Service tax applicablity
This query is : Resolved
02 May 2013
Can Deposit accepted from clients ,on later date it was forfeited (written back) in books of account , are liable to pay service tax?
09 May 2013
can any body advice?
11 May 2013
experts pl advice
02 August 2013
Dear Experts
Pl. advice
Pl. advice
24 July 2025
Regarding your query on service tax applicability on deposits accepted and later forfeited, here’s the clarification:
Are deposits forfeited liable to service tax?
Service tax is payable only on consideration received for taxable services.
A deposit received from a client is not service income until it is forfeited or adjusted against service charges.
If the deposit is forfeited and treated as income, it can attract service tax if it relates to a taxable service.
However, if the deposit is refunded or written back (forfeited amount reversed) in the books, no service tax liability arises on the refunded portion.
Summary:
Scenario Service Tax Liability
Deposit accepted (not forfeited) No service tax on deposit itself
Deposit forfeited and treated as income Service tax applicable if relates to taxable service
Deposit forfeited but later written back (refunded) No service tax on refunded amount
So, if the deposit was forfeited and accounted as income related to a taxable service, service tax is payable on that amount. If it was reversed or refunded later, no service tax on the reversed amount.
Are deposits forfeited liable to service tax?
Service tax is payable only on consideration received for taxable services.
A deposit received from a client is not service income until it is forfeited or adjusted against service charges.
If the deposit is forfeited and treated as income, it can attract service tax if it relates to a taxable service.
However, if the deposit is refunded or written back (forfeited amount reversed) in the books, no service tax liability arises on the refunded portion.
Summary:
Scenario Service Tax Liability
Deposit accepted (not forfeited) No service tax on deposit itself
Deposit forfeited and treated as income Service tax applicable if relates to taxable service
Deposit forfeited but later written back (refunded) No service tax on refunded amount
So, if the deposit was forfeited and accounted as income related to a taxable service, service tax is payable on that amount. If it was reversed or refunded later, no service tax on the reversed amount.
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