Service Tax has to be collected and remitted to the government at regular intervals as per the applicable rules. Delayed payment of service tax attracts interest and penalty. Some of the vital points on payment of service tax are listed below. Hope this helps.
Payment of Service Tax by Companies, Trusts, Associations, etc.
The payment of service tax by companies, trusts, associations, societies has to be done in monthly intervals. For example, Service Tax for the month of February has to be paid on or before 6th of March.
Payment of Service Tax by Partnership Firms/LLPs, proprietary concerns and Individuals:
Unlike Companies, the firms, Limited Liability Partnership firms, proprietary concerns, individuals have to pay service tax in quarterly intervals except March. For example, Service Tax for the quarter April – June is payable on 6th of July.
Service Tax for Quarter ending or month ending March
Service Tax on value of taxable services provided during the month of March or quarter ending March is required to be paid by 31st March. For example, service tax for the quarter Jan to March has to be paid on or before 31st March.
Payment of Service Tax on Accrual Basis
Service tax is payable on the basis of date of billing or receipt of advance, whichever is earlier and not on receipt basis.
Payment of Service Tax on cash basis
Individuals, proprietary concerns, partnership firms, Limited Liability Partnerships (but not HUFs) whose total value of taxable service is Rs.50 Lakhs or less in the previous financial year can opt to pay service tax on receipt basis instead of accrual basis. For example, Mr. Milind raises an Invoice for Rs.50,000 towards rent of commercial premises for the month of Feb 2015. He can pay service tax on this amount, only after he gets the money from the tenant. Suppose, the tenant defaults in tax payment, Mr. Milind needn’t pay service tax.
Payment of Service Tax on reverse charge mechanism
- Generally, the person who is providing taxable service is liable to collect and pay service tax from the service recipient. However, in few cases, exceptions have been made and the service recipient is made liable to pay service tax. Such payments are called as ‘service tax on reverse charge mechanism’
- In case of reverse charge, the recipient has to pay tax only after payment is made to the service provider. However, if the payment is not made within a period of 3 months of the date of the invoice, the due date for payment of service tax on reversecharge basis shall be the date immediately following the expiry of 3 months (from the date of the invoice received from the service provider).
- Cenvat credit cannot be utilized for payment of service tax when tax is payable under reverse charge method.
- The service recipient is liable to pay service tax even if the value of service of the service provider is less than Rs.10 Lakhs. Thus, small service provider exemption is not available in case of reverse charge method.
- The service recipient is eligible to avail Cenvat credit of the service tax paid on reverse charge method- However till 31.03.2015, such credit shall be available to the service recipient only after: a. the payment has been made to the service provider and; b. Service tax is paid. W.e.f. 01.04.2015, credit on reverse charge mechanism shall be available to the service recipient on payment of service tax.
Interest on delayed payment of service tax
- Upto 6 months delay – 18% per annum
- 6 months to 1 year – 24% per annum
- 1 and above – 30% per annum
- Interest is mandatory. It can’t be waived by the officer, even if evasion of duty is not mala fide or intentional.
- Interest payable for actual period of delay (i.e., number of days)
Penalty on Nonpayment of service tax
- Delayed payment of service tax attracts a penalty (in cases not involving fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of Service Tax) – Maximum of 10% of the service tax.
- In case service tax, interest are paid within 30 days of Show Cause Notice no penalty is levied.
- In case service tax, Interest are paid within 30 days of Order of CE Officer, 25% of penalty is payable.
Online payment of service tax.
E-payment of Service Tax through internet banking is mandatory with effect from 1st October 2014. The e-payment facilitates anytime, anywhere payment and an instant cyber receipt is generated once the transaction is complete. All payments effected up to 8 pm will be accounted for the day as that day’s receipt. Payment effected after 8 pm will be accounted as the next working day’s receipt. Failure to pay tax electronically shall be liable to a penalty which may extend to Rs.5000
Excess payment of Service Tax
One can pay any amount of service tax (more than the actual dues) as advance towards future tax liability. Such excess amount can be adjusted against the future tax liability. There is no limit on amount that can be adjusted or time limit for adjustment.
Excess Tax collected from the customer to be paid to the Government or refunded to the customer
Service tax is an indirect tax, it is to be collected from customer and remitted to the government. If tax is collected from the customer either it has to be remitted (after adjusting Cenvat credits, if any) to the government or to be refunded to the customer (in the event of non-provision or part provision of service). One can’t keep the taxes collected with him!
Adjusting the Service Tax paid but the payment not recoverable later.
It may happen that invoice is raised and service tax is paid to the government, but the payment may not come partly or fully from customer. In such cases, the taxpayer can issue a Credit Note to customer and then adjust the excess service tax paid by him against his service tax liability for the subsequent period. Please note that self-adjustment is possible for reasons such as service not provided partly or fully, invoice is renegotiated due to deficient provision of service, tax. However, such adjustment is not permissible in case of bad debts or giving simple discount/reduction in charges.
Service Tax is payable as soon as advance is received, even if service is provided later. For example, Mr. Abraham gets an advance of Rs.2,00,000 from the client in the month of March 2015 for the services to be provided in April 2015. In this case, Mr.Abraham has to pay Service Tax on Rs.2 Lakh in the month of March 2015. Please note that service tax is levied on service provided or agreed to be provided.
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