Home || Email || Contact Us || Value Added Services      
Introduction Text of Act Text of Rules Forms Download Case Laws From Government FAQ's Relevant Links
30.8.2010        
PAYMENT OF SERVICE TAX
Applicable Provisions Section 68 of the Finance Act, 1994
Applicable Rules Rule 6 of Service Tax Rules, 1994
Select Relevant Notifications / Circulars - Notification No. 36/2004-ST dated 31.12.2004
(Persons liable for payment of service tax other than service providers)
- DGST Circular No. 30 dated 23.08.2000
(Payment by cheque)
- CBEC Circular No. 58/7/2003 dated 20.05.2003
(wrong accounting codes)
Select Relevant Case laws - Eicher Consulting Services Ltd. v. CCE (Appeals) Mumbai (2003) 157 ELT 432 (CESTAT, Mumbai)
- NISA Industrial Services Pvt. Ltd. v. CCE Mumbai (2003) 157 ELT 06 (CESTAT, Mumbai)
- Bajaj Auto Ltd. v. CCE, Aurangabad (2005) 179 ELT 481 (CESTAT, Mumbai)
- Sahara Airlines Ltd. v. Commissioner of Customs (Appeals) (2000) 10 Taxman 378
Q.1 Whether service tax has to be paid on bills raised or amount of bills received in a month / quarter?
Q.2 Who is the person liable to pay service tax?
Q.3 Where should an assessee pay the Service Tax?
Q.4 How should service tax be paid?
Q.5 Whether the payment of Service Tax is to be made for the billed amount or for the value received?
Q.6 Is the amount for Service Tax charged from the client compulsorily to be indicated separately in the Bills/Invoices raised on him?
Q.7 Is there any exemption for payment of Service Tax if the receiver/ provider of the service is the Central Govt./ State Govt. organizations and/or Public Sector Undertakings? Can any one of the above claim immunity from the liability to pay or make provision for paying the Service Tax?
Q.8 Whether any general exemption from Service Tax is available for small scale service providers, as in the Central Excise?
Q.9 Can service tax be paid by cheque?
Q.10 What is the date of payment of Service tax – is it the date on which the cheque for the same is deposited / tendered in the designated Bank or the date on which the amount is credited?
Q.11 Is there any exception to the rule of paying service tax within 5 days of the end of quarter / month?
Q.12 If 5th of any calendar month (i.e. the last date of making payment/filing returns) is Sunday or Bank/Govt. holiday & the payment is made/return is filed on the subsequent working day, would it be treated as delay and subject to interest & penalty?
Q.13 Does delayed payment of service tax attract penal interest?
Q.14 The interest for delayed payment of Service Tax is presently payable @ 13% per annum for delay in payment of Service Tax. If payment is delayed for one or two days, whether the interest is to be paid for the full month or only for one or two days, as the case may be.
Q.15 What are the penal provisions if the service tax is not paid/ paid late?
Q.16 If any short payment of service tax is noticed after lapse of few months from the submission of returns, whether the assessee is liable to pay interest upto the date of assessment or the date of submission of returns to the Department?
Q.17 Is the interest paid for late payment of Service Tax refundable, in case of excess payment?
Q.18 Is service tax payable on the reimbursable/out-of-pocket expenses charged to the client on actual basis?
Q.19 Is service tax payable on overseas projects in which payment is received in foreign exchange?
Q.20 Would the services provided abroad be liable for payment of service tax?
Q.21 Who should pay the service tax in case of a non-resident?
Q.22 What are the provisions relating to the provisional assessment where actual amount cannot be correctly estimated?
Q.23 Can excess service tax paid be adjusted on refund to the client?
Q.24 Can excess amount of service tax paid be adjusted in subsequent periods?
Q.25 Can payment of service tax be rounded off? If yes, in what manner?
Q.26 Is service tax payable on advances?
Q.27 Is service tax payable when service has been rendered, but no sums have been realized in payment?
Q.28 What happens if the amount of service tax indicated separately or otherwise is not collected, but all other dues are realized for having rendered a particular service?
Q.29 When should the tax be paid?
Q.30 What would happen if the 5th day is bank holiday?
Q.31 What is the impact of assessee mentioning wrong accounting code of taxable service?
Q.32 What is Form TR-6?
Q.33 What are the precautions to be taken by the assessee while depositing the service tax?
Q.34 What are the hints for filling Form TR 6 and depositing Service Tax?
Q.35 When payment is made by a client or customer to an assessee after deducting his income tax liability under “tax deducted at source” provision, whether service tax liability of the assessee is only towards the amount actually received from his client or customer or tax is to be paid on the amount of income tax deducted at source also?
Q.36 Is service tax a deductible expense under Income Tax Act?
Q.37 Whether service tax deposited by the assessee in a branch of the bank other than the nominated bank for the Central Excise Commissionerate is to be treated as non-payment of service tax?
Q.38 Can the Department recover the service tax from the assessee relating to the past and if so under what circumstances?
Q.39 Whether service tax is payable in respect of sums received when service was not taxable?
Q.40 Can an assessee make a single consolidated entry for Cenvat credit?
Q.41 Can the service tax be paid electronically?
Q.42 adfa
Ans.1 Service Tax is required to be paid on the value of taxable services billed / charged and received from the clients. The liability to pay the tax on the bills collected lies on the service provider. The basis of payment is collection of dues.
Ans.2 The person providing the service is the person liable to pay service tax except in case of specified persons under section 68(2) of the Finance Act, 1994.
Ans.3 The assessee should deposit the service tax in the specified branches of certain designated banks. The list of such banks and branches are available in every Commissionerate of Central Excise. The amount should be paid in Form TR-6 challan (yellow colour). Different heads of accounts have been, specified for different taxable services by the Government under which the payment has to be made and the relevant heads should be clearly mentioned on the TR-6 challan.
Ans.4 According to Rule 6 of the Service Tax Rules, 1994, service tax shall be deposited under the head ‘service tax’ on Form No. TR-6 challan in the authorized branches only. Each assessee should choose only one bank branch convenient to him and all payments shall be made in that branch only. The challan used should be only yellow coloured TR-6 challans, which are to be pre-printed by the agency or depositor. The tax has to be paid on a monthly or quarterly basis depending upon the constitution of the assessee. For details, see Rule –6 of the Service Tax Rules in part III of the Book.
Ans.5 The Service Tax for a particular period is payable on the value of taxable service received in that period and not on the gross amount billed to the client. Thus, service tax on all values received during the period is to be deposited.
Ans.6 No, it is not mandatory under law to separately indicate the amount of Service Tax charged in the Bills/Invoices raised on clients. However, it is advisable for the service providers to separately bill the amount of Service Tax in the invoice/bill on the basis of taxable value of service rendered, especially so if he requires to avail the input credit scheme. Departmental Circulars also suggest the same. It is necessary to do so to claim Cenvat credit.
Ans.7 No, presently, there is no exemption from Service Tax, in respect of any taxable services rendered to Central/ State Govt. Organizations / or Public Sector Undertakings. The Service Tax would therefore, correctly be payable by the assessees in cases the service is being provided to the Central/ State Government Organisation and Institutions. Similar is the case where the service provider is a Public Sector undertaking or Central Government/State Government organisation or institution. The only exemption available relates to certain services provided to United Nations, International Organisation or specified Diplomatic Missions, export of services etc. In view of the above, none of the service providers can claim immunity from paying the tax on the services provided by them and none of the service receiver can claim immunity from making provisions for payment of tax on the services, through the concerned providers. This has also been clarified by the Ministry of Finance to all the administrative ministries of the Government of India as well as of the state Governments and Union Territories.
Ans.8 Yes, w.e.f. 01.04.2005, a general exemption is available for small scale service providers i.e., those having aggregate value of taxable services upto Rs 4 lakh. For details, see Chapter 10.
Ans.9 Yes, but if the assessee deposits the service tax by cheque, the date of presentation of cheque to the bank designated by CBEC shall be deemed to be the date on which service tax has been paid subject to realization of that cheque.
Ans.10 The date on which the cheque is tendered to the Central Government account would be considered as the date of payment provided that it is not returned unpaid in clearing
Ans.11 Yes, as per proviso to rule 6(1), the service tax on the value of taxable services received during the month of March or the quarter ending March, shall be paid to the credit of the Central Government by the 31st March of that calendar year. In other words, payment for quarter ending March or month of March should be deposited in March itself.
Ans.12 No, the payment made/return filed on the working day following 5th of the calendar month which was a holiday, would be considered as having been paid/filed on time.
Ans.13 Yes, simple interest at the rate of 13% per annum of delay is payable for the period by which payment is delayed.
Ans.14 The interest is to be levied under section 75 @ 13% per annum by which the payment is delayed. Thus, even for a delay by one day interest @ 13% per annum is to be charged on the basis of actual number of days.
Ans.15 For failure to pay the Service Tax, under section 76, the assessee would be required to pay a minimum penalty of Rs.100/- per day which may be extended to Rs.200/- for every day during which the failure continues. However, the penalty shall not exceed the amount of Service Tax that the assessee failed to pay Interest is also payable at the rate of 13 percent per annum under section 75.
Ans.16 If the short payment is noticed within six months /5 years as the case may be, from the date of filing of the returns, the interest @ 13% per annum is required to be paid U/s 75, (as delayed payment) upto the date of actual payment of such short paid amount.
Ans.17 Yes, Interest paid in excess of the tax actually due, which is only of an erroneous nature, is liable to be refunded.
Ans.18 No, the charges billed to the client on account of out-of-pocket expenses which are reimbursable on actual basis, such as, travelling, boarding and lodging expenses is concerned, are generally subject to service tax except otherwise provided for. However, the service tax assessee may be required by the jurisdictional officers to provide documentary evidence substantiating his claim for abatement from the gross amount received from the client for services rendered.
Ans.19 Taxable services rendered by an assessee to a client in respect of overseas projects for which payment is made in convertible foreign exchange are exempt from levy of service tax. this exemption is effective from 16th October, 1998 for all assessees and to claim this exemption, two conditions must be satisfied – it should be an overseas project or service and payment must be received in convertible foreign currency or exchange which is not repatriated out of India. This position existed upto 14th March, 2005 only.
Ans.20 No, the services rendered abroad shall not attract service tax as the levy covers only the services provided within India and export of service is exempt from service tax. See Export of Services Rules, 2005.
Ans.21 In case of taxable service provided by a person who is a non-resident or is from outside India not having any office in India, the person receiving taxable service in India shall pay the service tax.
Ans.22 Where an assessee if for any reason, is unable to correctly estimate on the date of deposit the actual amount payable for any particular month or quarter, the assessee may make a request in writing to the Assistant / Deputy Commissioner Central Excise to make a provisional payment of the tax on the basis of the request and the Assistant / Deputy Commissioner Central Excise may on such request, allow payment of service tax on provisional basis on such value of taxable service as may be specified.
The assessee 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 return.
Where an assessee submits a memorandum in the Form ST-3A, Assistant / Deputy Commissioner of Central Excise shall complete the assessment, wherever he deems it necessary, after calling such further records or documents as he may consider proper and necessary in the circumstances of the case.
Ans.23 Where on assessee has paid to the credit of Central Government service tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax paid by him against his service tax liability for the subsequent period, if the assessee has refunded the value of taxable services and the service tax thereon to the person from whom it was received. This can be exercised by the assessee suo-motu. Refund is not permissible in such cases.
Ans.24 Sub-rule(3) of Rule 6 provides a facility for adjusting excess payments of service tax by the assessee. It has been provided that where an assessee has paid to the credit of Central Government Service Tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him (calculated on a pro rata basis) against his Service Tax liability for the subsequent period, provided that the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received. However, the assessee is required to file the details in respect of such suo motu adjustments done by him at the time of filing the service tax returns. The assessees are advised to follow the procedure of Rule 6(3) correctly and make necessary accounting entries for subsequent verification. In cases where excess tax has been paid by assessee, same can be adjusted against future liability. Sub-rule 4A as inserted by Notification No. 23/2005-ST dated 07.06.2005 provides that where excess amount has been paid towards service tax liability due to non-receipt of details of payments received, assessee shall be entitled to adjust such excess amount against service tax liability in subsequent period and he should intimate the same to the concerned Superintendent of Central Excise within fifteen days of making such adjustment.
Ans.25 Yes, payment of service tax shall be rounded off to the nearest rupee. When any amount of tax includes 50 paise or more, it shall be rounded off to the next rupee and when it is less than 50, it shall be ignored.
Ans.26 The term Advance is normally taken to mean sums paid before the service has been rendered, thus any sums so received was not chargeable to service tax till the actual rendering of the service against this sum contracted for was completed. However, Finance Act, 2005 has amended section 67 to provide that gross amount charged for service tax purpose shall include any amount received towards the taxable service before, during or after the provision of service.
Ans.27 Rule 7 of the Service Tax Rules, 1994 is very clear on this issue. Service tax is payable only on the value of taxable services is realized during a period.
Ans.28 The liability to pay service tax remains with the service provider in the current scenario. Failure to realize or even charge the service tax does not negate this statutory liability. In event of any such failure, the amounts recovered from the client in lieu of having rendered the service/s will be taken to constitute amounts inclusive of service tax. Accordingly, the amount of service tax will be determined and required to be deposited to the credit of the Central Government. Section 67 provides that where the gross amount charged by a service provider is inclusive of service tax payable, the value of taxable service shall be such amount as with the addition of tax payable, is equal to the gross amount charged.
Ans.29 In case of individual, proprietorship firms and partnership firms, service tax should be paid on a quarterly basis by 5th of the month immediately following the quarter. In other case, service tax should be paid on a monthly basis by 5th of the month immediately following the calendar month. The quarter would mean calendar quarters, i.e., January – March; April – June; July – September and October – December.
Ans.30 The Department has clarified that where the 5th day of the month is a public holiday, the service provider may pay the service tax to the credit of Central Government account on the next working day immediately following the holiday.
Ans.31 Accounting codes have been prescribed for taxable services. Assessees should mention the proper accounting code on TR-6 challan while making payment of service tax. CBEC has clarified that in case of wrong codes having been mentioned, assessee need not be asked to pay tax again but the matter should be sorted out with the PAO. Thus, while care should be taken to mention correct codes, Department can not ask for the service tax again merely because accounting code was mentioned wrongly.
Ans.32 Form TR-6 is a memorandum or challan as referred to in Rule 92 of the Treasury Rules of the Central Government and is the form with which payment should be accompanied. Form TR-6 is a yellow colour challan and is to be submitted in four copies. Challan number should be put on top right hand corner of TR-6 challan.
Ans.33 The following precautions should be taken by the assessee at the time of paying the service tax-
(i) Service tax should be paid within the time limit laid down in this regard, i.e., by 25th of the month following the month/ quarter.
(ii) It should be deposited in the specified branches of the banks designated for this purposes in each Central Excise Commissionerate.
(iii) The major head and sub-head relating to the service provided by the assessee should be correctly filled in the TR-6 challan.
(iv) The TR-6 challan should be yellow in colour and should be filed in quadruplicate after being properly filled.
(v) In case of delay in making payment of service tax in time, the interest is also required to be paid at a simple rate of 15% per annum for the period for which payment is delayed.
Ans.34 Assessees should note the following points while filling Form TR-6 of treasury challan and depositing service tax with the Government –
1) TR-6 is to be submitted in four copies.
2) Only yellow colour forms should be used.
3) TR-6 should be got printed by the assessees with proper codes.
4) Period should be indicated in first column of full particulars.
5) Only designated bank and branch should be used.
6) Payment into non-designated banks may not amount to paying tax.
7) Payment by cheque will not be treated as discharge of duty unless the cheque is encashed.
8) Account Heads should be correctly indicated.
9) Bank Code and name should be correctly mentioned on TR-6 and it should be ensured that bank seal clearly indicate the date of remittances.
10) Service providers are advised to mention the correct accounting code in the TR-6 challan while depositing the service tax.
11) Major head is 0044 for service tax.
12) Challan number should be put on top right hand corner of TR-6 challan.
13) Amount of service tax should be rounded off to the nearest rupee.
14) Service tax payer code (STPC) should be indicated in every challan.
Assessees should also note the following points while making the payment –
a) All assessee should use pre-printed challans
b) Assessees should use a running serial number for a particular financial year which may be put on top right hand corner of each TR-6 copy.
c) It is advised that assessees should also select one branch of the authorized bank branch.
d) To minimize chances of wrong classification of revenue and ensuring proper segregation of challan and scrolling of receipt at banks, only yellow colour TR-6 challan be adopted.
e) The 15 digit alpha numeric service tax payer’s code should be used.
f) Assessee can not deposit service tax in a bank or in a branch situated outside the jurisdiction of the concerned Commissionerate or in any other bank apart from the nominated one.
Ans.35 The service tax is to be paid on the value of taxable services which is charged by an assessee. Any income tax deducted at source is included in the charged amount and is a part of taxable value. Therefore, the service tax is to be paid on the amount of income tax deducted at source also, i.e., gross amount charged.
Ans.36 In my opinion, yes, to the extent it is not recovered from clients. It can be treated as business expenditure and charged to profit & loss account.
Ans.37 Yes, for payment of service tax specific banks has been nominated for every Central Excise Commissionerate. If service tax amount is deposited in a branch of bank other than the nominated bank, it may amount to non-payment of service tax. It has however, been ruled in Shaman Marketing Research Association v. CCE, 2003 (153) ELT, 231 (CEGAT, Mumbai) that when tax was already paid to one of the designated banks, tax could not be demanded again and the matter should be regularized by transfer of amount between banks.
Ans.38 The Department can recover the service tax relating to a period upto five years in a situation where the Central Excise Officer has reason to believe that by reason of omission or failure on the part of the assessee, to make a return under section70 for any prescribed period to disclose wholly and truly all material facts necessary for his assessment for any prescribed period, the value of taxable service for that prescribed period has escaped assessment or has been under assessed.
Ans.39 No, service tax will not be payable on such amounts received during the month or quarter which relate to earlier period when such service was not taxable. According to Rule 6(1), notwithstanding the time or receipt of payment towards the value of services, no service tax shall be payable for the part or whole of the value of services, which is attributable to services provided during the period when such services were not taxable.
Ans.40 Service tax has to be paid on a monthly basis by all assessees except individuals and firms where it is to be paid on a quarterly basis by the 5th day of the month following the end of the quarter. When the assessee pays the service tax, he may make a consolidated single entry for utilization of credit of tax paid against payment of excise duty or service tax. The rules do not prohibit this.
Ans.41 Yes, electronic payment facility of service tax is available to the assessees presently at select banks (Union Bank of India, ICICI Bank, IDBI Bank, HDFC Bank and UTI Bank). The internet banking option provided by the banks for payment of central Excise and Service Tax mainly consists of the following :-
Solution is available to:
(a) Customer of any of the core banking branches of the bank.
(b) A taxpayer who poses PAN based 15 digit Assessee Code.
(c) Customers having registration with the bank opting for e-payment.
(d) Customers having banks internet banking ID. Payment Timing:
(a) This is a 24/7 facility and as such, customers can make the payment any time of the day.
(b) All payments effected up to 8 pm will be accounted for the day itself and all payment effected after 8 pm will be accounted as next working day’s receipt.
Area of Coverage:
Facility is available to the Central Excise and Service Tax assessees registered with Central Excise department and for the Commissionerates for which the bank is authorized to collect indirect tax revenue.
Advantages:
(a) Ease of operation and convenience
(b) Facility is available on 24 x 7 basis
(c) One can pay on behalf of the firm, company and others
(d) Online payment of taxes (No more queues and waiting)
(e) Filling of single challan form
(f) Selection of appropriate tax type from drop down menu
(g) Instant Cyber receipts for the payment made
(h) Receipted copy of challans delivered at doorstep.
Ans.42 asdfa
HOME  || SUBSCRIBE/UNSUBSCRIBE NEWSLETTER || QUERY BOARD|| HUMORS FROM STC
COPYRIGHT DISCLAIMER 2005 by ASCOCA
SERVICE TAX COUNSELLOR NEWSLETTER 2005
Site Designed & Conceived By : JMF INFOTECH