ABATEMENT under service tax law:

The service tax is payable on value of taxable service rendered by the service provider .However ,in rendering of many services ,the goods are invariably used. One of the simplest methods of excluding the value of goods is to provide ad hoc abatement from the gross amount charged in order to arrive at the value of taxable service.

Thus, abatement is an exemption granted in respect of the value of taxable service. Therefore,  first of all the value of taxable service is to be computed as per the provisions of section 67 and rules made thereunder and ,then ,abatement is granted.The gross amount charged ,for the purpose of abatement is inclusive of value of goods and materials sold.

The notification No.26/2012-ST,dated 20.06.2012 ,provides abatement in respect of various descriptions of services and the abatements are subject to conditions stipulated in the notification.

The Central Government exempts taxable services of the description  specified  in Column No-1 of the Table below , from so much of the service tax leviable thereon , as in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (2) of the said table, of the amount charged by such service provider for providing the said taxable service  unless specified otherwise ,subject to the relevant conditions specified in the corresponding entry in column (3)  of the said table namely :-

Methodology to calculate tax liability —  Abatement is available in GTA @75%  i.e. tax is leviable on 25% of the freight  resulting in effective tax rate of 3.5% ( 25% X 14%-The current tax rate )