Service tax query

[Jitender Sharma]

Dear Sir,

Please guide me regarding the query. We will receive payment from the service receiver for the invoice raised by us say for e.g. Rs 10,000 including service tax i.e; Rs 8,900 for Service and Rs 1,100/- as Service tax. Now if customer not satisfied with our service upto 3 month then we are offering 100 percent refund which means we have to return Rs.10,000/- to Service receiver.

But by doing so, we will face loss of Rs. 1,100/- (Service Tax) which is already paid. How can we save ourself from the Loss. Can it be adjusted as modvat against the new invoice or not

Please suggest if anything possible

Dear Sir, Please guide me regarding the query. We will receive payment from the service receiver for the invoice raised by us say for e.g. Rs 10,000 including service tax i.e; Rs 8,900 for Service and Rs 1,100/- as Service tax. Now if customer not satisfied with our service upto 3 month then we are offering 100 percent refund which means we have to return Rs.10,000/- to Service receiver. But by doing so, we will face loss of Rs. 1,100/- (Service Tax) which is already paid. How can we save ourself from the Loss. Can it be adjusted as modvat against the new invoice or not Please suggest if anything possible

Read more at: http://www.caclubindia.com/forum/details.asp?mod_id=291618&offset=0#.U3M0cHbzeEM

Dear Sir, Please guide me regarding the query. We will receive payment from the service receiver for the invoice raised by us say for e.g. Rs 10,000 including service tax i.e; Rs 8,900 for Service and Rs 1,100/- as Service tax. Now if customer not satisfied with our service upto 3 month then we are offering 100 percent refund which means we have to return Rs.10,000/- to Service receiver. But by doing so, we will face loss of Rs. 1,100/- (Service Tax) which is already paid. How can we save ourself from the Loss. Can it be adjusted as modvat against the new invoice or not Please suggest if anything possible

Read more at: http://www.caclubindia.com/forum/details.asp?mod_id=291618&offset=0#.U3M0cHbzeEM

[phaniraju konidena]

Dear Sir,

In Service Tax provisions, there is no option to adjust the amount in such a situation, hence as of my knowledge, you have to claim 'refund' with the department enclosing the copy of agreement and debit notes and a copy of ledger from your service receiver so as to satisfy the department as the re-payment is caused on the basis of agreement.

With regards,

K.PHANI RAJU

[Yoginder Singh]

Dear Jitender Sir, I hope below rule will help you  

Service Tax Rule 6(3)

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 or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract, the assessee may take the credit of such excess service tax paid by him, if the assessee.-

        (a)  has refunded the payment or part thereof, so received for the service provided to the person from whom it was received; or

         (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.

[phaniraju konidena]

As per the Rule 6(3) of Service Tax Rules, as amended w.e.f 01.04.2011 provides that if 

(i) service not provided fully or partly for any reason or (ii) where amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract, assessee (service provider) can (a) refund the amount to the service receiver with service tax or (b) issue a Credit Note to service receiver [Till 31.03.2011, there was no provision of issue of credit note. Only there was provision of refund, and that too only for non-provision of service and not for any other reason].

After such refund of amount or issue of credit note, then assessee can himself adjust the excess service tax paid by him against his service tax liability for the subsequent period [Rule 6(3) of Service Tax Rules as amended w.e.f 01.04.2011]. [Till 31.03.2011, the provision of credit note was not there. Only refund was permissible]. 

[Manoj Agarwal]

Dear Sir,As already mentioned, Rule 6(3) of Service Tax Rules, 1994 is the remedy to your problem.

AI Summary

Service tax credit adjustment allowed after refund or credit note, enabling offset against future liability. Where a service provider refunds payment or issues a credit note because the service was not provided or was renegotiated due to deficiency, the provider may take credit for the excess service tax paid and adjust it against subsequent service tax liability; alternatively, the provider may claim a departmental refund supported by agreement, debit notes, and ledger evidence of repayment.