Service tax on advance received

[Asked by Guest]

Sir, I need your valuable support. My company having rent income is receiving advance rent at the time of signing contrat for 6 months and this is being adjusted some percentage in every month. Our practice is that we are paying service tax on monthly rent received including this adj. amount ( ST is not paid on advance received). Kindly suggest whether we should deposit ST on advance received or this practice is o.k. Thanks

[sunil jain]

In terms of sec 67(3), gross amt shall include any amt received befor,during or after provision of service. Hence any advance payment recd. shall form part of taxable service and s.tax is to paid at the time of receipt of advance itself.

If the amount received is 'advance rent', then Service tax is to be paid on the entire amount at the time of 'receipt of the money'. However, if the amount received is rent deposit as per the agreement, which is in turn adjusted against rent, then different view can be taken.

in case any advance amount is received and the services will be given later on the service tax should be deposited at the time of advance received.

AI Summary

Service tax on advance payments: advance rent is taxable on receipt, while refundable deposits may be treated differently.
Service tax is payable on amounts received before provision of the taxable service because the taxable gross amount includes any amount received before, during, or after provision of service; non deposit advance rent is taxed on receipt, whereas genuinely refundable rent deposits adjusted later may be treated differently.