Service tax if payment not received

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 May 2015 Dear Experts,

1. Service tax is to be paid as per point of taxation i.e as per invoice if payment is not received. However in case of assesses where service tax is to be paid on receipt basis (50 Lakhs or less in previous financial year), then in that case will service tax be paid if payment is not received? Is there any time period for non payment?

2. Also for the month of march, liabilty to be discharged by march 31st. What if subsequently payment is not received?

3. If service receiver does not pay service tax seperately, then amount should be considered as inclusive of service tax?

Regards,

Querist : Anonymous

Querist : Anonymous (Querist)

21 May 2015 Dear experts,

Please advice.

Querist : Anonymous

Querist : Anonymous (Querist)

22 May 2015 Dear Experts,

Please advice.

Regards,

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Here’s a clear breakdown on **service tax liability when payment is not received** under the Point of Taxation (PoT) rules and payment basis:

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### 1. **Payment of service tax when payment is not received (for assesses paying on receipt basis)**

* **Normal PoT rule:** Service tax is payable on the earlier of—invoice date or receipt of payment.
* **For assesses with turnover less than ₹50 lakhs in previous year (payment basis):**

* Service tax is payable **only on receipt of payment** (not on invoice date).
* If payment is not received, **no service tax liability arises** till payment is received.
* There is **no specific time limit** prescribed for how long you can defer service tax due to non-payment.
* However, if payment is eventually received, service tax becomes payable immediately.

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### 2. **Liability for March month (year-end)**

* If your service tax liability arises on payment basis and **payment is not received by 31st March**, you **need not pay service tax for March** for the unpaid amount.
* When you receive payment later (say in April), service tax will be payable in that month.

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### 3. **If service receiver does not pay service tax separately**

* Under service tax law, **service tax is payable by the service provider, not the receiver** (except in reverse charge cases).
* The provider should show service tax separately on invoice.
* If service tax is not charged separately by the provider, then the **amount charged is deemed to be inclusive of service tax**.
* The provider is liable to pay service tax on the total amount collected.
* If the receiver pays an inclusive amount, the tax component needs to be computed accordingly.

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### Summary:

| Scenario | When service tax payable? | Comments |
| -------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------------------- |
| Provider on invoice basis | On invoice date or payment received (whichever is earlier) | Even if payment not received, tax due on invoice date |
| Provider on payment basis (<50L turnover) | Only on receipt of payment | No tax payable till payment is received |
| Year-end March liability | Tax due only on payments received before 31 March | Tax on subsequent payments to be paid later |
| Service tax not shown separately by provider | Tax considered included in total amount | Provider liable to pay tax on gross amount |

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If you want, I can help you draft specific journal entries or return filing notes based on your payment receipt status. Need that?

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