Applicability of service tax - recognition or advance basis, Service Tax

[Rahul Bagaria]

In my opinion service tax should be paid on revenue recognisation and not on the advance payment.This is in context with advance premium received by an insurance company and its liability to pay service tax.Service tax should be paid only on the revenue recognisation and not on advance payment of premium

Posts / Replies

[Rama Krishana]

As I remember the history, initially the service tax was payable on accrual basis. But later on demand from the service providers, it has been modified and service tax was set to be paid on realization of amount of taxable services. If the whole scheme of service tax is analyzed at one go, it is better that legislature should give an option to the assessee to pay either on realization basis or accrual basis. But once the option is exercised, the same should not be allowed to be changed for the lifetime of the assessee, since reconciliation is the big problem. Moreover, where as your issue of service tax on advance is there, as long as service is payable on receipt basis, the scheme of service tax on advance appears to be correct.