Question120: During Service tax regime, certain invoices were raised but remained unrealised. The invoice amount in few cases needs to be reduced and in some cases the full invoice needs to be cancelled. Also there are few cases where invoices could not be realised due to financial crunch with clients. Kindly advise

- whether and how credit for above service tax reversal can be availed under GST era or else refund is to be claimed under old service tax law.

- incase the invoices are realised now or later , whether payer can avail input credit at the time of making payment incase not claimed earlier'

- what would be the status of invoices remaining unrealised under service tax law and GST regime which is ultimately required to be written off '

Also guide us on procedural requirements along with legal implications.


Answer The Liability of Service tax was to be paid on the basis of Point of taxation , which is earliest of the following:-

1. The date of issue of invoice
2. The date of completion of service if the invoice is not issued within 30 days of completion of service.
3. The date of payment determined as per Rule 2A.
Now payment or cancellation is an event which takes effect after the point of taxation. So your liability to pay tax as per point of taxation is not changed by the events took place after the point of taxation mentioned in mail.

Following is the point wise reply:-
Q.1.When the Service tax paid in the regime of GST.
Ans. ITC is not available as per Section 142.

Q.2. Tax already paid but bill is cancelled.
Ans. File a refund claim under service tax.

Q.3. For the debit notes issued by receiver of service.
Ans. File refund claim.

In case (2) and (3) you have to give proof that the receiver has not claimed ITC of service tax or has reverse the same.

following is the summary of above:-

1) All tax liabilities related to Service tax, Excise, Sales tax are to be paid in cash and no ITC of the same is allowed (Section 142).

2) Refund relating to above is allowed in cash (section 142)

3) If there is any liability to pay tax, you have to pay it even in case if it is refundable in future to you because of certain events took place after the Point of taxation. (reply dt. 05/05/2018)