The Service Tax amount is required to be paid in Form TR-6 challan (Yellow in colour) in the specified branches

Indian Service Tax

Payment Of Service Tax - Procedure

Q. 3. 1 How and where to pay Service Tax?

Ans. The Service Tax amount is required to be paid in Form TR-6 challan (Yellow in colour) in the specified branches of designated banks. The list of such Banks and Branches is available in every Commissionerate of Central Excise. Different heads of accounts have been specified for different taxable service by the Govt. under which payment has to be made. While making the payment of service tax to the credit of Central Govt., head of account should be correctly and properly indicated under major and minor heads and sub-heads to avoid misclassification.

Q. 3. 2 When is Service Tax required to be paid?

Ans. If the assessee is an individual or a proprietary or partnership firm, the service tax is to be paid on quarterly basis. The payment is to be made by the 25th day of the month following the quarter. For example, Service Tax for the quarter ending 30th June is to be paid by 25th July.

In respect of other categories, the tax is payable on monthly basis and is to be paid by 25th day of the succeeding month.

Q. 3. 3 Whether the payment of Service Tax is to be made for the billed amount or for the value received?

Ans. 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.

Q. 3. 4 Whether service tax deposited by the assessees in non-designated bank will amount to non-payment of service tax?

Ans. Yes. For payment of service tax, specific Bank has been nominated for every Central Excise Commissionerate. If service tax amount is deposited in a branch of Bank other than nominated Bank, it amounts to non-payment of Service Tax.

Q. 3. 5 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?

Ans. The date of deposit of cheque is the date of payment of Service Tax. The Service Tax Rules as amended provide that it would suffice if the cheque is presented to the bank by the 25th of the month. However,Ifthe cheque bounces, it would mean as if the tax has not been paid and the necessary penal consequences would follow.

Q. 3. 6 How do you describe the expression "person" appearing in the definition of taxable service?

Ans. The expression refers to a "legal person" and would include any individual, proprietary firm or partnership firm, company, trust, institution and society etc.

Q. 3. 7 Would services provided in India for the foreign client be liable for payment of service tax?

Ans. Yes, the service tax is payable on all taxable services rendered in India, whether to an Indian or foreign client.

Q. 3. 8 Would the service provided abroad liable for payment of Service Tax?

Ans. No, the services rendered abroad shall not attract service tax as the levy covers only the services provided within India.

Q. 3. 9 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 the 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?

Ans. 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. Therefore, Service Tax is to be paid on the amount of income tax deducted at source also.

Q. 3. 10 What is the interest rate applicable on delayed payment of Service Tax?

Ans.Every person, liable to pay the tax in accordance with the provisions of Section 68 or rules made thereunder, who fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest at the rate of fifteen per cent per annum for the period by which such crediting of the tax or any part thereof is delayed.

Q. 3. 11 Is the amount for Service Tax charged from the client compulsorily to be indicated separately in the Bills/Invoices raised on him?

Ans. Yes, it is compulsory to separately indicate the amount of Service Tax charged in the Bills/Invoices raised on clients in terms of Section 83 of Finance Act, 1994 read with Section 12A of Central Excise Act, 1944. It is also 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.

Q. 3. 12 Is there any exemption for payment of Service Tax if the receiver/ provider of the service is the Central Govt./State Govt. organisation and/or Public Sector Undertakings? Can anyone of the above claim immunity from the liability to payor make provision for paying the Service Tax?

Ans. No, there is no such general exemption, exempting the services received/provided by the Central Government/State Government organization or Public Sector Undertakings. No one can claim immunity from payment of service tax until specifically provided in law.

Q. 3. 13 Whether any general exemption from Service Tax is available for small scale service providers, as in the Central Excise?

Ans. No. At present there is no such general exemption available for small scale service providers.

Q. 3. 14 What are the penal provisions if the service tax is not paid/paid late?

Ans. Any person liable to pay service tax in accordance with the provisions of Section 68 or the rules made thereunder, who fails to pay such tax shall pay in addition to paying such tax, and interest on that tax in accordance with the provisions of Section 75, a penalty which shall not be less than one hundred rupees but which may extend to two hundred rupees for every day during which such failure continues, so, however, that the penalty under this clause shall not exceed the amount of service tax that he failed to pay.

Q. 3. 15 Can any adjustinent of tax liability be made by an assessee on his own in cases where Service Tax has been paid in excess?

Ans.Yes. As per Rule 6(3) "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 apro ratabasis) against his service tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received." In all other cases of excess payment, the refund claims have to be filed with the department.

[Source: Directorate of Publicity and Public Relations, Customs & Central Excise, New Delhi, October, 2003].

Advances

Cir. No. 65/14/2003

Date: 5/11/2003

Sub:- Payment of service tax in case of advance payment of value of services.

I am directed to say that some doubts have been raised regarding payment of service tax in cases where a lumpsum payment for a service to be provided in future over a certain period of time, is made in advance before the date on which the particular service came under the tax net, but the entire or part of such service is provided after the date on which it became taxable. The doubt appears to have arisen as Rule 6(1) of Service Tax Rules, 1994, provides for payment of tax on the value of service received during a month/quarter, and in the instant case, no payment is received after the date on which the tax came into force (for example a case where payments for coaching service is received before 1/7/2003 i.e. the date on which this service became taxable, but the entire or part of coaching is provided after that date).

In this regard it may be noted that rule 6 only prescribes the procedure of payment of tax. The liability to tax is created by Section 66 of the Finance Act, 1994 as amended from time to time. The liability to pay tax is fastened on the service provider by Section 68 of the said Act. These two sections read together imply that service tax is payable. by the service provider on the value of taxable services. Thus if a service provided is taxable, tax has to be paid on its value. Section 67 also clarifies value of service as the amount charged for the taxable service by the service provider. In other words, an amount becomes value of taxable service only when it has a nexus with the service provided. That is the reason why the expression used in rule 6 is "value of taxable services" and not amount. The implication is that the tax has to be paid on the value of taxable services attributable to the service provided in a month/quarter as and when it is received. Thus, rule 6(1) can not be read in isolation. When read alongwith the provisions of the Act, it becomes clear that where the value of taxable service has been received in advance for a service which became taxable subsequently, service tax has to be paid on the value of service attributable to the relevant month/quarter which may be worked out onpro ratabasis.

In this context, attention is invited to para 2.3.1 of circular No.59/8/ 2003 dated 20/6/2003 wherein it was clarified that in view of the notification 1112003-ST dated

20/6/2003, no service tax would be payable where maintenance contracts are entered into before 1/7/2003, provided the invoices are raised and paid prior to 1/7/2003. It was further mentioned in the circular that similar would be the situation in case of continuing services. By continuing services what was meant was continuing maintenance services where there is an ongoing contract under which regular periodical payments are made. That para 2.3.1 was only in the context of maintenance and repair service is also quite clear from the heading, "MAINTENANCE AND REPAIR SERVICES" of para 2.3 in that circular. No similar exemption has been granted to any other service in case of advance payments.

Public Holiday

Cir. No. 63/12/2003-ST

Date 14/10/2003

Sub:- Return to be filed on next day if 25th day is a holiday.

It is directed to say that doubts have arisen with regard to the last date of payment of Service Tax and for filing the Service Tax return in case the 25th of the month in which the Service Tax is to be paid or return filed happens to be public holiday.

As per the Rules 6 and 7 of the Service Tax Rules, 1994, Service Tax received by the service provider is to be deposited with the Central Government by 25th of the month immediately following the month in which it is received. In case of individual or proprietary or partnership firm the Service Tax received during any quarter shall be deposited with Central Government by 25th of the month immediately following the said quarter.

Adequate precautions should be taken by the service providers to deposit the tax in time. In case of genuine hardship on account of public holiday on 25th of the month in which a service provider has to pay the service' tax or file the returns, he may pay the service tax in Government account on next working day immediately following the holiday. Same thing applies with regard to the filing of return.

Case Law

Where the cheque was not dishonoured, the payment must be deemed to be made on the date on which cheque was handed over to the Department, not the date on which cheque was encashed - 2002 (141) ELT 66 (New Delhi ­Cegat).