Service tax calculation

If there is an agreement for provision of service and the service provider, after provision of service sends a bill for, say, Rs.1 lakh+ST on Rs.1 lakh. while processing the bill, they identified some lacuna in the service provided and hence as per the penalty clause of the agreement levied the penalty of, say, Rs.10000. accordingly, only 90000+ST is to be paid to the service provider. As per the accounting of the service receiver, the gross amount (Rs.1 lakh) is shown as an expense and the penalty deducted (Rs.90000) is shown as miscellaneous income. Now the service tax is to be calculated on Rs.1 lakh or on 90000? 

Replies (4)

Hiii Poornima.....The Finance Act  says "service tax has to be collected on the amount that is actually received by the service provider"...In ur case...finally the service provider is gonna receive only Rs.90000...So hence service tax is also pyable on Rs.90000...It has got nothing to do with the Amount billed or Accounting :)

Dear Poornima,

I agree with Riaa

Dear Poornima...

Riaa is right...

Heyy poo........Riaaa is right...

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