In continuation to our previous post service tax registration payment and return; we wish to give you some more information about service tax. In this post you can read some regular questions and its answers.
Shall I pay service tax on billed amount or amounts actually received?
How are you paying service tax? On billed amount or on receipt? Many are paying service tax on billed amount and unaware of the concept ‘tax payment on amount actual received’. There is no problem paying service tax on billed amount. But this is not the correct way for the payment of service tax. A service provider is liable to pay service tax’ only when he receives the consideration for his service. Thinking practically it is not fair paying service tax on service provided; that has never received payment. I will explain this with an example.
ABC Ltd billed Rs 500000.00 (Inclusive of service tax) on 1st May 2009. Payment received Rs 300000.00 on 14th July and Rs 200000.00 on 25th August.
From the above example let’s find out the service tax liability on each month.
| Date | Bill amount | Payment received | Tax liability | Service tax payment date without interest. |
| 01/05/2009 | 500000.00 | 0 | 0 | 0 |
| 14/07/2009 | 0 | 300000.00 | 28014.00 | 05/08/2009 |
| 25/08/2009 | 0 | 200000.00 | 18677.00 | 05/09/2009 |
However there is an exception for this clause. Transaction between associated enterprises; service tax is payable even if the consideration for service provided is received or not. The service tax is payable immediately after debiting /crediting in the books of account.
How do we find out the tax liability on partly received payments?
From the above example Rs 500000.00 is inclusive of service tax. This means ABC LTD charged a gross amount of Rs 453309.00. And a service tax Rs 46691 in their service bill.
How do you calculate tax liability when you receive a part payment? Here you are getting RS 300000.00 as a part payment. So our liability is calculated by making back calculation on Rs 300000.00 use the following formula.
Since tax liability is on amount received; shall I liable to pay service tax on advance received?
Yes, any advance received is immediately taxable even if the service is provided later.
Advance received but service is not provided due to some reason, is service tax refundable?
Yes, the service tax paid in advance shall be refunded as service tax not payable on service not provided.
I am a new service provider, my service crossed Rs 10 Lac this year. Shall I pay service tax on total amount of service provided during the year or Service provided after ten Lac?
Your service is taxable only when it crosses 10 Lac limit. But the liability is on only amount after 10 Lac make it more clear refer below chart of ABC Ltd started a new business from 1st April 2009
| Date | Bill No | Bill Amount | Payment Recd | Registration | Tax Liability |
| 01/04/2009 | 1001 | 250000.00 | 250000.00 | No | 0 |
| 28/08/2009 | 1002 | 450000.00 | 450000.00 | No | 0 |
| 01/01/2010 | 1003 | 210000.00 | 210000.00 | Yes ( Total amount received crosses Rs 9Lac) | 0 |
| 31/03/2010 | 1004 | 250000.00 | 250000.00 | Al ready registered | Rs 160000 Is taxable @10.3% |
In the above example Rs 160000.00 is chargeable to tax @10.3% in bill no 1004.
In the above example ABC LTD service is taxable from the 1st day April in the next financial year 2010-11. As last year; their service crossed the limit Rs 10 Lac and started paying tax.
How to find out the Service tax liability if tax is not collected from customer?
It is the liability of the service provider to pay service tax even if tax is not collected from client. In such cases total bill amount is considered as inclusive of tax and liability is ascertained by making back calculation
To find out value of taxable service use the following formula
You can calculate service tax liability from the value of taxable service or assessable amount.
For example you have billed Rs 100000.00 and no tax is collected from customer your taxable amount and service tax is calculated as follows
I cannot assess the service tax liability for a particular month or Quarter. In such situation; how to pay service tax?
If you cannot assess the service tax liability for a particular month or quarter for some reasons, you can pay service tax on provisional basis by giving a request to Assistant/Deputy commissioner of central excise in writing .after getting such request the concerned authority may let you pay tax on provisional basis. Such assessee has to file memorandum in Form ST3A showing the details of actual service tax deposited and actual service tax liability of each month or quarter.
Very Well Explainatory Examples.
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xcekllent Explaination. Keept It UP
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thanks understood very well
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its excellent explanatory information.
can I ask one thing ” as I am billing including service tax and receive the amount after deducting TDS in this case how do I calculate the Service tax as the bill amount and the cheque amount is differ.
In general I was using the same formula given above but one of my friend told me to us the formula as gross value received /.897 X 10.30% is this the accurate formula to calculate the Service tax please suggest.”
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Sir
Can you give defination of associated enterprises mentioned above in clause “Transaction between associated enterprises”.
Thanking You
Waiting for prompt reply.
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can I ask one thing ” as I am billing including service tax Rs. 45940/- and receive the amount after TDS deducting Net received Rs. 38816/-the above amount not match as per act.
Please tell me how I calculate the TDS amount bill amount and the cheque amount is differ.
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admin Reply:
August 16th, 2010 at 3:53 pm
Hi sunny,
As you know tds is the amount deducted and paid on behalf of you. so consider this amount as received. and pay service tax on 45940/-. but the cash system( payment of service tax on received amount) is going to change and in future you have to pay service tax on billed amount. we will give you a detailed post on this keep visiting us
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But the provision is that no exemption is available if services are provided under the brand name or trade name of any person whether registered or not. Now what does that mean?
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Service tax how pay on house rent amount.
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I newly enterd in to this facilities bussiness
i am submitting the bills including service tax
as i am submitting the toltal bill is 94000-00
in this i am giving the salaries and ESI PF is approx 86000-00
in this mater how much service tax i need to pay
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We are manufacturers paying Excise duty from Rs 1 and availing Cenvat credit on input .
We are registered ubder Service Tax also and are giving consulting Services and errection commissioning services.
we do not use Service Tax Credit for payment of Excise Duty.We pay GTA on all freight bills by cash ( not using Cenvat or service Tax credit)
If services rendered by us are less than 9 lakhs – do we have to pay and collect service tax on our services
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yr explanation about how to find out service tax liability? is very easy and understood able. a lot thanks…………
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Sir,
we want to find out hw to pay service tax liability for the goverment and in which case tell me separately.
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Dear Sir,
we have find out the result in connection with how to find out service tax liability ? ur reply is very respectful and understoodable.
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i am small service provider and got registration when taxable limit was rs 4 lakh. but in next f y taxable limit fixed for 8 lakh and current year it was 10 lakh.as i am registered in very first year as my turnover crosses 4 lakh but now my turnover never exceed the taxable limit.kindly let me know that am i liable for service tax being small service provider
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good one
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