Service Tax :- Adjustment of Excess Service Tax Deposited

Tuesday, August 13, 2013 | comments

Friends   There is possibility of excess payment of service tax in the following situations :-
(1)    The assessee has issued on invoice or received of any payment but -
(a) taxable service is not so provided either wholly or partially or
(b) there is renegotiation of amount of invoice [Rule 6(3)]

(2)  Assessee is unable to correctly estimate, on the date of deposit, the actual amount payable for any particular month or quarter [Rule 6(4)]

(3) Excess payment is due to any other reason. [Rule 6(4A)]

Situation (1) : Invoice already issued or payment is received but taxable service is not provided or renegotiation of amount of invoice [Rule 6(3)].



Where an assessee has issued an invoice or received any payment against a service to be provided.

    i) which is not provided by him either wholly or partly for any reason, or
    ii) where the amount of invoice is renegotiated due to deficient Provision of Service or non-fulfillment of any terms contained in a contract.

    the assessee may take credit of excess service tax paid by him provided:

    i)  he has refunded the payment or part thereof so received for the service provided to the person from whom it was received; or
    ii) he has issued a credit note for the value of the service not so provided to the person to whom such an invoice has been issued.

Example
    A commercial coaching centre named XYZ charges following advance fee in December 2012 for a period of two years (from January 2013 to December 2014) from a student A for imparting commercial coaching in respect of an entrance examination of Engineering Degree Course when the rate of service tax was prevailing at 12%.   


Rs.
Total Coaching Fee for a period of Two Years
200000
Service Tax @ 12% on value of taxable service
24000
Primary Education Cess @ 2% of amount of Service Tax
480
Secondary & Higeher Education Cess @ 1% of amount of Service Tax
240
Total Amount charged from the A
224720

          Further for the sake of convenience it has been assumed that XYZ  does not charge any kind of Registration Fee from the students and if a student leaves the coaching in between, he is given proportionate refund of coaching fee as well as relevant Service Tax, Primary Education Cess (EC) and Secondary  Higher Education Cess (SHEC).  Now, consider the following independent situations :
In the above three situations A will be given following amounts of refund respectively:-
    1. If  A does not join the aboe course due to some unavoidable circumstances and consequently no service at all is provided by XYZ.
    2. If  A is compelled to leave the above coure after completing one year of coaching.   In other words, partial services (i.e. 50%) ar not provided by XYZ.
    3. A complaints against the quality of coaching being imparted which tantamount to deficient provision of service Consequently, XYZ negotiates amount of coaching fee to Rs. 1,50,000 plus applicable service tax.

      In the above three situations A will be given following amounts of refund respectively :-

    1. Rs. 224720 (Rs. 200000+Rs. 24720) (assumed it is refunded on 15.01.2013)
    2. Rs. 112360 (Rs. 100000+Rs. 12360) (assumed it is refunded on 20.02.2014)
    3. Rs. 56180 (Rs. 50000+Rs. 6180) (assumed it is refunded on 18.07.2014)
      XYZ can adjust Rs. 24720, Rs. 12360 and Rs. 6180 against its Service Tax liability for the month of January 2013, February 2014 and July 2014 respectively.


      Situation (2): Assessee is unable to correctly estimate, on the date of deposit, the actual amount payable for any particular month or quarter:

      Payment on provisional basis [Rule 6(4) of Service Tax rules, 1994]: Where an assessee is, for any reason, unable to correctly estimate, on the date of deposit, the actual amount payable for any particular month or quarter, as the case may be , he may make a request in writing to the Assistant Commissioner or Central Excise or the Deputy Commissioners of Central Excise, as the case may be , giving reasons for payment of service tax on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, on receipt of such request may allow payment of service tax on provisional basis on such value of taxable service as may be specified by him and the assessee may request for provisional assessment in that case.

      Provisional assessment [Rule 6(5) & 6(6) of Service Tax Rules, 1994]: The assessee requesting the provisional assessment shall file a statement giving details of the difference between the service Tax deposited and the Service Tax liable to be paid for each month in a memorandum in Form ST-3A accompanying the half-yearly return in Form ST-3.
      In case the Service Tax assessee reports to provisional assessment after following the procedure and furnishes the returns in Form ST-3A along with Form ST-3, it is a the responsibility of the asstt./Deputy Commissioner to complete the assessment after calling for from the assessee the relevant documents or records, as may be considered necessary by him. Wherever the Asstt. / Dy. Commissioner, after considering all the details/documents proposes to re-assess the Service Tax liability, the finalization of the provisional assessment would be made after providing adequate opportunity to the assessee by issuing the show cause notice and giving opportunity of being heard in persons.

      Situation (3): Excess payment is due to any other reason [Rule 6(4A) & 4(B) of Service Tax Rules, 1994]

      Where an assessee, due to any other reason, has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be , the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding amount or quarter, as the case may be.

      The adjustment of excess amount so paid, shall be subject to the condition that the excess amount paid is on account of reasons not involving interpretations of law, taxability, valuation or applicability of any exemption notification.
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