Bad debts of services

This query is : Resolved

CA. Mohit chaturvedi (Querist)
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16 October 2014 if a person deposited service tax on service of room rent. but the tenant has runaway without giving the consideration of such service.
then the person is eligible to take credit of such service at next time.

but the assessee decided to close the service of room rent, then is he will receive refund of such tax or not?
and if he will take the refund then what he have to do?

CA vandana goyal

CA vandana goyal (Expert)
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16 October 2014
As per the Central Board of Excise and Customs, bad debts are not allowed as deduction from service tax. The service tax department has clarified that if the amount of invoice is renegotiated due to deficient provision of service or due to terms of the contract (for example contingent on the happening or non-happening of a future event), the tax will be payable on the revised amount. This is subject to the excess amount either refunded or a suitable credit note issued to the service receiver. However, concession is not available for bad debts.

Thus, even if your client does not pay you, you are required to pay service tax.