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Advance consultancy fee

sujit raut (director) (23 Points)

30 March 2017

I received advance consultancy fee from my client in March 2017 of Rs 2000000. If work will not fulfill then i have to return the same or return after deduct my expenses. Should i have to pay service tax on same. If i paid service tax & suppose i return the money to client in month of June 2017 then how can i claim service tax paid.

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3 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (160332 Points)
Replied 30 March 2017

The Finance Act, 2005 had inserted Explanation 3 in Section 67 of the Act so as to clarify that the gross amount charged for taxable services shall include any amount received towards the taxable service received before, during or after provision of such service.

Amendments had been made in Section 65(105), Section 67 and rule 6 of Service Tax Rules, 1994 to link payment of Service tax with the receipt of payment for taxable services provided or advance payment received towards taxable service to be provided in future. When payments relatable to taxable service are received during the course of provision of service, service tax is liable to be paid to the extent of receipt of payment. In other words, a person is liable to pay the tax as soon as the consideration towards the taxable service is received.

In case if refund of advance amount, you can revise ST return and adjust the service tax already paid for future payment liabilities; and/or ask for refund.

CA Prakash N (Head - Indirect Tax (GST & FTP)) (373 Points)
Replied 31 March 2017

As Mr.Dhirajla said, service tax has to be paid on receipt of advance.

To answer your question, you can issue a credit note to the extent of amount repaid including attributable ST as per Rule 6(3) of ST Rules.