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Purpose of collecting service tax on accrual basis

Parankusa ( ) (78 Points)

30 July 2011

Dear members,

Service tax is payable on accrual basis wef 01/04/2011. My querry is, what is the purpose of such an amendment? The earlier procedure of service tax being paid when value of taxable service was received was more convinient. But now does this amendment result in a burden to service providers, because they have to pay service tax irrespesctive of the receipt? So what is the benifit of this amendment?

Thanking in anticipation,

Regards,

Shrinidhi

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7 Replies

CA Madhvi (...Blissful...) (1658 Points)
Replied 30 July 2011

Beneficial to department only...........

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Rushi (Practice) (160 Points)
Replied 30 July 2011

its also for stop evasion of tax

CA CS Akashdeep Singh (Practicing CA) (1394 Points)
Replied 30 July 2011

From next year, GST is going to be launch and GST is applicable on both goods and services. So it is a move to make both goods and services equivalent i.e., accrual basis

Ashok J (CA Final) (880 Points)
Replied 31 July 2011

Professionals like CA, Advocates, Doctors, Comp Secretaries, ICWAs follow cash basis of A/c. Paying serv tax on accrual basis is only ADDITIONAL BURDEN on service providers. This foolish move is only in the interest of Govt.

Max Payne (employed) (2569 Points)
Replied 01 August 2011

Originally posted by : Ashok J
	Professionals like CA, Advocates, Doctors, Comp Secretaries, ICWAs follow cash basis of A/c. Paying serv tax on accrual basis is only ADDITIONAL BURDEN on service providers. This foolish move is only in the interest of Govt.

CA, CWA, CS, legal consultant are allowed to follow cash basis for service tax as per the Point of Taxation Rules 2011, if it is a proprietary concern or partnership firm.... So its additional benefit for professionals.....

But its unavoidable switch for transition to GST... its been postponed so many times.... states are collecting VAT as soon as sales take place...

so to make some progress, there has been change in the union levy than telling states to collect VAT on cash basis.....

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CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 01 August 2011

All other taxes namely income tax, central excise , vat, customs are payable on accrual basis. The amendment is to have uniformity.

mohankumar (manager) (28 Points)
Replied 02 August 2011

I have been wondering why no voices are raised from the service industry against the senseless amendment of " service payment on accrual basis".

The service industry is not the trading industry one must understand ; here , apart from the small margins, the timely settlement of service invoices is a rarity.

This amendment , now , to pay service tax irrespective of the actual receipt of service bills shall stfle the already struggling industry.

Also, the comparison with VAT is totally wrong as in a trade dealing one would have a large input tax to set off with.

I think the negative impact of this amendment on the working capital of the service industry has still not sunk in to all.

I wish that representation is made to the ministry by the whole service industry ( I include even our CA, ACS brethern who have already been exempted) on a massive scale to force them to back this amendment without any further delay.

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