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Service tax on retention money
Hello,
A bill for Works contract was raised inclusive of Service tax.Only 90% of bill value has been paid by the client,thereby keeping 10% as retention money.Now the doubt is on what amount do we have to deposit Service tax ie: 90% or the 100%.will the service tax on retention amount be paid when we receive the amount.plz do inform if there is any circular or notification or any case law for this.
Replies (5)
Dear Shailly,
Service tax follows cash (i:e receipt) basis except in case of transactions between Associated enterprise.
Therefore In present case Service Tax is payable on 90% of the invoice amount *(i:e what we have actually received)
and Service Tax on remaining 10% will be paid on receipt of the same.
i agree with amir......
Case laws :-
CIT vs Shoorji Vallabhdas 46 ITR 144
283 ITR 295 and 283 ITR 297.
The high court held that the retention money could be brought to tax only when actually received.
Im also providing URL of the same for your reference.
https://www.business-standard.com/india/news/tax-liabilityretention-money-after-receipt/257757/
sushmita, Shoorji judgment relates to income tax and not service tax
If we have received the exempt service and retained the money, should we disclose in the return inclusive of retention money or excluding it?
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