Non payment of invoice (including ser tax )by customer
This query is : Resolved
20 April 2012
I am registered as consulting engineer and issue invoices to my customers according to service tax regulations. One of my customers to whom I issued invoice dt 15-03-2012 , has inspite of my repeated reminders, refused to pay me the invoice amount which included 10% Ser tax plus 2% Edu tax plus 1%SHS Cess.Under such case , what action should be taken by me regarding a) payment of ser tax amount to govt & b)against customer’s failure to pay service tax to me?
Am I compelled to pay service tax even if the corressponding amount is not received by me from my customer?
Rgds. B. R.
Am I compelled to pay service tax even if the corressponding amount is not received by me from my customer?
Rgds. B. R.
21 April 2012
Under current Service Tax POTR Rules , you are liable to pay. If not is received partly the Cenvat can be claimed. If not received fully it is a dead loss
24 April 2012
Thanks Ankit.
There are few more querries as under.
a)I had taken ST registration in 2007-08 when my Turnover was above Rs 8 lacs. However, in subsequent years it is less than Rs 8 lacs and for the years 2009-10, 2010-11 it was NIL.For 2011-12 it is less than 4 lacs.Though my request for surrendering was rejected , I continue to file ST returns regularly. Pl tell me Am I supposed to charge in my invoice the Servoce tax to my clients when I never exceeded Rs 10 lacs limit?
b)If yes to above, Being Consulting Engineer , when should I pay Service tax under POTR Rules??
Thanks & Rgds . BR
There are few more querries as under.
a)I had taken ST registration in 2007-08 when my Turnover was above Rs 8 lacs. However, in subsequent years it is less than Rs 8 lacs and for the years 2009-10, 2010-11 it was NIL.For 2011-12 it is less than 4 lacs.Though my request for surrendering was rejected , I continue to file ST returns regularly. Pl tell me Am I supposed to charge in my invoice the Servoce tax to my clients when I never exceeded Rs 10 lacs limit?
b)If yes to above, Being Consulting Engineer , when should I pay Service tax under POTR Rules??
Thanks & Rgds . BR
03 August 2024
When dealing with non-payment of an invoice by a customer, especially when it includes service tax, and considering your queries related to service tax regulations, here’s a detailed response:
### **1. **Non-Payment of Service Tax by Customer**
#### **a) Payment of Service Tax to Government**
- **Service Tax Liability**: Under the service tax regulations, the liability to pay service tax is on the service provider, irrespective of whether the customer has paid the invoice amount or not. Therefore, you are required to pay the service tax to the government even if the corresponding invoice amount has not been received from the customer.
- **Action Required**: You should pay the service tax, education cess, and secondary and higher education cess (SHS Cess) to the government based on the invoice issued. This liability is independent of the payment received from the customer.
- **Recovery of Service Tax**: You can follow up with the customer to recover the amount including the service tax. If the customer refuses to pay, you may need to consider legal recourse for recovery of the dues, but this does not affect your obligation to pay service tax to the government.
#### **b) Action Against Customer’s Failure to Pay**
- **Legal Recourse**: You can initiate legal action to recover the dues. This can include sending legal notices or filing a suit for recovery in a civil court if necessary. This process is separate from your service tax obligations and pertains to your commercial contract with the customer.
- **Documentation**: Ensure you keep detailed records of all communications and attempts to recover the amount. This will be useful in legal proceedings if required.
### **2. **Service Tax Registration and Charging Service Tax**
#### **a) Charging Service Tax When Turnover is Below Threshold**
- **Threshold Limit**: The threshold limit for service tax registration and exemption was ₹10 lakhs for the period in question. However, once registered, even if your turnover falls below ₹10 lakhs, you are still required to charge and pay service tax on the invoices issued.
- **Surrendering Registration**: If your turnover falls below the threshold, you should apply for the surrender of your service tax registration. Since your request was rejected, you must continue to comply with service tax regulations, including charging service tax on your invoices.
- **Service Tax Collection**: Despite the low turnover, if your registration is still active, you must continue to charge service tax on your invoices and comply with the filing requirements.
#### **b) Point of Taxation Rules (POTR) for Consulting Engineers**
- **Point of Taxation**: For consulting services, the point of taxation is generally the date of invoice or the date of payment, whichever is earlier.
- **Payment of Service Tax**: Service tax should be paid based on the point of taxation rules. If the invoice date is before the date of payment, you must pay the service tax by the due date for that period, even if the payment from the customer is delayed.
- **Compliance**: Ensure timely payment of service tax based on the point of taxation and file returns accurately.
### **Summary**
1. **Service Tax Payment**: You are required to pay service tax to the government based on the invoice, regardless of whether you have received payment from the customer. This is a statutory obligation.
2. **Recovery of Dues**: Take legal action to recover the amount from the customer, but this does not affect your service tax liability.
3. **Service Tax Registration**: Even if your turnover is below ₹10 lakhs, if your service tax registration is active, you must charge service tax on your invoices and comply with filing requirements.
4. **Point of Taxation**: Pay service tax based on the point of taxation rules—either the date of invoice or date of payment, whichever is earlier.
Consult a tax professional for specific guidance tailored to your situation and to ensure compliance with all applicable service tax regulations.
### **1. **Non-Payment of Service Tax by Customer**
#### **a) Payment of Service Tax to Government**
- **Service Tax Liability**: Under the service tax regulations, the liability to pay service tax is on the service provider, irrespective of whether the customer has paid the invoice amount or not. Therefore, you are required to pay the service tax to the government even if the corresponding invoice amount has not been received from the customer.
- **Action Required**: You should pay the service tax, education cess, and secondary and higher education cess (SHS Cess) to the government based on the invoice issued. This liability is independent of the payment received from the customer.
- **Recovery of Service Tax**: You can follow up with the customer to recover the amount including the service tax. If the customer refuses to pay, you may need to consider legal recourse for recovery of the dues, but this does not affect your obligation to pay service tax to the government.
#### **b) Action Against Customer’s Failure to Pay**
- **Legal Recourse**: You can initiate legal action to recover the dues. This can include sending legal notices or filing a suit for recovery in a civil court if necessary. This process is separate from your service tax obligations and pertains to your commercial contract with the customer.
- **Documentation**: Ensure you keep detailed records of all communications and attempts to recover the amount. This will be useful in legal proceedings if required.
### **2. **Service Tax Registration and Charging Service Tax**
#### **a) Charging Service Tax When Turnover is Below Threshold**
- **Threshold Limit**: The threshold limit for service tax registration and exemption was ₹10 lakhs for the period in question. However, once registered, even if your turnover falls below ₹10 lakhs, you are still required to charge and pay service tax on the invoices issued.
- **Surrendering Registration**: If your turnover falls below the threshold, you should apply for the surrender of your service tax registration. Since your request was rejected, you must continue to comply with service tax regulations, including charging service tax on your invoices.
- **Service Tax Collection**: Despite the low turnover, if your registration is still active, you must continue to charge service tax on your invoices and comply with the filing requirements.
#### **b) Point of Taxation Rules (POTR) for Consulting Engineers**
- **Point of Taxation**: For consulting services, the point of taxation is generally the date of invoice or the date of payment, whichever is earlier.
- **Payment of Service Tax**: Service tax should be paid based on the point of taxation rules. If the invoice date is before the date of payment, you must pay the service tax by the due date for that period, even if the payment from the customer is delayed.
- **Compliance**: Ensure timely payment of service tax based on the point of taxation and file returns accurately.
### **Summary**
1. **Service Tax Payment**: You are required to pay service tax to the government based on the invoice, regardless of whether you have received payment from the customer. This is a statutory obligation.
2. **Recovery of Dues**: Take legal action to recover the amount from the customer, but this does not affect your service tax liability.
3. **Service Tax Registration**: Even if your turnover is below ₹10 lakhs, if your service tax registration is active, you must charge service tax on your invoices and comply with filing requirements.
4. **Point of Taxation**: Pay service tax based on the point of taxation rules—either the date of invoice or date of payment, whichever is earlier.
Consult a tax professional for specific guidance tailored to your situation and to ensure compliance with all applicable service tax regulations.
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