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Service tax paid in advance

Kalpit (CEO) (25 Points)

16 August 2011

I have been following the accrual system for the payment of service tax payment for the first 6 months means " for the period from 1st April 2010 to 30th Sept. 2010 i have paid service tax on the amount of the bills raised" for the period from 1st Oct to 31st March 2011 i want have paid service tax on the basis of the cash basis". since i have paid the service tax for the first quarter on the accrual basis the aount of the service tax is paid in excess.

Now my point is can i follow 2 methods i.e. accrual basis in first quarter and cash basis in next quarter and can i adjust the service tax paid in excess due to the change of method.

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12 Replies

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 16 August 2011

There is nothing illegal in paying service tax in advance. Excess payment can be adjusted in subseqquent payments.

Monica (student - CA Final) (83 Points)
Replied 16 August 2011

In my opinion, the excess payment of service tax can be adjusted in the subsequent month or quarter and change of method does not effect adjustment of excess service tax payment. The relevant section is:

Rule 6 of Service Tax Rules, 1994:

Where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards Service Tax liability for a month or quarter, he may adjust such excess amount paid by him against his Service Tax liability for the succeeding month or quarter.

The Conditions for Self-adjustment of Excess amount of Service Tax paid :

(i) Excess Service Tax paid is on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification,

(ii) Excess Service Tax amount paid by an assessee having Centralised Registration [Rule 4(2), Service Tax Rules, 1994. ] on account of delayed receipt of details of payments towards Taxable services may be adjusted without monetary limit.

(iii) In cases other than specified in clause (ii) above, the excess amount of Service Tax paid may be adjusted with a monetary limit of1,00,000/- (one lakh) for a relevant month or quarter.

(iv) The details and reasons for such adjustment shall be intimated to the jurisdictional Superintendent of Central Excise within a period of 15(fifteen) days from the date of such adjustment.

1 Like

Ravi Chopra (CA) (661 Points)
Replied 16 August 2011

Kindly note : `````````````````````````````````The monetary limit for adjustment of excess service tax paid is increased from Rs. 1.00 lacs to Rs.2.00 lacs.

3 Like

ASHUTOSH (F & A ) (33 Points)
Replied 17 August 2011

can adjustment be made only for qtr/mth, if excess service tax deposited 2 or 3 years ago can adjust in this month

Originally posted by : Ravi Chopra
	Kindly note : `````````````````````````````````The monetary limit for adjustment of excess service tax paid is increased from Rs. 1.00 lacs to Rs.2.00 lacs.

CA Unnikrishnan Nair N (Chartered Accountant) (2083 Points)
Replied 17 August 2011

Appears to be difficult

ASHUTOSH (F & A ) (33 Points)
Replied 18 August 2011

Sir pls tell me duration ,

Ravi Chopra (CA) (661 Points)
Replied 19 August 2011

In my Opinion,

it can be done only in SUCEEDING MONTH/ QUARTER..

Also U cant claim carry forward of excess service tax. Since in ST3 of previous years you may have not shown that there was excesss payments.

For adjustment under rule 6(4A), there is need of furnishing details of acknowledgement No. of intimation to Superintendent fore the sauid quarter (this is based on analysis of ST3) which u might not have done!!!

So u can not claim the adjustment

Kalpit (CEO) (25 Points)
Replied 20 August 2011

Thank you all for your valuable opinions.

My another problem is can i follow two different methods viz. for first quarter accrual and for second quarter cash syatem in the same year.

Further the excess of service tax is just due to change of method then can i adjust it.

yusuf shaikh (ACCOUNTS MANAGER) (29 Points)
Replied 20 August 2011

Please note from 1st July '2011 onwards the service tax is payable on Billing system.

CA Saiyum khan (Practicing CA) (685 Points)
Replied 21 August 2011

Originally posted by : Kalpit
	Thank you all for your valuable opinions. My another problem is can i follow two different methods viz. for first quarter accrual and for second quarter cash syatem in the same year. Further the excess of service tax is just due to change of method then can i adjust it.

Service Tax Liability on accrual basis is applicable effective from 01-07-2011. Prior to that whatever amount has been paid on accrual basis would be considered as advance and can be adjusted against liabiity of subsequent month / quarter.

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 22 August 2011

In this year there is an option to follow cash basis upto 30th June. Subsequently as per the deemed service date as per POTR. Therefore you can change.

Further service tax is not really on accrual basis as ST is payable even on advacnes.

Jimmy (CA ) (75 Points)
Replied 28 August 2011

i think Kalpit question is whether he can follow Cash basis or Accrual basis upto March 2011..

I think Tax department basically wants tax on every services you have rendered and received money. so it does not matter you follow any system but you have to make sure that tax is to be paid on every services you have rendered. Hence uniform / single method followed is always helpful. You can change method but then have to prove and maintain details to show that there is no revenue loss to the tax department.

In my opinion you need to re-calculate Service Tax liability and input credit (if you have not) upto March 2011 (and also upto 30th June 2011 if you wish) on payment basis (ie. as per Rules) and you will also know the excess tax amount paid. You can also revise your returns based on this. I suggest to employ professional if amount involved is high as present penal interest is 15 to 18% p.a.

Regards

CA Jimmy Chauhan