CIR NO.699/15/2003-CX, DT. 05/03/2003

Clarification regarding service tax on authorised service station

I am directed to say that some doubts have been raised as to

i) whether the service provided by an Authorised Service Station related to the motor vehicles other than those for which they do possess authorization from the manufacturer, are liable to service tax or not.

ii) whether the cost of lubricants/paints provided during the course of providing any taxable service by an Authorised Service Station would form part of value of taxable service for the purpose of levy of service tax.

iii) whether any service provided to customer at the time of purchase of new vehicle is liable to service tax.

1. It is clarified that per section 65(8) of Finance Act, 1994, “Authorised Service Station” means any service station, or centre, authorised by any motor vehicle manufacturer, to carry out any service or repair of any motor car or two wheeled motor vehicle manufactured by such manufacturer. As per section 65 (90) (zo), the taxable service is any service provided to a customer, by an authorised service station, in relation to any service or repair or motor cars or two wheeled motor vehicles, in any manner. Therefore, service tax is leviable only on such services which are provided in relation to motor cars or two wheeled motor vehicles for which the service station is authorised. The intention was also to cover only the authorised service and repair of motor car and two wheeled motor vehicles.

2. During the course of providing service, an authorised service station also replaces engine oil, gear oil and coolants etc. as per the request of the customer. The price charged by authorised service station for engine oil, gear oil and coolants is towards sale of these consumables to the customer. Therefore, the sale of consumable during course of providing service is akin to sale of parts and accessories and therefore value of such consumables is not includible in the value of taxable services provided value of such consumables is shown separately.

However, there are certain items such as paints used for painting body etc. during the course of providing service, and form intrinsic part and parcel of service in so much as that these are not distinctly and separately identifiable from the services rendered. Therefore, value of such items, which form intrinsic part of service, is includible in the value of taxable service.

3. The activity of providing Teflon Coating at the time of sale cannot be construed as a service or repair provided by an authorised service station even though the same dealer may also be authorised to carry out after sale services. The authorised sales dealer and authorised service station are appointed to perform two disnstinct functions for the car manufacturer and therefore the activity performed at the time of sales of vehicle by the dealer is distinct from the service provided by the authorised service station. Normally, authorised service station comes into picture only after vehicle comes on road. Therefore, it is envisaged that any activity of sales dealer at the pre-sale state or at the time of sale will not come under the purview of service tax.

Sd/-
(Manish Mohan)
Under Secretary (CX.4)

F. No. 248/1/2002-CX.4

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