Advance receipt for contract

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PREM KUMAR.T (Querist)
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27 October 2012 In respect of a Contract service, the service provider receives 10% of the contract amount in advance before raising the invoice. After completion of the work or during the tenure of work, the service provider raises the invoice. In such invoice, the advance amount received is adjusted proportionately.
The query is whether the service tax is payable as and when the ADVANCE amount of 10% is received.

CA Sahil Singla..

CA Sahil Singla.. (Expert)
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27 October 2012 Yes. As per Point Of Taxation rules, service tax becomes due when payment is received or invoice is raised whichever is earlier.
So, in your case, to the extent of 10% amount, service tax becomes due in the month payment is received by Service provider.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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28 October 2012 No it depends on your turnover at the time of raising the advance Bill i.e mobilisation advance. If the amount paid is below 10 lac it is no service tax chargeable and not payable. In the bill raised if it is over 10 lacs then you have to charge Service Tax and pay it accordingly. It is also pertinent to mention that you are liable for TDS on advance taken by you for execution of contract.

PREM KUMAR.T

PREM KUMAR.T (Querist)
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02 January 2013 thanks for your reply.

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