Service tax
This query is : Resolved
03 September 2016
Sir, We are Pvt. Ltd. Company & service tax provider on Renting of Immovable Properties. We are raising our bills on monthly/Quarterly basis to our clients/ service receipents. But for the last 5 - 6 years they have not paid our service tax regulary, they have paid in instalments. Now they says that we should raise the bills in current date with current rate (form 10% & 12.36% & 14 % previous rates of service tax to current rate i.e. 15%) to claim our pending service tax from them. Is it possible? What will be effect on our liabilities. will there be any penalty from the department regarding issue of duplicate bills in current date with current rates?
03 September 2016
Sir, We are Pvt. Ltd. Company & service tax provider on Renting of Immovable Properties. We are raising our bills on monthly/Quarterly basis to our clients/ service receipents. But for the last 5 - 6 years they have not paid our service tax regulary, they have paid in instalments. Now they says that we should raise the bills in current date with current rate (form 10% & 12.36% & 14 % previous rates of service tax to current rate i.e. 15%) to claim our pending service tax from them. Is it possible? What will be effect on our liabilities. will there be any penalty from the department regarding issue of duplicate bills in current date with current rates?
24 July 2025
This is a common and critical issue in service tax compliance, especially in cases of delayed payments across multiple financial years with changing tax rates.
Let’s break it down step by step:
✅ 1. Applicability of Service Tax Rate – Based on Point of Taxation Rules (POTR)
As per the Point of Taxation Rules, 2011, the rate of service tax applicable is based on:
Date of Service Provision
Date of Invoice
Date of Payment
🔹 Important Rule:
If invoice is raised within 30 days of completion of service, the rate applicable will be based on the earlier of:
Date of invoice, or
Date of payment
If invoice is not raised within 30 days, then the rate applicable will be the date of payment.
✅ 2. Can You Raise Bills at Current Rates for Past Services?
No, you cannot revise old bills at current (higher) service tax rates just because the client is now willing to pay.
🔴 Why Not?
The service tax liability is governed by law, not mutual agreement.
You are not allowed to change historical tax rates just to help the service recipient claim credit.
This may be treated as misrepresentation or incorrect billing, potentially attracting penalty or scrutiny from the tax department.
✅ 3. What You Can Do Legally:
If your old invoices were:
Issued correctly at the then-applicable rates (e.g., 10%, 12.36%, 14%), and
Services were provided in those respective periods,
➡️ Then you should NOT reissue bills with 15% service tax.
Clients can still pay those amounts now based on original invoices. If they lost the bills, you may provide a copy (marking it clearly as "Duplicate Copy for Reference") with the original date & rate.
⚠️ Risks of Issuing Revised Bills with Current Date & 15% Rate:
Violation of POTR – Department can penalize for incorrect application of tax rate.
Interest Liability – You may be liable for interest on the delay from the original due date of tax payment.
Mismatch in Returns – If your ST-3 returns for those years show tax collected at 12.36%, but you now issue revised bills at 15%, this will create a mismatch.
✅ Best Practice Recommendation:
Do not raise new invoices at 15% for past services.
Ask the client to pay the pending amount as per original invoices.
Collect payment and pay interest on delayed tax deposit (if applicable).
File a revised ST-3 return if any correction is needed.
📌 Summary:
Issue Guidance
Can I reissue old bills at 15%? ❌ No, not legally correct
Should client pay as per old rate? ✅ Yes, as per original invoice
Can I provide duplicate copy of invoice? ✅ Yes, with original date & rate clearly stated
Is there penalty for duplicate billing with wrong rates? ⚠️ Yes, risk of interest/penalty
What to do now? ✅ Reconcile old invoices, collect payment at correct rate, deposit tax + interest if due
Let’s break it down step by step:
✅ 1. Applicability of Service Tax Rate – Based on Point of Taxation Rules (POTR)
As per the Point of Taxation Rules, 2011, the rate of service tax applicable is based on:
Date of Service Provision
Date of Invoice
Date of Payment
🔹 Important Rule:
If invoice is raised within 30 days of completion of service, the rate applicable will be based on the earlier of:
Date of invoice, or
Date of payment
If invoice is not raised within 30 days, then the rate applicable will be the date of payment.
✅ 2. Can You Raise Bills at Current Rates for Past Services?
No, you cannot revise old bills at current (higher) service tax rates just because the client is now willing to pay.
🔴 Why Not?
The service tax liability is governed by law, not mutual agreement.
You are not allowed to change historical tax rates just to help the service recipient claim credit.
This may be treated as misrepresentation or incorrect billing, potentially attracting penalty or scrutiny from the tax department.
✅ 3. What You Can Do Legally:
If your old invoices were:
Issued correctly at the then-applicable rates (e.g., 10%, 12.36%, 14%), and
Services were provided in those respective periods,
➡️ Then you should NOT reissue bills with 15% service tax.
Clients can still pay those amounts now based on original invoices. If they lost the bills, you may provide a copy (marking it clearly as "Duplicate Copy for Reference") with the original date & rate.
⚠️ Risks of Issuing Revised Bills with Current Date & 15% Rate:
Violation of POTR – Department can penalize for incorrect application of tax rate.
Interest Liability – You may be liable for interest on the delay from the original due date of tax payment.
Mismatch in Returns – If your ST-3 returns for those years show tax collected at 12.36%, but you now issue revised bills at 15%, this will create a mismatch.
✅ Best Practice Recommendation:
Do not raise new invoices at 15% for past services.
Ask the client to pay the pending amount as per original invoices.
Collect payment and pay interest on delayed tax deposit (if applicable).
File a revised ST-3 return if any correction is needed.
📌 Summary:
Issue Guidance
Can I reissue old bills at 15%? ❌ No, not legally correct
Should client pay as per old rate? ✅ Yes, as per original invoice
Can I provide duplicate copy of invoice? ✅ Yes, with original date & rate clearly stated
Is there penalty for duplicate billing with wrong rates? ⚠️ Yes, risk of interest/penalty
What to do now? ✅ Reconcile old invoices, collect payment at correct rate, deposit tax + interest if due
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