According to the Proviso of sub-rule (1) of Rule 6 of the Service Tax Rules, 1994 reads, “Provided also that the service tax on the value of taxable services received during the month of March, or the quarter ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the calendar year.” Even otherwise, interest @18% per annum is chargeable under Section 75 of the Finance Act, 1994, for delayed payment of service tax. There are cases where industries pays excess service tax to the credit of Central Government due to miscalculation of service of value, pending of the information regarding the actual receipt of the values of the taxable services provided or paid service tax to the credit of Central Govt. on services which was later not provided for any reason which later appears that excess service tax has been paid. How we can adjust the excess payment of service tax against the future liability or Is there any period or monetary restriction for such adjustments?
As Illustrated: Whether the excess payment of service tax of Rs.
10 lakhs during the month of March, can be adjusted straightaway throughout the
tax liability due for April, or it can be adjusted in the coming months if any
balance left?
In the contrast this with sub-rule (3) of rule 6 of the Service
Tax Rules, 1994, which reads,
“(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 a pro rata basis)
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 the above scenario, where an assessee paid service tax in
advance, who later on did not provide any service, hence there was no liability
on his part to pay the service tax in the first instance, as per the above
sub-rule, in case he refunded the service tax to the person from whom he
received, can adjust the amount without any restriction on the amount or the
period. Notice the words, ‘for the subsequent period’ in the above
sub-rule (3) against the words, ‘for the succeeding month or quarter’ of
sub-rule (4A)
Sub-rule (1A) of rule 6 of the Service Tax Rules, 1994, which
reads as follows.
“(1A) Without prejudice to the provisions contained in sub-rule
(1), every person liable to pay service tax, may, on his own volition, pay an
amount as service tax in advance, to the credit of the Central Government and
adjust the amount so paid against the service tax which he is liable to pay for
the subsequent period:
Provided that the assessee shall: intimate the details of the
amount of service tax paid in advance, to the jurisdictional Superintendent of
Central Excise within a period of fifteen days from the date of such payment;
and indicate the details of the advance payment made, and its adjustment, if
any in the subsequent return to be filed under section 70 of the Act;
Explanation: For the removal of
doubt, it is hereby clarified that in case the value of the taxable service is
received before providing the said service, service tax shall be paid on
the value of service attributable to the relevant month, or quarter, as the
case may be.”
In the above case, an assessee can pay service tax in advance and
adjust the same as and when he receives the taxable value on pro rata basis
during the subsequent period. There is no restriction as to the
amount and the period of adjustment, as in the case of non–provision of service
mentioned in sub-rule (3) of rule 6. Notice the words, ‘for the subsequent
period’ in the above sub-rule (1A), against the words, ‘for the succeeding
month or quarter’ of sub-rule (4A).
Sub-rules (4A) and (4B) of rule 6 of the Service Tax Rules, 1994
which are relevant, read as follows.
“(4A) Notwithstanding anything contained in sub-rule (4),
where an assessee 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 month
or quarter, as the case may be.
(4B) Reason for adjustment: Adjustment shall be
possible if excess payment of service tax for a month/quarter (as the case may
be) shall be for any reason other than following:
(i) wrong interpretation of law;
(ii) Taxability, classification or valuation of taxable services;
(iii) Applicability of any exemption Notification
(ii) Monetary
limit: Excess
payment made for a month/quarter (as the case may be) can be adjusted within a
monetary limit of Rs. 2 lakh. However, Adjustment of excess payment made, in
case of Centralized Registration, due to delay in receipt of details from other
offices (branches), can be done without any monetary limit.
Amendment: W.e.f.01.04.2012,
rule 6(4B) has been amended vide notification no. 3/2012 dated 17.03.2012 to
remove conditions mentioned in column (ii) & (iii) hereinabove. Now,
adjustment of excess payment of service tax made can be adjusted without any
monetary limit. Further no intimation is required to be filed with
Superintendent. However, adjustment of excess payment made shall be reflected
in service tax return of the assessee.
Sub-rule (4) of rule 6 reads as follows.
“(4) 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 of Central Excise or the Deputy
Commissioner 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 provisions of
the Central Excise (No.2) Rules, 2001, relating to provisional assessment,
except so far as they relate to execution of bond, shall, so far as may be,
apply to such assessment.”
So, in the cases of advance payment, centralized accounting system
and non-provision of taxable service, there is no restriction as to the amount
and period, as to the adjustment of excess payment of service
tax. In the case of excess payment (rule 4A &
4B) simpliciter alone, such adjustment can be made only once during
the subsequent month or quarter, as the case may be, without any monetary
limit.
For example: An assessee paid an excess service
tax of rupees 5 lakh in the month of March, and his liability to pay service
tax for the month of April is 2 lakh rupess, so 2 lakh rupees can be adjusted
out of excess payment of 5 lakh made in march, but the balance of 3 lakh rupees
cannot be adjusted due to period restriction and therefore the assessee has to
claim refund for the balance amount of 3 lakh rupees.
The reasons for the stipulation of period restrictions imposed on
adjustment of excess payment of service tax (sub-rule 4) appears
improper, although the alternate path of filing of refund claim is available,
which is a bit cumbersome procedure when compared with the self-adjustment of
excess payment of Service Tax by the assessee.
Initially there was a restriction on Monetary limits also
but by virtue of the notification no. 03/2012 dated 7/03/2012 the Monetary
limits has been abolished by the finance act but Time limits for adjustment of
excess service tax payment is still a issue before us.
Hence it is advisable and equitable that the Govt should also lift
the period restriction of sub rule 4A of rule 6 of Service tax rules 1994.
Author Name: Pawan Kumar
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