Adjustment of service tax paid earlier

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sekharsc

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30 March 2016 Can service tax paid in AY 2015-16 be adjusted in AY2016-17 by way of credit note if the business demands

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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30 March 2016 No. However, if you have shown the Service Tax as paid in advance in A.Y 2015-16 in one of the two ST - 3s filed, the same can be adjusted in 2016 - 17 and necessary details can be filled up in the ST - 3s of 2016 - 17.

sekharsc

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31 March 2016 Kindly read my question. ST not paid in advance in Ay201516 but business demands credit note be issued for the realated invoice in Ay201617. Can the service tax charged and paid in Ay 2015-16 be adjusted in Ay 2016-17 emerging from credit note

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Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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08 April 2016 There are no provisions for reversal of service tax already paid. That said, generally the Department seeks re-conciliation of the TO as per ST - 3 and TO as per Audited Accounts. It depends on how the credit note is accounted for. Though Service Tax is payable on invoices issued, unlike VAT return there is no details to be filed invoice wise. Hence suppose the credit note is for Rs. 1 lakh. The turnover for the month of say January 2016 is Rs.25 lakhs, The credit note can be shown as other deductions and the tax paid on Rs.24 lakhs, effectively adjusting the tax excess paid in FY 2014 - 15. I have specifically taken January 2016, since the ST - 3 for the period April to September 2015 would have been filed long back and the 90 days window for revision would have lapsed.

I hope this clarifies your query with a practical solution, acceptable to the Department.

sekharsc

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08 April 2016 I agree the problem is the moving from one FY to another FY. The business demands that credit note be given for changes within 6 months of the transaction. How will the department look at it.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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14 April 2016 If the adjustment cannot be done as above, then the only option is to approach the Department for a Refund of duty paid. Getting a refund from Central Excise is an herculean task, and the relevant application has to be filed within one year of payment of the tax. If that is the case you can file Form R for refund alongwith the Credit Note. One of the conditions is if the duty has already been passed on to the recipient (obviously yes) then the same should be refunded to the service recipient / purchaser of goods. This results in an absurd situation, because the Credit Note is equivalent to reversal of transaction, but then 'the law is an prized ass'. One has to approach the divisional AC/DC to process the refund.

In view of the practical difficulties, my earlier suggestion is the course, which the Central Excise Department will accept and allow - regarding Income Tax it would be prior period transaction.