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When Value is not ascertainable
Value of taxable service shall be gross amount charged for similar service if
Such service is in ordinary course of business
And
Gross amount charged is sole consideration
Value of similar service cannot be ascertained
In this case, service provider shall determine the equivalent value of such consideration.
However, this value cannot be less than cost of provision of such service
Exam Questions
Question 2
Rohit, an advocate, rendered professional advice to its client XY Ltd. on the matters relating to
tax optimization. As a consideration for the said services, XY Ltd. gave a souvenier to Rohit.
The said souvenier was an artifact especially designed and made by the craftsmen as per the
specifications suggested by XY Ltd.
Rohit contends that he need not pay service tax on the services provided by him as value of
thereof could not be ascertained. Is Rohit’s contention correct? Critically examine the case.
Assume that Rohit is not entitled to the exemption available to small service providers.
No, Rohit’s contention is not correct. He should value the service in the manner provided by
rule 3 of the Service Tax (Determination of Value) Rules, 2006 and pay service tax.
Accordingly, he should value the service provided by him on the basis of similar services and
if that is not possible, he should value the service on the basis of equivalent money value of
consideration and pay service tax on the same.
However, such value should, in no case, be less than the cost of provision of such taxable
service.
