Calculation of service tax

[chandrashekhar K]

Is calculation of service Tax on accrual basis or payment basis. Are both the methods allowable. Is it possible to shift from one basis to another after adopting eother

Service tax liabilty arises on payment basis. There is no bar on making payment in advance.It is advisable to make payment of service tax on receipt basis.

Service tax is payable on the basis of 'receipt' i.e at the time of receipt of service charges. However, if the transaction is between 'Associated enterprises' (as covered u/s 92A of IT Act), service tax liability is to be discharged at the time of accrual/receipt whichever is earlier.

[DEV KUMAR KOTHARI]

View expressed by V Ramanujam is correct.

AI Summary

Service tax on receipt basis: liability arises on receipt/payment; associated enterprises face liability on accrual or receipt, whichever earlier.
Service tax liability principally arises on the receipt or payment of service charges and is customarily and advisably discharged on receipt; advance payment is permitted. For transactions between associated enterprises, liability must be discharged at the earlier of accrual or receipt, resulting in an earlier charge than the general receipt/payment practice.