Doubly taxed service under Service Tax Act & GST Act. Also output of Service Tax on advance payment wrongly taken as input in TRAN 1.

[Vaibhav Bhala]

Respected Sir

We have received an advance in pre-GST regime for service tax and we duly paid service tax on it. The services were to be rendered after 01-07-2017 i.e. post-GST induction. As we were unaware of GST provisions at that time we charged GST at the actual time of supply of services and it was duly deposited with Government. Since it was doubly taxed we took credit of earlier service tax paid in TRAN-1.

But now we realized that as per Sec. 142(11)(b) of CGST Act, 2017, we were not supposed to charge GST on the supply of Services for which Service Tax was already deposited and service tax paid was our output liability and input of it cannot be availed in TRAN-1. Our intention was not to cheat the Revenue.

It is humble request to guide us how to correct this mistake.

[KASTURI SETHI]

Have you reversed Credit along with interest or not ?

[Vaibhav Bhala]

No, Sir. But in the mean time Service Tax Department Auditor raised a demand of the same amount we took input in TRAN-1.

[KASTURI SETHI]

Dear Querist, . I want to read the demand show cause notice. Is it convenient for you to send me through email ?

[SHARAD ANADA]

Pay Wrongly availed credit in tran 1 through DRC 03 And apply for GST refund for excess payment of tax undeg sec 54

[KASTURI SETHI]

Interest and penalty both both would be imposed. Had the party paid through DRC 03 before being pointed out by the department, they would have got relief from penalty.

AI Summary

Double taxation on services: reverse wrongly claimed transitional credit, pay via DRC 03 and seek refund if eligible.
The taxpayer wrongly claimed transitional input credit for service tax paid on an advance for services later supplied under GST; the correct approach is to reverse the transitional credit with interest, remit the tax via DRC 03, and, if eligible, apply for refund of any excess payment, noting potential interest and penalty consequences.