Service tax: point of taxation

Queries 725 views 4 replies

Hi,

A mall charges service Tax on Common area maintenance (CAM) to it shop owners. there are many shop owners who do not pay this CAM charges since more than 6 months.

so the service tax liability keeps increasing without any actual receipt of it.

So what should the Company do? Not charge service tax? account for the CAM bills only on receipt basis for those particular shops? or is there any other way by which the company can avoid paying ST till it receives actual cash from the shop keepers?

Please do reply on the above query with appropriate references for the same as soon as possible.

Thank you so much in advance.

:)

Replies (4)

Sir,

I would like to know what can the Mall do in my above situation where it cannot recover any CAM Charges but still has to bear the ST it charges in its Bill.

You can adjust the service tax paid to Revenue against future tax liability by using rule 6(3)(a) or 6(3)(b) of service tax rules 1994 as amended. But you have to keep your documentation in order. You have to prove to department that there was renegotiation of invoice or it is a case of bad debt due to deficiency in provision for service.

Your case may not strictly fall within the rule.

Ok... so the only way is by proving the unpaid invoices as Bad Debts and hence excess payment and thereby deducting it against future ST liability.

If the service provider is an individual or a partnership firm, and the aggreate value of taxable service provided is not exceeding Rs. 50 Lacs in the preceding year, then they take use option to pay service tax on receipt basis instead of accrual basis.

 

Otherwise, you may defer the issue of invoice till there is reasolable certinity that the payment would be realised. As per Rule 4A of the STR, 94 invoice shall be issued within 30 days of completion of the service. You may contend that the service is not complete as there is no certainity of its realization. (Refer AS-9 Revenue Recognition)


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