Read new provisions relating to Service Tax variation

We know that from time to time Govt. of India revises Service tax . So , after revision or new amendments in service tax either service tax may be increased or decreased . At this time service tax variation are needed .

Under Service tax act , "Company can adjust service tax amount in future bill of customer . "


For instance : As per instructions from Govt. of India service tax had been revised from 12.36 % to 10.30% w.e.f. 24 Feb 2009 , but HFCL infotel ltd. takes payment of Internet service 16th . So , in 16Feb. 2009 , HFCL infotel ltd. charged service tax 10.30% instead of 12.36% . Now HFCL collected less service tax from 16 Feb. 2009 to 23 Feb. 2009 . This can be adjusted from customer in future . Now company adjust this in 16 May 2009 . The difference of service tax to be charged is 2.06 % from 16 Feb. 2009 to 23 Feb. 2009 under service tax variation provision


Suppose my Internet bill is Rs. 444


I will also pay service tax variation to above company


444 X 12.36 - 10.30 / 100 X 8/28 = Rs. 2.6 or Rs . 3


I will also pay current month service tax 10.30%

444 X 10.30% = 45.73

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I will pay total of above amount = 492.73

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Accounting Effect , if company will not apply the provision relating to service tax variation

1. Service tax is indirect tax , it means all burden of service tax liability is shifted on customers . If service tax variation provision did not apply , then this variation amount was given by company to govt. department . So , it will decrease company profit .
2. Because service tax variation is just difference between actual and old service tax amount and if customers will not pay that amount , customers profit will excess which is not tree and this is false window dressing of customers profit .
   

So , it is the duty of company that it should add customers bill as soon as company knows the difference .