Advance received before service became taxable

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Palash Gupta

Student...Hoping to pass Inter

643 Points Posted on 29 June 2012

Respected Experts

Can anyone throw some light on issue of advances that pertains to a period in which a service frm which such advances were generated was not taxable and it became taxable in a later period..

Do i have to pay service tax on such advances or not???

plz reply..:)

Replies (2)

Arun Prasadh

Practicing CA

52 Points Posted on 30 June 2012

Pls see below rule,

Rule 5 of Point of Taxation Rule 2011.

Payment of tax in case of new services.—Where a service is taxed for the first time, then,—

(a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable;

(b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within fourteen days of the date when the service is taxed for the first time.

If you received advances & invoice is issued within 14 days of the date when service is taxed for the first time. Then no service tax liability.