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In continuation to our previous post service tax registration payment and return; we wish to give you some more information about service tax.  In this post you can read some regular questions and its answers.

Shall I pay service tax on billed amount or amounts actually received?

How are you paying service tax?   On billed amount or on receipt? Many are paying service tax on billed amount and unaware of the concept ‘tax payment on amount actual received’.   There is no problem paying service tax on billed amount. But this is not the correct way for the payment of service tax. A service provider is liable to pay service tax’ only when he receives the consideration for his service. Thinking practically it is not fair paying service tax on service provided; that has never received payment. I will explain this with an example.

ABC Ltd billed Rs 500000.00 (Inclusive of service tax) on 1st May 2009. Payment received Rs 300000.00 on 14th July and Rs 200000.00 on 25th August.

From the above example let’s find out the service tax liability on each month.

|Date |Bill amount |Payment received |Tax liability |Service tax payment date without |

| | | | |interest. |

|01/05/2009 |500000.00 |0 |0 |0 |

|14/07/2009 |0 |300000.00 |28014.00 |05/08/2009 |

|25/08/2009 |0 |200000.00 |18677.00 |05/09/2009 |

However there is an exception for this clause. Transaction between associated enterprises; service tax is payable even if the consideration for service provided is received or not. The service tax is payable immediately after debiting /crediting in the books of account....