Service tax treatment in case of Bad Debts

When your Debtors turns Bad. It is sure that you are going to get nothing. Service tax to be paid on collection basis. When no collection of Consideration for services provided then nothing payable to the Govt. You can reverse the service tax entry.

Originally posted by : Selvakumar.S
	When your Debtors turns Bad. It is sure that you are going to get nothing. Service tax to be paid on collection basis. When no collection of Consideration for services provided then nothing payable to the Govt. You can reverse the service tax entry.

completly agree to above post

HI, If my debtor turns bad debts what about service tax paid by me earlier,

"Goods sold 2 years back"

Even if 2 years have elapsed, you can reverse the entry and adjust the liability of service tax against your present liability.

Thank you.

Dear Sir,

Extract of Rule  6(3) of Service tax rules 

Where an assessee has issued an invoice, or received any payment, against a service to be provided which is not so provided by him either wholly or partially for any reason, 44b[or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract]44b, the assessee may take the credit of such excess service tax paid by him, if the assessee.- 
44c[(a) has refunded the payment or part thereof, so received for the service provided to the person from whom it was received; or]44c 
(b) has issued a credit note for the value of the service not so provided to the person to whom such an invoice had been issued.]44

My comments

 For example, if the service is already provided and the invoice has also been issued, service tax would have been paid on the same, at the time when the service is provided or at the time when the invoice is raised, whichever is earlier. But if the payment is not at all received subsequently, there is no provision to claim adjustment / refund of the service tax already paid. Such service tax could not be covered under Rule 6 (3) of the Service Tax Rules, 1994 as the service has been provided.

I conclude saying that, no tax can be adjusted/refunded on account of Bad Debts.

Venkatanarayana G.M

venkat @ hiregange.com

9620116162

Dear Sir,

Why cant he get a refund under section 83 for the service tax already paid ?