How to calculate service tax where client pays only for the service amount and not the service tax mentioned in the bill?

Service Tax is payable on amount realized. In given situation, the amount so realized from the client would be treated as gross amount inclusive of Service Tax and accordingly the value of taxable service and the Service Tax liability are worked out as follows:

For example :

Value of taxable service (AV) = Rs. 10000

Amount Billed = Rs. 10000 + Service Tax Rs. 1030 = Rs. 11030

Amount paid = Rs. 10000.

Treat Rs. 10000 as gross amount inclusive of service tax. In case the gross amount, including service tax, received is, say, Rs 10000. In such cases the service tax liability may be arrived at by reverse calculation in the following manner.


AV = ---------------- X 100 = Rs. 9066.18 (Rs. 9066)


Amount of Service Tax + Education Cess Payable = Rs. 934


Note: If the recipient of service pays full billed amount later, the differential service tax must be paid forthwith.