Service tax on advance

As per Rule 4A(1) of the Service Tax Rule, 1994, every person providing taxable service has to issue an invoice, a bill or, as the case may be, a challan. Invoice, bill or challan must be issued within 14 days from the date of completion of taxable service or receipt of any payment towards the value of such taxable services, whichever is earlier. Thus, invoice, bill or challan is required to be issued even when advance is received, even if service is to be provided later.

The third proviso to Rule 4A(1) of the Service Tax Rules, 1994, as substituted from 1 April 2011, provides that for continuous supply of service, every person providing such taxable service has to issue an invoice, bill or challan, within 14 days of the date when each event specified in the contract, which requires the service receiver to make any payment to service provider, is completed.

However, the words continuous supply of service have not been defined in the Service Tax Rules, 1994. But Rule 2(c) of the Point of Taxation Rule, 2011, defines continuous supply of service to mean any service provided or to be provided continuously under a contract for a period exceeding three months.

You are required to raise invoice within 14 days when advance is received and discharge the service tax liability.