Service Tax Not Leviable on Grants For Daily Expenses towards Services Rendered: Kerala HC

The Kerala High Court ruled that service tax is not applicable on grants received by organizations for daily expenses linked to services rendered. The petitioner contended that the grants were not consideration for services but financial assistance for operational costs. The court observed that grants do not fall under the definition of “taxable services” under the Finance Act unless explicitly linked to commercial activities. Consequently, demand notices issued for service tax on such grants were quashed. This ruling provides clarity on the taxability of grants and reinforces the principle that taxes should only apply to income or activities expressly outlined in tax statutes. Tax experts view this decision as a landmark judgment that ensures fair taxation practices while protecting non-commercial entities from undue tax burdens.