write off of serivce tax provision

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This query is : Resolved

Rabnoor Singh Khanna (Querist)

25 August 2009 If a billing on which service tax is applicable is made and only 70% is received and party is not willing to pay the remaining amount then what will be the treatment in this regard. Also tell accounting treatment & entry.

CA Ravi Kumar Murugesh

CA Ravi Kumar Murugesh (Expert)

25 August 2009 Section 67(3) provides that the gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after the provision of such service. Rule 6(1) of Service Tax Rules makes it clear that service tax is payable on value of taxable services received. Thus, if service provider does not receive any payment from his customer, there is no liability of service tax. Service tax is payable only on value of taxable service actually received, and not on amount billed.

If the service receiver pays less amount, reasonable interpretation is that proportionately less tax is payable.

The gross amount charged can be taken as inclusive of service tax and the value and service tax is to be calculated by back calculations.

Thus you have to pay service tax on 70% of bill by presuming that you had received that amount including service tax.
Suppose, if you received Rs.7000 as 70% of bill amount, then you have to pay service tax 7000/110.30*10.30=Rs.654.

Rabnoor Singh Khanna

Rabnoor Singh Khanna (Querist)

25 August 2009 but when we make bill whole service tax is transfered to service tax payable account. You have not mention wat will be the treatment of remaining amount which is not received in accounts