Advance Payment made to Vender without payment of service tax with Advance

[Guest]

Dear experts,

kindly guide,

We paid 10% (on Assessable Value) advance to a party. but, the party asking for 10% on Gross value (including service tax) and say that they have require to pay service tax to Govt.

here my query is that, Is service tax liability is occur toward service provider, if we pay advance 10% on Assessable value or not ?

please revert, and if possible please share notification in this regard.

Regard

Vikram

[Ganeshan Kalyani]

The explanation to Point of Taxation Rules, states that "wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance."

In view of above provision service tax is payable on advance. Thanks.

[Guest]

thanks you very much sir,

[KASTURI SETHI]

Very well explained by Sh.Ganeshan Kalyani, Sir. Reply is more than sufficient. In support of his views, I want to add that Point Of Taxation Rules should be read in conjunction with definition of the term, "Gross Amount Charged" under Section 67 (3) of the Finance Act.

"Gross Amount Charged" for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service."

[Ganeshan Kalyani]

Thank you Sri Kasturi Sir for appreciating me. I feel good when somebody appreciates my work. Thanks.

[CSSANJAY MALHOTRA]

We fully endorse the views of Mr. Ganeshan Kalyani.

AI Summary

Advance payment service tax: advance receipts determine point of taxation and trigger service tax liability on gross amount. Receipt of any advance for a taxable service fixes the point of taxation at the date of receipt, creating an immediate service tax obligation; the definition of Gross Amount Charged includes amounts received before, during, or after the service, so advances form part of the taxable value.