Service tax

Dear all,

Case 1

There are some invoices in the customer account and there are some receipts in the customer account which are not adjusted against invoices, further the dr. balance is more than the credit balance

case 2

customer pays excess money than the invoice hence there is a net credit balance in the account , which he may adjust when some invoice is raised at a future date hence the customer account shows a credit balance

As per service tax act "advance money received is subject to service tax "

querry

our company classifies the above two as advance money and pays service tax on the credit balances in the customer account?

My contention is both are not advances for payment of service tax . First case the credit balance if adjusted against the debit there is no advance. In the second case the excess money is a liability for the company and the money is to be returned to the customer hence no service tax is to be paid on the above two cases

Please quickly clarify whether my contention is correct or not

Regards,

G.Kannan

Mr. G. Kannan.

if your query relates to a period after the applicability of POTR 2011 then in that case, u will have to follow the prov of Rule 3, namely :

For any services provided and bill not raised within 14 days from the date of completion of service , then POT shall be the date of completion of service or date of receipt of payment whichever is earlier.

If bill raised within 14 days from date of completion of service , then POT shall be the date of invoice or date of receipt of payment whichever is earlier.

in either cases, advance receipts shall b liable to service tax as and when recd.

In ur case, if u recd excess payments against future invoices, then it shall be regarded as an advnace an ST shall be payable immediately.

Further in a case where payment is not recd in advance ST is payable to the credit of the CG as per your applicable Point of Taxation (Date of Invoice or Date of completion of service as the case may be).

For Eg, if after applying the above Rule 3 of POTR, ur Point of Taxation is 11th Aug, 2011, den due date of such payment to the CG is 5th Sept, 2011 (6 th Sept incase of payment electronically & 5th/6th Oct, 2011 in case the assesse is a firm, proprietorship or an individual,in which case payment has to be made quarterly instead of Monthly)

Note : wef 01.04.12 the POTR rules have been amended to substitute 30 days instead of the 14 days mentioned in the rules therein.

I hope this will clarify your doubts.

Regards

Pratul