Service Tax adjustment

This query is : Resolved

Srinivasan (Querist)
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05 March 2010 We are making payment of service tax collected immediately within 5th of next month (as per excise procedure), without waiting for the collection from the customers, to avoid manual tracking of service collected from customers.

In some cases, the customers rejecting the services provided to them by raising debit note. In such case, can we adjust the service paid on the original bill against the current month service tax liability, or whether i have to go for refund? Kindly explain with legal provisions.

Lekh Sood

Lekh Sood (Expert)
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05 March 2010 Your case is covered by Rule 6(3) of the service tax rules.By rejecting the service it takes the character of service not provided.You can adjust the service tax debit notes in the payment.

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.