Baroda Branch of WIRC of ICAI
How to File Service Tax Returns
and its Challenges
CA. Manilal Parsiya
How to File Service Tax Returns

How to fill Service Tax Return

How to file Service Tax Return
Challenges in filing of ST3

Complexity is due to complex Service Tax Law and badly structured Service Tax return.

Partial reverse charges always requires registration for specific service covered by reverse charge mechanism
(for “Works Contract Service”).

Difficult to cross verify the data due to bad structure of ST3. Hence ST3 is the most error prone return.

Poor structure in terms of link of one cell to another in the ST3. Same amount in subsequent cells has to be
entered manually.

Some fields in the ST3 are seemed not relevant.

ST3 Return Excel Utility for the period July-Sept. 2012 was issued on 29.04.2013. Whereas ST3 Return Excel
Utility for the period Oct-12 to March-13 has been issued on 31.07.2013.

Govt. has taken almost 3 months to add one line in ST3 in PART K – Self Assessment Memorandum “I/We have
filed this return within specified time limit and incase of delay, I/we have deposited the amount towards late
filing as prescribed under rule 7C of ST Rules”.

Whereas Govt. has given to the assessee less than one Month to file the ST3.

ST3 demands lot of patience to go through entire lengthy and complex ST3.

Many debugging problems have been encountered in case of software for Service Tax.
Structure of Service Tax Return
PART A – General Information
PART B – Value of Taxable Service and Service Tax
Payable
PART C – Service Tax Paid in Advance
PART D, E, F – Service Tax, EC, HSEC Paid in Cash
and through CENVAT Credit
PART G – Arrears, Interest, Penalty and any other
amount etc. paid
Structure of Service Tax Return

PART H1-Details of Challans

PART H2-Source Documents for details of
payment made in advance and
adjustment

PART I – Details of CENVAT

PART J – Credit details for Input Service
Distributor

PART K –Self Assessment Memorandum
PART A – General Information

Field with * (red asterisk) is compulsory to be filed for
validate the sheet

Some field like Name of the Assessee, premises code
shall come automatically while uploading the return

Most of fields except fields having amount to be filled
are having drop down selection

Most of grey fields are having pre-fixed selection
options
PART A –
General Information

Add all services for which registration has been taken.

Separate sheets shall be available for each services we
have added.

Service after added cannot be edited; it can be deleted by
“delete service” option keeping cursor on red colored cell.

Majority time assessee is either a service provider or a
service receiver for a particular category of service except
few exceptions.

After selecting option in green cells “Yes”, grey cells shall
be turned in to green and data can be entered in that
cell.
PART A –
General Information

Data is to be filled in respective sheet either as a service
receiver or as a service provider or for both.

More than one exemptions and/or abatement
notifications and serial nos. can be selected by “add
notification” menu.

Case of partial reverse charge is being treated as an
exemption and we have to select ‘Yes’ in exemption menu.

Rebate on service tax on export of services under
notification can be shown in Point B1.12 – Any other
amount claimed as deduction, please specify

Serial No. appears after selection of exemption
notification
Exemption Notifications listed in Drop
Down List
Notification
No.
Nature of exemption
36/2010
Service tax on advances received prior to 1-7-2010 in respect of
services as per amended definition if service provided after 1-7-2010
45/2010
Exemption on taxable services relating to transmission and
distribution of electricity for the period up to 21.06.2010
25/2012
Mega Exemptions
27/2012
Exemptions to services to foreign diplomatic mission
30/2012
Exemption by way of partial reverse charge mechanism
31/2012
Exemption to exporter for transport of goods from place of removal
to freight station, container depot, port, airport (only in case of GTA on
reverse charge basis)
32/2012
Exemption of services provided by a Technology Business
Incubator(TBI) or a Science and Technology Entrepreneurship
Park(STEP)
33/2012
Exemption to small service provider(up to 10 lakh)
40/2012
Exemptions on services provided to SEZ authorized operations
Exemption Notifications listed in Drop
Down List
Notification Nature of exemption
No.
41/2012
Rebate of service tax i) in case of excisable goods on services used
beyond place of removal and in other case taxable service used in such
export of goods
42/2012
Service provided by a commission agent located outside India and
engaged under a contract or agreement or any other document by the
exporter in India, to act on behalf of the exporter, to cause sale of
goods exported by him.
43/2012
Notification No. 43/2012-St, dated 2-7-2012
1.
Service of transportation of passengers, with or without
accompanied belongings, by railways in -(A) first class; or
(B) an air conditioned coach
2.
Services by way of transportation of goods by railways
(Only in case of Transportation of goods by rail)
Abatement Notifications listed in Drop
Down List
Notification
No.
Nature of Abatement
Serial No.
14/2012
Exemption in case of taxable service involving import
of technology
Always 1
24/2012
Value of taxable services in terms of Service Tax
(Determination of Service Rule), 2006 (Valuation of
certain service on the basis of statutorily prescribed
percentage in case of Works Contract Service,
Restaurant or Outdoor Catering Service & prescribed
slab in case of Service in relation to Money Changing
Always 1
26/2012
Exemption to specified services by way of abatement
(as per
next slide)
29/2012
Exemption on property tax from renting of immoveable Always 1
property
Abatement to specified services – w.e.f.
1.7.2012(26/2012-ST)
Sl. Description of taxable service
No.
Taxable Conditions
Percent
1
financial leasing including hire purchase
10
Nil
2
Transport of goods by rail
30
Nil
3
Transport of passengers by rail
30
Nil
4
Bundled service by way of supply of food or
any other article of human consumption or
any drink, in a premises (including hotel,
convention centre, club, pandal, shamiana or
any other place, specially arranged for
organizing a function) together with renting
of such premises
70
CENVAT on any goods
classifiable under Chapter
1 to 22 of Central Excise
Tariff Act, 1985 has not
been taken
5
Transport of passengers by air
40
CENVAT credit on inputs
and capital goods has not
been taken
Abatement to specified services – w.e.f.
1.7.2012(26/2012-ST)
Sl. Description of taxable service
No.
Taxable
Percent
Conditions
6
Renting of hotels, inns, guest houses, clubs,
campsites or other commercial places
meant for residential or lodging purposes.
60
CENVAT credit on inputs
and capital goods has not
been taken
7
Services of goods transport agency
25
CENVAT has not been
taken
8
Services provided in relation to chit
70
Same as above
9
Renting of any motor vehicle designed to
carry passengers
40
Same as above
10
Transport of goods in a vessel
50
Same as above
11(i) Package tour by tour operator
25
Same as above
11
(ii)
10
Same as above
services solely of arranging or booking
accommodation for any person in relation to
a tour
Abatement to specified services – w.e.f.
1.7.2012(26/2012-ST)
Sl.
No.
Description of taxable service
Taxable Conditions
Percent
11
(iii)
Services by a tour operator in case other than
above
40
12
Construction of a complex, building, civil
structure or a part thereof, intended for a sale
to a buyer, wholly or partly except
where entire consideration is received after
issuance of completion certificate by the
competent authority,-
Same as above
1. CENVAT credit on
inputs used has not
taken.
(i)
for residential unit having carpet area upto
2000 square feet and where the amount
charged is less than rupees one crore;
25
(ii)
For other than the (i) above.
30
2. The value of land is
included in the
amount charged
from the service
receiver.
PART B – Value of Taxable Service and Service Tax
Payable – Service Provider

Quarter/month wise gross amount(excluding ST) for which
bills/invoices/challans are issued less amount on which Service Tax has
already charged on advance receipt basis in earlier quarter/month and
bills/invoices/challans on which Service Tax charged on partial reverse
charge basis is to be shown against Sl. No. B1.1.

Gross amount is the value of all services, other than those services
specified in the negative list provided any where except in the State of
Jammu and Kashmir(B1.1).

Gross amount shall include amount charged towards export service,
exempt service, amount charged as pure agent, amount includible in
terms of rule 5(1) (reimbursement of expenses ) and rule 6(1) of
ST(Determination of Value Rule), 2006 etc.

Post POTR, tax obligation generally arises on accrual or realization of
consideration, whichever is earlier (subject to few exceptions). Amount
received in advance for service whether taxable or exempt is to be
shown against S. No. B1.2.
PART B – Value of Taxable Service and Service Tax
Payable – Service Provider

As per third proviso to Rule 6(1) of Service Tax Rules, 1994, in case of individual
and partnership firms whose aggregate value of taxable services is fifty lakh
rupees or less in the previous financial year, the service provider shall have the
option to pay tax up to a total of rupees fifty lakhs in the current financial year
on receipt basis.

If assessee has opted to pay Service Tax on receipt basis as above than such
amount taxable on receipt basis is to be shown against Sl. No. B1.3.

Amount taxable for service provided for which no bills, invoices, challans or any
other documents have been issued (Rule 4A(1) of ST Rules) is to be shown
against Sl. No. B1.4

The value of consideration charged other than in money, is to be estimated in
equivalent money value of such consideration in terms of the Service Tax
(Determination of Value) Rules, 2006 is to be shown against Sl. No. B1.5.

Gross amount on which Service Tax is payable on partial reverse charge whether
on accrual or advance basis is to be shown against Sl. No. B1.6.
PART B – Value of Taxable Service and
Service Tax Payable – Service Receiver

Quarter/month wise gross amount(excluding ST) for which bills/invoices/challans are received less
amount on which Service Tax already charged on advance payment in earlier quarter/month and
bills/invoices/ challans on which Service Tax charged on partial reverse charge basis is to be
shown against Sl. No. B2.1.

Amount paid in advance for service whether taxable or exempt is to be shown against S. No.
B2.2.

Sl. No. B2.3 is not relevant in case of service receiver since third proviso to rule 6(1) of Service
Tax Rules, 1994 is applicable only to service provider

The value of consideration paid other than in money, is to be estimated in equivalent money
value of such consideration in terms of the Service Tax (Determination of Value) Rules, 2006 is to
be shown against Sl. No. B2.4.

Amount paid for service received from non-taxable territory – imports is to be shown against Sl.
No. B2.5.

Amount paid for service received from non-taxable territory – other than imports is to be shown
against Sl. No. B2.6.

Amount on which Service Tax is payable on partial reverse charge whether on accrual or advance
basis is to be shown against Sl. No. B2.7.
PART B – Value of Taxable Service and Service
Tax Payable – Exemption and Deductions

Amount of service exported is to be shown against Sl. No. B1.8.

Amount charged for exempted service other than export (and amount paid in
case of service receiver) including non-taxable portion of value of service
included under partial reverse charge is to be shown against Sl. No. B1.9 and
B2.9 respectively.

Against Sl. No. B1.10 and B2.10 amount received/paid as pure agent (for
example Taxes, Duties, Fees etc paid on behalf of service receiver and claim
reimbursement through bills/invoices).

Abatement on specified services under Notification such as 26/2012-ST dated
20.06.2012 (details as per earlier slides) is to be shown against Sl. No. B1.11
and B2.11

Sl. No. B1.12 and B2.12 covers any deductions which is not mentioned in any
other clause. (For example, deduction of property tax paid in respect of the
taxable service of renting of immovable property in terms of 6(4C) of Service Tax
Rules, 1994 read with Notification No. 29/2012-ST. or exemption in case of
taxable service involving import of technology under Notification No. 14/2012-ST
dated 17.07.2012)
PART B – Value of Taxable Service and Service
Tax Payable – Service Tax Rate wise Break up

Different rate of Service Tax like 12%, 10%, 8%, 5% can be entered by
adding row and quarter/month wise Net Taxable Value is to be entered
for advalorem rate and specific rate (Rule 6 of ST Rules provides for
specific rate in case of air travel agent service, foreign exchange broker
service and service of promotion, marketing, organizing lottery).

Taxable amount is to be converted into taxable unit in case of specific
rate(For ex. In case of the services of booking of tickets for travel by air
provided by an air travel agent, shall have the option, to pay an amount
calculated at the rate of 0.6% of the basic fare in the case of domestic
bookings, and at the rate of 1.2% of the basic fare in the case of
international bookings, of passage for travel by air, during any calendar
month or quarter.)

Aggregate quarter/month wise total of service tax rate wise break up
value must match with Net Taxable Value at B1.14 & B2.14.

Amount can only be entered against R & D Cess cell, if exemption
Notification No. 36/2010-ST has been selected at exemption menu.
PART C – Service Tax Paid in Advance
Rule 6(1A) provides that every person liable to pay service
tax, may, on his own volition, pay an amount as service tax
in advance 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,—
(i)
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
(ii)
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.]
PART D, E, F – Service Tax, EC, HSEC Paid
in Cash and through CENVAT Credit
1
Amount paid by challan
2
Amount paid by CENVAT (not applicable in case of service receiver)
3
Amount of Service Tax paid in Advance adjusted in terms of Rule 6(1A) of ST Rules.
4
Rule 6(3) of ST Rules allows adjustment of Service Tax amount which was paid earlier in
respect of taxable service not provided wholly or partially by the service provider or where the
amount of invoice is re-negotiated. Such adjustment is to be shown here.
5
Rule 6(4A) of ST Rules allows adjustment of Service Tax amount paid in preceding months or
quarter, which is in excess of the Service Tax liability for such month or quarter. Such
adjustment is to be shown here.
6
Rule 6(4C) of ST Rules allows adjustment of Service Tax amount paid in preceding months or
quarter, which is in excess of the amount required to be paid towards Service Tax liability for
such month or quarter on account of non-availment of deduction of property tax paid in terms
of Notification No. 29/2012-ST from the gross amount of rent charged for the immovable
property. Such adjustment is to be shown here.
7
Details of Source Documents relating to Sl. No. D,E&F(3,4,5,6&7) are to be provided in Part
H2 of the return.
1.
PART G – Arrears, Interest, Penalty
and any other amount etc. paid
Arrears of revenue includesa) Amount that was payable earlier but not paid;
b) Amount pending recovery on finalization of
adjudication or appellant stage, as the case may
be;
c) Amount pending in appeals without having any
stay for recovery; or
d) Amount arising on finalization of provisional
assessment etc.
PART G – Arrears, Interest, Penalty
and any other amount etc. paid
G7
Any amount collected in excess of the service tax assessed
or determined and paid on any taxable service from the
recipient of taxable service in any manner, has to be paid as
per the provisions of Section 73A of the Finance Act, 1994.
Assessee may furnish such amount here.
G8
Interest paid (in cash only)
G9
Penalty paid (in cash only)
G10
Amount of late fee paid for any delayed filing of return has to
be entered here as prescribed under Rule 7C of ST Rules.
G11
Any other amount paid may be specified. (It may include
amount paid in terms of any adjudication order, any appellate
order, etc.)
PART H Details of Challans and
Source Documents

Source document details for payment made in advance or adjustment,
for entries made at Sl. No. D, E & F (3, 4, 5, 6 & 7) and G1 to G11.

Enter relevant Sl. No. D, E & F (3, 4, 5, 6 & 7) or G1 to G11 for
adjustment or payment of ST at source document detail sheet.

Enter month/quarter in which adjustment or payment is shown at Sl. No.
D, E & F (3, 4, 5, 6 & 7) or G1 to G11.

Against source documents, following details may be furnished,i)
For adjustment under rule 6(3) of Service Tax Rules, 1994,
furnish details of earlier return, from where excess amount
is derived
(ii)
For adjustment under rule 6(4A), furnish details of
acknowledgement No. of intimation to Superintendent as required
to be furnished in the rules;
PART H Details of Challans and
Source Documents
(iii)
For arrears, interest and penalty, the source document/period
is as follows,(a) in case these are paid suo moto by the assessee, the period for which such amount is
paid may be furnished
(b) if paid consequent to a show cause notice (SCN) or order, the source document is
relevant SCN No./Demand Notice No., Order-in-Original No. or Order-in-Appeal No., or
any other order , etc.;
(iv)
For adjustment of excess amount of service tax paid on the
service of ‘Renting of Immovable Property’ in case the taxpayer
has not availed the deduction of property tax paid in terms of
Rule 6(4C) of the Service Tax Rules, 1994 read with
Notification No. 29/2012-ST, dated 20th June, 2012 and he opts
to avail such deduction against his service tax liability within 1
year from the date of payment of such property tax, the source
document is original receipt issued by the concerned
department of State Government showing the payment of
such property tax.
PART I – Details of CENVAT

Details at Sl. No. I1 is to be given only in case of
assessee provides exempted and non-taxable service
or manufacturing exempted excisable goods.

Rules 6(2) of CENVAT Rules, 2004 provides where a
manufacturer or provider of output service avails of
CENVAT credit in respect of any inputs or input
services and manufactures such final products or
provides such output service which are chargeable to
duty or tax as well as exempted goods or services,
then, the manufacturer or provider of output service
shall maintain separate accounts including receipt
and consumption of input service and input goods…
PART I – Details of CENVAT

Rule 3 of CENVAT Rules, 2004 provides if the manufacturer of
goods or the provider of output service, opting not to maintain
separate accounts, then he shall follow any one of the following
options, as applicable to him, namely:—
(i)
pay an amount equal to six per cent of value of the exempted
goods and exempted services; or
(ii)
pay an amount as determined under sub-rule (3A); or
(iii)
maintain separate accounts for the receipt, consumption and
inventory of inputs and pay an amount as determined under subrule (3A) in respect of input services;
(Note: Rule 3A prescribed method of deriving CENVAT reversal amount
on the basis of formulae and procedure to be followed including
advance intimation to Superintendent of Central Excise)
PART I –
Details of CENVAT

Details at Sl. No. I2 is only to be provided if
separate books are not maintained.

Always check last return for opening CENVAT
balance available.

CENVAT Credit can be carried forward
without time limit.

Service Tax paid under reverse charge by
challan, if CENVATable, can be claim as
CENVAT in the same month/quarter.
How to file Service Tax Return
1.
Fill up the return data
2.
Validating sheets
3.
Validate return and generate XML
4.
Upload XML file in to ACES Application
5.
Status can be Uploaded, Filed or Rejected
6.
If rejected, it needs to be corrected and
uploaded again.

New user-friendly features in the Oct. 2012 - Mar. 2013
ST-3 Return:
A.
Previously, the assessees were able to view the filed returns
using the option, 'View Original ST3'. This facility has been
enhanced with a new feature by displaying in the return, the
list of error codes (with corresponding error messages).This
will help the assessees to know about the errors so that they
can exercise the option of filing Revised return by rectifying
the errors. This facility will be made available shortly and the
exact date will be intimated on ACES website.
B.
As soon as the return uploaded by the assessee is accepted
or rejected by the system, a system-generated message will
be e-mailed to the assessee. The assessee can rectify the
errors and file the corrected return.