SHORT PAYMENT OF SERVICE TAX

[vuchcholla Bhaskar]

Dear Sir,

We have paid short payment of service tax reverse charge amount on 31.03.16 and balance amount we paid on April'16 with interest. Now my query is can we show in returns of Oct'15 to Mar'16 or Apr'16 to Sep'16.

Thanks for the understandings and awaiting for your valuable reply.

Thanks & Regards

Bhaskar

[KASTURI SETHI]

Dear Sir,

How can you show transaction of April, 16 in ST-3 return for half year ending March, 16 ?

[Ganeshan Kalyani]

Sir, first of all I would like to know whether the short payment made is out of self assessment or out of Departmental Audit ?

If it is out of self assessment, then in my view you have to show the details in Oct 15 to Mar 16 return as the service for which differential payment is made is pertaining to Mar 16.

If it is out of Departmental audit then it has to be shown in Apr 16 to Oct 16. This is my view. Also I agree with Sri Kasturi Sir's. Thanks.

[KASTURI SETHI]

Sh.Ganeshan Kalyani Ji,

As per accounting principles the balance amount paid along with interest in April, 16 should be shown in ST-3 return for April,16 to Sept.,16 in arrears' column. However, if the assessee wants to post the amount paid in April, 16 in ST-3 return for half year ending March, 2016, the ACES System will pick up. But such entry would be in contravention of accounting principles.

Do you agree Sir ?

[Ganeshan Kalyani]

Sir, In my view Accounting principle states that if expense is pertaining to Mar16 then it has to account in that month only. And service tax payable / receivable as the case on such services should be accounted in that month only.

And since the interest paid is due to delay from the due date to paid date the interest shall have to be accounted in the month in which such interest is paid. Thanks.

[DR.MARIAPPAN GOVINDARAJAN]

Since you have paid the short payment with interest in April 2016, the same should be shown in April 2016 - September 2016 return.

[KASTURI SETHI]

Thanks to both Sh.Ganeshan Kalyani, Sir and Sh.M.Govindarajan, Sir for clarification and concurring with me.

With all due respect to the clarifications above, in my personal view, if the payment (along with interest) made in the month of April 2016 is pertaining to March 2016, it should be shown in the Oct 15 to Mar 16 return. Reason being:

1. Payment made in April 2016 is pertaining to Mar 2016 itself

2. For instance, ST for the month of Feb 2016 is payable by 6th March 2016, even though it is paid in March 2016, in the ST 3 return the payment is shown for the month of Feb 2016 in the paid sheet and challan sheet. Similarly, Payment made in April 2016 pertaining to Mar 2016 should be shown as for the month of Mar 2016 in paid sheet and challan sheet and interest to be disclosed separately.

[KASTURI SETHI]

Dear Sir,

This anology is not applicable as ST for March, 2016 is to be paid by 31.3.2016. ST for February, 16 can be paid in March, 16. Here financial year is changed.

[Ganeshan Kalyani]

There are different opinion in this regard. All experts have given their best opinion. However I would like to know whether department will accept the facts and figures that is disclosed by the assesses whether it is in Mar 16 return or in Apr -Sep 16 return. The disclosure provision is being met. Please share your views.

AI Summary

Short payment of service tax: disclose for period to which service pertains or in subsequent half year per accounting principle.
Short payment of service tax under the reverse charge mechanism paid partly on 31 March and balance with interest in April raises whether tax and interest must be declared in the ST-3 return for the period to which the service pertains or in the subsequent half-year when payment occurred. Accounting principles favour recognising tax in the month of the service and interest when paid; practical filing practice and departmental-audit adjustments may require reporting the April payment as an arrear in the April-September return. ACES may allow earlier posting but may conflict with accounting norms.