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Service tax applicability on unbilled revenue

Kumar (Finance Manager) (82 Points)

03 April 2013

Dear Seniors & Experts,

I request you all please let me know whether Service Tax attracts on unbilled revenue? As per our agreement with Client we can only generate the Invoice on every four weeks and the same ends on mid of April, 2013. In this connection we are not able show last two weeks (March, 2013) professional services as revenue for 2012-13. As Invoice falls next financial year, the same hits our Turnover for 2012-13 Financial Year. Subsequently, we understand that the same can be shown as unbilled Income in our books of accounts for 2012-13 and Invoice can be generated later.

In view of the above, I request you all kindly guide us whether do we need to pay service tax @ 12.36 % on unbilled Income?

An early reply would be highly appreciated.

Thanks in advance,

Kumar

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6 Replies

Abhinay Kesanapalli (Articles asst.) (84 Points)
Replied 03 April 2013

As per Point of Taxation Rules, Service Tax liability will arise at the time date of invoice(i.e., if invoice is issued before 30 days of completion of service, otherwise take date of completion of service) or amount received whichever is earlier.

In your case service tax liabilty will arise at the time of completion of contract (completion of contract means billing date agreed between the parties).

You can check in POT rules. IN Rule-3 Determination of Point of Taxation in that continuous supply of service.

Prabhat Kumar (Advocate & Consultant) (1912 Points)
Replied 03 April 2013

Since you have already provided the service to your client,you can book the charges in your book of accounts and thereafter as per" Rule 2A of Point Of Taxation Rules 2011" you can make payment of Service Tax in the financial year 2012-13 itself although invoice is raised in April 2013.