Point of taxation
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
13 July 2012
Dear Expert,
I have recently started a private limited company offering consultancy services on loan syndication. From 1st April 2012 onwards, the service tax rules states that the service tax is to be paid to the government on accrual basis i.e. at the time of crediting the invoice in the books of accounts instead of paying service tax once the payments have been received from the clients i.e. receipt basis.
I wanted to know as to have the rules being changed w.e.f 1st July 2012 whereby the payment of service tax to the government has been made on receipt basis i.e. on receipt of payment from the clients or is it still the same?
Kindly advise?
I have recently started a private limited company offering consultancy services on loan syndication. From 1st April 2012 onwards, the service tax rules states that the service tax is to be paid to the government on accrual basis i.e. at the time of crediting the invoice in the books of accounts instead of paying service tax once the payments have been received from the clients i.e. receipt basis.
I wanted to know as to have the rules being changed w.e.f 1st July 2012 whereby the payment of service tax to the government has been made on receipt basis i.e. on receipt of payment from the clients or is it still the same?
Kindly advise?
13 July 2012
I do not think any change in rules was as earlier.accrual basis paid.
Please wait reply of other experts..
Please wait reply of other experts..
Querist : Anonymous
Querist :
Anonymous
(Querist)
13 July 2012
Thanks for the response. Also i had one more query..
How should service tax be deducted and paid to the government if an advance is received from the client?
How should service tax be deducted and paid to the government if an advance is received from the client?
10 August 2024
When dealing with service tax (now replaced by GST in India), it's essential to understand how to handle advances from clients. Here’s a step-by-step guide on how to deduct and pay service tax (or GST) on advances:
### 1. **Receipt of Advance**
- **Advance Receipt**: When you receive an advance payment from a client for a service to be provided, you need to account for it as per the prevailing tax regulations.
### 2. **Determine the Service Tax/GST Rate**
- **Service Tax**: For transactions before July 1, 2017, service tax rates and applicable rules should be referred to.
- **GST**: For transactions from July 1, 2017, GST rules apply. The rate of GST depends on the nature of the service provided.
### 3. **Calculate the Tax on Advance**
- **Service Tax/GST on Advance**: Calculate the service tax/GST on the advance amount received. For instance, if the advance is ₹10,000 and the applicable service tax rate is 15% (including cess), the tax amount would be ₹1,500.
- **GST**: For GST, the calculation would be based on the rate applicable (e.g., 18% GST on ₹10,000 would be ₹1,800).
### 4. **Issue a Receipt**
- **Invoice for Advance**: Issue a receipt or a provisional invoice for the advance payment received, including the service tax/GST amount. Ensure that the invoice includes details like the client's name, amount received, tax rate, and the tax amount.
### 5. **Deposit the Tax**
- **Service Tax**: Pay the service tax to the government using the prescribed method. Service tax payments should be made through the designated banks or online portals as per the guidelines in force before GST implementation.
- **GST**: For GST, deposit the tax through the GST portal. The payment should be made under the appropriate tax head (CGST, SGST, or IGST) depending on the nature of the transaction (intra-state or inter-state).
### 6. **Adjust the Advance Against Final Invoice**
- **Final Invoice**: When you provide the final service, issue a final invoice showing the total service value and the tax already collected as advance. The advance amount received and the tax paid on it should be adjusted against the total invoice amount.
- **Example**: If the final invoice amount is ₹50,000 and the tax due on it is ₹7,500 (assuming a 15% rate), and you have already received ₹10,000 as advance with ₹1,500 as tax, adjust this advance against the final amount. The final invoice should show the remaining balance to be paid by the client.
### 7. **File the Returns**
- **Service Tax**: For periods when service tax was applicable, file service tax returns including details of the advance received and tax paid.
- **GST**: For GST, include the details of advances received and the tax collected in your GST returns. Use the appropriate forms in the GST portal.
### **Additional Considerations**
- **Reverse Charge**: If the reverse charge mechanism applies, ensure compliance with those specific rules.
- **Record Keeping**: Maintain records of all advances received, invoices issued, and taxes paid for proper documentation and compliance.
### **Summary**
1. **On receipt of advance**, calculate and charge service tax/GST on the advance amount.
2. **Issue a receipt or provisional invoice** showing the advance and the tax.
3. **Deposit the tax** with the government.
4. **Adjust the advance** against the final invoice.
5. **File returns** with appropriate details of advances and taxes.
Always ensure compliance with the latest regulations and consult with a tax professional for precise guidance tailored to your specific situation.
### 1. **Receipt of Advance**
- **Advance Receipt**: When you receive an advance payment from a client for a service to be provided, you need to account for it as per the prevailing tax regulations.
### 2. **Determine the Service Tax/GST Rate**
- **Service Tax**: For transactions before July 1, 2017, service tax rates and applicable rules should be referred to.
- **GST**: For transactions from July 1, 2017, GST rules apply. The rate of GST depends on the nature of the service provided.
### 3. **Calculate the Tax on Advance**
- **Service Tax/GST on Advance**: Calculate the service tax/GST on the advance amount received. For instance, if the advance is ₹10,000 and the applicable service tax rate is 15% (including cess), the tax amount would be ₹1,500.
- **GST**: For GST, the calculation would be based on the rate applicable (e.g., 18% GST on ₹10,000 would be ₹1,800).
### 4. **Issue a Receipt**
- **Invoice for Advance**: Issue a receipt or a provisional invoice for the advance payment received, including the service tax/GST amount. Ensure that the invoice includes details like the client's name, amount received, tax rate, and the tax amount.
### 5. **Deposit the Tax**
- **Service Tax**: Pay the service tax to the government using the prescribed method. Service tax payments should be made through the designated banks or online portals as per the guidelines in force before GST implementation.
- **GST**: For GST, deposit the tax through the GST portal. The payment should be made under the appropriate tax head (CGST, SGST, or IGST) depending on the nature of the transaction (intra-state or inter-state).
### 6. **Adjust the Advance Against Final Invoice**
- **Final Invoice**: When you provide the final service, issue a final invoice showing the total service value and the tax already collected as advance. The advance amount received and the tax paid on it should be adjusted against the total invoice amount.
- **Example**: If the final invoice amount is ₹50,000 and the tax due on it is ₹7,500 (assuming a 15% rate), and you have already received ₹10,000 as advance with ₹1,500 as tax, adjust this advance against the final amount. The final invoice should show the remaining balance to be paid by the client.
### 7. **File the Returns**
- **Service Tax**: For periods when service tax was applicable, file service tax returns including details of the advance received and tax paid.
- **GST**: For GST, include the details of advances received and the tax collected in your GST returns. Use the appropriate forms in the GST portal.
### **Additional Considerations**
- **Reverse Charge**: If the reverse charge mechanism applies, ensure compliance with those specific rules.
- **Record Keeping**: Maintain records of all advances received, invoices issued, and taxes paid for proper documentation and compliance.
### **Summary**
1. **On receipt of advance**, calculate and charge service tax/GST on the advance amount.
2. **Issue a receipt or provisional invoice** showing the advance and the tax.
3. **Deposit the tax** with the government.
4. **Adjust the advance** against the final invoice.
5. **File returns** with appropriate details of advances and taxes.
Always ensure compliance with the latest regulations and consult with a tax professional for precise guidance tailored to your specific situation.
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