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Service tax on Amount recovered from employees

Vedanta Deshika


Service tax on Amount recovered from employeesAs we all know, service tax is now chargeable on any service provided to be provided by a service provider, however there are few exceptions stated in "negative list". Service tax is also payable on explicit services which are called "Declared services"

Service has been now defined u/s 65b(44) unlike the old service tax regime which states

Service means any ACTIVITY carried out by a person for another for CONSIDERATION, and includes a DECLARED SERVICE, but shall not include;

(a) An activity which constitutes MERELY,

i. A transfer of title in GOODS or IMMOVABLE PROPERTY, by way of sale, gift or in any other manner; or

ii. A transaction in money or ACTIONABLE CLAIM

(b) A provision of service by an employee to the employer in the course of or in relation to his employment.

A careful analysis of the second part of the definition i.e. exclusions clearly says that any provision of service by an employee to employee is NOT A SERVICE. However, it should be in the course of employment

Now, what happens if the employer recovers some amount from employees  towards transportation facilities and canteen facilities.

Is it liable to Service Tax ?? because when the employer is collecting some amount from the employees for the facility of such transport or canteen , the employer is providing a service to their employees and strictly speaking the employer is a service provider.

The circular issued by (Download TRU - F. No.354/127/2012-TRU) has the answer for these questions. However, the above circular is still  in draft stage.

We can discuss this circular if you have any doubts.

Feel free to write to me

CA Pulkit Sharma


Really Intresting. Can you ellaborate and throw some light on circular.

What the circular says or indication given by the circular?

Is service tax applicable?


Rahul Rai



Seems you already finished reading the notification.

Please explain it. Thanks in advance.