14 April 2012
w.e.f. 01/04/2012, rate of ST has increased from 10% to 12%. In general cases, where payment thereof was on accrual system, the rate change will not bring many practical difficulties. However in case of CA, where their ST liability arises on receipt of fees, what happens when invoice is raised @10% tax & at the time of recipt of fees, the rate is 12%. Following are the major issues relating to the same :
As per analysis of a couple of experts, ST liability in case of CA shall arise at the rate prevailing on the date of receipt of payment. So in present case, since the rate is increased from 10% to 12%, the applicable rate for all receipt in the current FY shall be 12%. Is this analysis tight?
Secondly, vide notification No. 3/2012-Service Tax, in case of CA having turnover more than 50lacs, liability / payment of ST is changed to accrual basis. So how do we tackle practical dificulties, like raising an invoice & thereafter either cancelling the same or else discounting it at the request of the client?
Shall we get service tax credit (in light of hte basic rules of reversal of paid service tax - either the whole / part of the service to be provided, was not provided at all and the entire money, if at all received, is refunded to the client.)?
Can we go by some provisional billing till the time the money is recd from the client, before raising a final invoice & paying service tax on it, even when the service is already provided?
14 April 2012
As per Reliance Industries Ltd. (Gujrat HC) rate of service tax shall be taken of the date when services provided irrespective of date of issue of invoice and receipt of payment. However, now rule 5B of Service Tax Rules, 1994 provides of which date rate of service tax shall be taken i.e. of date when services shall be deemed to have been provided. you can also read my article dated 31.03.2012 " Determination of Date of Which Rate of Service Tax To Be Taken" It will be very useful in this respect.
16 April 2012
Sir, can u give me link of ur article. and according to my understanding of Rule 5B, in case of services like that of CA where POT was receipt of fees, ST is to be charged at teh rate applicable on the date of receipt of payment. So can you please elaborate on this matter a little?
16 April 2012
Also I recently came to know that the additional 2.06% to be charged to client or paid from our own pocket is applicable only in respect of invoices raised between 01/07/11 and 31/03/12. ST liability on all prior invoices are to be discharged @10.3% only. Can someone help me understand the reason for such bifurcation?
18 April 2012
Desired link is as under: https://www.caclubindia.com/articles/determination-of-date-of-which-rate-of-service-tax-to-be-taken-13477.asp
Rule 5B says that The rate of tax in case of services provided, or to be provided, shall be the rate prevailing at the time when the services are deemed to have been provided under the rules made in this regard.
POT Rules, 2011 provides when services shall be deemed to be provided. in case of services provided by CA, these services shall be deemed to be provided on the date when payment is received. Accordingly rate of service tax shall be taken of the date when payment is received. Now Rule 2A defines meaning of date of payment. you can read it.
POT Rules, have come into force wef 01.04.2012 or 01.07.2012. However rule 2B of Service tax rules, 1994 has come into force wef 01.04.2012. Therefore according to my interpretation in respect of invoices raised upto 31.03.2011 rate of service tax to be taken of the date when services rendered instead of date of receipt of payment as per Reliance Industries Gujrat HC and in respect of invoices raised after 31.03.2011 rate should be taken of date on which payment is received.
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