The word "sale" is a nomen juris. It is the name of a consensual contract. Service tax is a value added tax. Amount received as principal is not the consideration for services rendered. Such amount is credited to the capital account of the lessor/hire-purchase service provider. It is the interest/finance charge which is treated as income or revenue and which is credited to the revenue account. Such interest or finance charges together with the lease management fee/processing fee/documentation charges are treated as considerations for the services rendered and accordingly they constitute the value of taxable services on which service tax is made payable. Service tax is leviable on 10 per cent of interest portion vide Notification No. 4/2006. Service tax imposed by Section 66 (as amended) on value of taxable services referred to in Section 65(105)(zm) read with Section 65(12), insofar as it relates to financial leasing services including equipment leasing and hire-purchase is within the legislative competence of the Parliament under Entry 97, List I of the Seventh Schedule to the Constitution. Contracts entered to be dealt with by competent authority in accordance with the law laid down.
