Regd gross value of taxable services

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Athif (Querist)
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18 March 2012 Hi

Hope you can help me in clarifying calculating service tax for software services in following scenarios:

As an example. Suppose I charge 15,000rs as development charge for making a custom software. My expenses incurred during this service excluding this said 15k, include 3k in phone calls/travel.
1. So, is it that my net profit 15k-3k = 12k is my gross taxable income ? I then have to compute 12k * (10.3/100) as service tax ?

2. If the client does part payment, i.e., he pays 7.5k by march 31st, 2012 and remaining by may 31st, 2012. Do I only have to pay service tax on 7.5k receipt in march ? OR do I need to pay service tax on the invoice in total (i.e., 15k) ?

3. Suppose I calculate service tax on my invoice of 15k and I start doing work as expected. In case the client is fraudulent or is in condition to not pay me my fee. I'm in loss as I've received nothing from the client. but still do I need to pay service tax on the invoice for which I've received no payment ?

Regards
Athif

Arun Gulati

Arun Gulati (Expert)
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19 May 2012 1. on full 15K. read Rule 5 of service tax Rules.

2. on invoice basis.

3. Yes, you are liable to service tax even on money, you have recovered as in case of bad debts also service tax is payable. However, there are other things also to circumvent this situation like instead of raising bill, you can raise the performa inovice etc.

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