Excess Payment of Service Tax Adjustment

[Ganeshan Kalyani]

Dear Experts,

I would like to discuss on the provision of Section 6 (3) of Service Tax Rules With regard to below transaction.

An assessee has paid service tax in the month of September 2015 for say ₹ 10,000/-. Later in the month of November, the terms got re-negotiated to lesser value and as a result the service tax payable revised to ₹ 9000/-. The assesse adjusted the excess payment of ₹ 1000/- against the liability of November.

In this scenario the assesse may as per the provision cited below may show this adjustment in the second half yearly return.

The rule is reproduced as below:

Rule 6(3) of ST Rules states that ‘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.

If availed the benefit of this provision then assesse can refrain from filing an intimation letter to the Department about such excess payment. As the provision applies when the service tax had been paid on advance. Here it is not advance but an excess payment.

Request to discuss on the issue to enrich my knowledge. Thanks.

[Ganeshan Kalyani]

I apologise. Please read Section 6 (3) as Rule 6 (3). Sorry.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

Sir, Yes the assessee can refrain from filing an intimation to the department in this context. ST-3 return is itself intimation to the department.It is worthwhile to mention that there is a lot of difference between Rule 6(3) and Rule 6(4),(4A), 4(B). Earlier filing intimation was must when ST-3 returns were being filed manually.

Have I understood your message or not ? Awaiting your response in this regard.

[Ganeshan Kalyani]

Thanks you Sir. Your answer to the point and enriched my knowledge. Thank you so much Sir.

AI Summary

Excess service tax payment credit can be adjusted against later liabilities without separate departmental intimation. Rule 6(3) permits an assessee to take credit for excess service tax paid where an invoice was issued or payment received but the service was not provided or was renegotiated, provided the assessee has refunded the payment (or part) or issued a credit note for the unprovided service; such excess may be adjusted against subsequent liabilities and the ST-3 return serves as the operative intimation to the department.