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Service Tax on Bad Debts

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CA Mohan Agarwal

Chartered Accountant in Practice

53 Points Posted on 10 May 2021

Dear Sir, I have issued invoices of Rs. 2,72,000/- during the FY 2015-16 to several clients who have not paid me the amount till date. During the Service Tax regime for the FY 2015-16 & FY 2016-17, I filed my ST-3 on receipt basis as my GTO was less than 50 Lacs per annum. Such amount I have already written off in my books for the Income Tax Purposes. Can the department ask me to pay the Service Tax on such invoices along with Interest & Penalty?

Replies (6)

Quick Summary

This discussion explores whether Service Tax is payable on invoices issued during FY 2015-16 and 2016-17, where clients have not paid the amounts. The original poster filed their returns on a receipt basis and has written off these amounts for Income Tax purposes. They are seeking clarification on whether the department can demand Service Tax, interest, and penalties on these bad debts, and are looking for relevant case law to support their understanding that no tax is due.

CMA Poornima Madhava

CMA

13117 Points Posted on 10 May 2021

As I understand, no service tax is payable in this case as you have already written off the dues. So no interest and penalty too.

CA Mohan Agarwal

Chartered Accountant in Practice

53 Points Posted on 10 May 2021

Thank you. Can you share any Judgement or any Case Law wherein the issue has been taken up and duly resolved.

CMA Poornima Madhava

CMA

13117 Points Posted on 10 May 2021

Refer this: https://www.casemine.com/judgement/in/574bdf74e561095bc6d331e8

This case law is not mainly about whether there exists a liability of service tax in case of bad debts; it also goes further in to utilization of cenvat credit on input services in such cases.

You can still find here the solution to your query.