When clients (Recipient of service) do not pay service tax a

When clients (Recipient of service) do not pay service tax amount, what should be done?

a. Is the Service Tax payable by the assessee even in cases where his clients [recipient of service] do not pay for the service(s) rendered or when the client pays only a part of the bill raised in this regard? 

Service Tax is required to be paid at the rate in force (at present 10.3%) only on the value/amount of taxable service, received in a particular month or quarter as the case may be, and not on the gross amount billed to the client. [Refer to sub-section (2) of Section 67 of Finance Act,1994/Rule 6(1) of Service Tax Rule 1994]. 

b. How does one work out the Service Tax liability and pay the same to the Government, in case the customer or a client pays only the value of the service amount, but not the Service Tax amount mentioned in the bill? 

Service Tax is payable on amount realized. In given situation, the amount so realized from the client would be treated as gross amount inclusive of Service Tax and accordingly the value of taxable service and the Service Tax liability are worked out as follows: 

For instance : 

Value of taxable service (AV) = Rs. 10000.00 

Amount Billed = Rs.10000 + Service Tax Rs.1030.00 = Rs.11030.00 

Amount paid = Rs.10000. Treat Rs.10000 as gross amount inclusive of service tax. 

In case the gross amount, including service tax, received is, say, Rs 10000. In such cases the service tax liability may be arrived at by reverse calculation in the following manner. 

Amount of Service Tax + Education Cess Payable = Rs.930 

Note: If the recipient of service pays full billed amount later, the differential service tax must be paid forthwith.