Applicable service tax rate

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 May 2012 Sir

We are a part of a Govt Company and we have contract with transporters for stock transfer from our HQ to Branch office.We are paying Service Tax as a service receipient on the Bills raised by the transporter.The service was provided in the month of Jan'12 Bill was raised in Feb'12 and we made the payment in April'12.I want to know wheather we have to pay the ST @ 10% or 12%.Pls help its urgent.

PUNEET GOYAL

PUNEET GOYAL (Expert)
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01 May 2012 As per Rule 7 of POT Rules, 2011, in case of reverse charge mechanism, point of taxation shall be determined on the date when payment is made by service receiver. Accordingly rate of service tax shall be taken of date on which payment is made by service receiver.Thus in your case rate shall be 12%.

CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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02 May 2012 Agreeed witht the Expert......

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PUNEET GOYAL

PUNEET GOYAL (Expert)
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02 May 2012 Hello Nikhil HRU?

CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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02 May 2012 Changing my previous view, Dear Puneet,

1. Rule 4 does not apply for reverse charge because Rule 7 overrides whole POInt of Taxation Rules, Now then effectively there is no rule which guides the applicab le rate of tax in cases where still receipt of payment is the point of taxation. In that case What do you think, Old policy of applying rate of service tax on the basis of provision of service should not be followed.

Then the rate of tax shall be 10%

PUNEET GOYAL

PUNEET GOYAL (Expert)
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02 May 2012 Dear Nikhil, you are right that rule 7 overrides all provisions of POT Rules. Your this view itself confirm my above conclusion. In Rule 5B of STR, 1994, (Newly inserted wef 01.04.2011) it is provided that rate of service tax shall be taken of the date when services shall be deemed to have been provided and POT rules provides provision as to when services shall be deemed to be provided. Rule 7 provides special provision in above case and accordingly rate of service tax shall be determined.

Moreover, Rule 4 of POT, overrides only rule 3 and we shall go to rule 4 only if in our case POT shall be determined in rule 3. In above case rule 7 of POT is relevant one.

CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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02 May 2012 Ok Got it your point. You are absolutely correct.