If the client has paid the money on the bills raised and service tax has been paid on that. Subsequently, the client has disputed the entire amount paid and asked to refund the entire amount mentioning that there is a technical mistake in the work done. If the service provider acceptw the contention of the client and reverse the entry in the books of account, can the service tax paid be adjusted against other future bills?
(CA Final Student M.Com)
Replied 22 March 2010
Firstly let me make one thing clear. Service tax has to be paid on the receipts & not on billed amount.
Secondly as per Rule (6 4A) of service tax rules 1994 the Assesseemay adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be
However such adjustment is shall be subject to the following conditions, namely:—
(i)excess amount paid is on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification,
(ii)excess amount paid by an assessee registered under sub-rule (2) of rule 4, 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 paid may be adjusted with a monetary limit of [one lakh rupees] for a relevant month or quarter, as the case may be,
(iv)the details and reasons for such adjustment shall be intimated to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such adjustment.]
Replied 22 March 2010
There are actually two ways to go about this :
1) Like Chintan replied in the above message, either go through with the reverse entry and treat the amount you have as excess service tax paid and comply with Rule 6A.
2) The other method, which I think is more relevant to your case, since the people you are providing service to are your clients and they are expected to bill you in the future, just treat the service tax paid on the amount received as advance paid and in any subsequent bills which you put in your books, adjust the advance service tax paid against it. This reduces the need for any excess money adjustment.