02 August 2010
we have already paid service tax @12.36% on Mob advance receipt basis. After reducing the service tax @10.3% we have charged service tax in bill @10.3% but clients have recoveed mob advance and also service tax amount @12.36%(which paid against mob. adv.) from our bill. we are financialy lost. Pls. give us a opinion for Convince our client.
02 August 2010
A harmonious reading of Section 65 and Section 68 would mean that taxable event is ‘providing of taxable service’. Section 68 clearly stipulates that service tax can be charged only when the service is provided. It is only the manner of payment, which is linked with receipt of payment. The time when the liability has to be discharged has only been linked with the receipt of payment. Therefore in the given circumstances, stand of the client seems to be correct. If the services have been rendered in 10.3% regime, then there is no point in even 12.36% on mob.adv. amount.
further, regarding your feelingg that you are loosing 2%, please understand that there is a remedy available to you in this regard, as under:
Third proviso to Rule 6, which deals with provisions governing adjustment of excess service tax paid, provides as under:
“Where an assessee has paid to the credit of Central Government service tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him (calculated on a pro rata basis) against his service tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received.”
A plain reading of the above provision indicates that in case services are not provided, service tax paid in excess may be adjusted. The taxable event is provision of services and hence the rate of service tax would be the rate in force on the date of rendition of taxable services.
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