Recently
there was an interesting case between a Public Sector Bank (PSB) and Revenue
Authorities wherein one of the issues was applicability of Service Tax on the
value of interest received on Bill Discounting facility extended by the PSB to
its customers.
Readers
may like to read my earlier post on Bill Discounting : Issue
of applicability of TDS in Bills Discounting
In
the present case regarding applicability of Service Tax, the PSB argued that
the interest collected on Bill Discounting was exempted from levy of Service
Tax by virtue of Notification No.29/2004-ST dated September 22, 2004.
The
deciding authority CESTAT accepted the argument of PSB and held that as per the
first part of the said Notification, the subjects for exemption from Service
Tax are OD facility, CC facility, or Bill Discounting facility and objects are
value equivalent to interest or discount, as the case may be i.e. as per the
circumstance. Therefore, the value of interest as well as discount in
connection with providing the services of OD facility, CC facility, or Bill
Discounting facility would be exempted from Service Tax under section 66 of the
Finance Act 1994.
