clarification on the latest position - publicly please!"
Board has given the clarification now. Strangely after the Right to Information Act has come into force, the Board and its officers are secretive about such highly public matters. These clarifications are contained in letters to Chief Commissioners. Why can't they be properly publicized as circulars?.