Service tax payable

This query is : Resolved

Shamsheer (Querist)
Follow

17 June 2014 Dear All,

Service tax should be paid upon raising the invoice or upon reciept of payments?

I am seeing people suggesting both the ways. Hence I would like to have an expert advise.

Thanks in Advance.

Nikhil Kaushik

Nikhil Kaushik (Expert)
Follow

17 June 2014 after introduction of point of taxation rules implementation, the service tax becomes due on invoice basis...

Shamsheer

Shamsheer (Querist)
Follow

17 June 2014 Thank you for the quick response.

But I have one more doubt on it. If the receivable amount becomes a bad debt, or any deduction on already raised invoice, then can we claim for the service tax we already paid?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

24 July 2025 Great question — and a common one. Here's the clear position based on **Point of Taxation Rules, 2011 (POTR)** and **Service Tax Law** as applicable **before GST** (i.e., before July 1, 2017):

---

## ✅ **1. When is Service Tax Payable?**

Under the **Point of Taxation Rules, 2011**, service tax is generally **payable on the earlier of**:

* **Date of invoice**, or
* **Date of payment received**,
Whichever is earlier.

### Example:

* Invoice dated: 10 June 2014
* Payment received: 25 June 2014
👉 **Tax is payable on 10 June 2014** (invoice date).

---

## ⚠️ **2. What if It Becomes a Bad Debt Later?**

This is where things get tricky:

* **Even if you do not receive the payment**, **you cannot claim refund or reversal** of the service tax paid on that invoice.
* **There is NO provision** under the Finance Act, 1994 or CENVAT Credit Rules to **adjust service tax paid against bad debts**.

### Important Case Reference:

> In **CCE vs. Sundaram Finance Ltd. (2015-TIOL-958-HC-MAD-ST)** — it was held that **non-receipt of consideration** does not entitle the assessee to **refund or reversal** of service tax paid.

---

## ✅ **3. What About Deduction or Discount on Invoice?**

If the invoice amount is **later reduced** (e.g., due to negotiation, rejection, or discount), and:

* The revised amount is **mutually agreed**,
* **Credit notes** are issued,
* And no payment is made on excess amount,

👉 Then, you may be able to **adjust excess service tax** in subsequent periods **subject to Rule 6(3) of the Service Tax Rules, 1994** — but only if the tax was **not passed on** to the recipient.

---

### 🔍 Summary:

| Situation | Can You Claim Back Service Tax? |
| ------------------------------------- | -------------------------------------------- |
| Bad debt (non-payment) | ❌ No refund or reversal allowed |
| Negotiated deduction with credit note | ✅ Possible adjustment under Rule 6(3) |
| Invoice cancelled before payment | ✅ No tax payable (can adjust in next return) |

---

Let me know if you need a draft **debit/credit note format**, or a **self-declaration template** to support tax adjustments.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now