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Whether Service tax is to be paid on unrealised security?

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This query is : Resolved

Priyanka Mukhiya (Querist)

04 June 2011 An Industrial Construction Service Provider has provided services and out of the total bill amount, the service receiver has retained an amount as security towards satisfactory performance.The service provider has paid the service tax on realised amount net of the security.
Whether the security amount retained by the receiver of services should be included in total realisations and whether Service tax should be paid on such unrealised security amount???

CA Unnikrishnan Nair N

CA Unnikrishnan Nair N (Expert)

04 June 2011 After 01-04-2011, under Point of Taxation Rules, the amount retained may be liable to tax because the builder would have raised bill upon completion of a stage specified under the contract which attracts tax regardless of payment. Prior to 01-04-2011, retained amount may not be liable until released provided the contractee is not associate concern.

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