service tax payment

[Ramakrishnan Seshadri]

Dear Sir,

One of our service provider doing catering services is paying the service tax every month only on the payment received on the invoices. Whether this is correct or the service tax has to be paid on the invoices raised every month and not to wait till the payment is received on this invoices.

Kindly experts please clarify whether this procedure is correct or how to pay service tax.

Most urgent.

Thanks & Regards,

S.Ramakrishnan

[PAWAN KUMAR]

Dear Sir,

As per my view, you service is completing every month for which you are raising bills to your service receiver.

As per point of taxation rules 3, The time when invoice is issued or payment of such invoice is received whichever is earlier.

If you are raising invoice regularly after close of every month i.e. within the time of 30 days and payment of such invoice is received on a later date, the point of taxation will be date of invoice as per my view.

therefore you are liable for service tax on the date of invoice.

[Rajagopalan Ranganathan]

Sir

According to Rule 3 (a) of Point of Taxation Rules, 2011 ‘point of taxation’ shall be,-

(a) the time when the invoice for the service provided or to be provided is issued:

Provided that where the invoice is not issued within the time period specified in rule 4A of the Service Tax Rules,1994, the point of taxation shall be the date of completion of provision of the service.

Therefore in my view if the service provider issues the invoice between 1 to 4th of the month then he (service provider) has to pay the service tax either on 5th or 6th of the same month.

rule 4A of the Service Tax Rules,1994 stipulates that "every person providing taxable service shall pay not later than thirty days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him in respect of such taxable serviceprovided or agreed to be provided.

In view of the above the service provider has to pay the service tax once he raised the invoice/bill/challan etc. If he pays it after receiving payment from you he is liable to pay interest for late payment of the tax.

[Pritesh Chhajed]

Äs per Service Tax Rules, there is an option available to individuals and partnership firms to pay tax on receipt basis (in case the aggregate value of taxable services of such service provider is 50 lacs or less). We believe, the catering service provider in your case must be adopting this basis for discharging service tax.

Provided below is the relevant extract of Rule 6 (refer 3rd Proviso to this rule).

Regards

Pritesh

[email protected]

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6. PAYMENT OF SERVICE TAX
(1) The service tax shall be paid to the credit of the Central Government,-
(i) by the 6th day of the month, if the duty is deposited electronically through internet banking; and
(ii) by the 5th day of the month, in any other case,
immediately following the calendar month in which the service is deemed to be provided as per the Rules framed in
this regard:
Provided that where the assessee is an individual or proprietary firm or partnership firm, the service tax shall be
paid to the credit of the Central Government by the 6th day of the month if the duty is deposited electronically
through internet banking, or, in any other case, the 5th day of the month, as the case may be, immediately
following the quarter in which the service is deemed to be provided as per the Rules framed in this regard:
Provided further that the service tax on the service deemed to be provided in the month of March, or the quarter
ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of
March of the calendar year.

Provided also that in case of individuals and partnership firms whose aggregate value of taxable services provided
from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have
the option to pay tax on taxable services provided or agreed to be provided by him up to a total of rupees fifty lakhs
in the current financial year, by the dates specified in this sub-rule with respect to the month or quarter, as the case
may be, in which payment is received.

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AI Summary

Point of taxation: service tax is triggered on invoice issuance unless a small provider opts to pay on receipt basis. The point of taxation is generally the date the invoice is issued; if no invoice is issued within the prescribed period, the date of completion of service applies. Individuals and small partnership providers may elect to pay service tax on receipt of payment instead, subject to the prescribed payment schedules and potential interest for delayed payment.