Re-credit of service tax where ST has been paid on receipt of advance or on accrual basis and where such amount is refunded or services are not provided

Re-credit of service tax on advances and accruals allowed where payment is refunded or credit note issued.

Where service tax has been paid on advances or on an accrual basis but the service is not provided, is partially provided, or the invoice amount is renegotiated, Rule 6(3) permits the assessee to claim credit for the excess tax and adjust it against subsequent liability provided the payment is refunded or a credit note is issued for the unperformed or deficient service. The rule gains importance in conjunction with the Point of Taxation Rules affecting timing of liability.