Introduction Details:
a. Notified vide Notification No. 18/2011 dated March 1, 2011 and Notification No. 25/2011 dated March 31, 2011.
b. Effective from April, 2011, option to implement from July, 2011.
c. The Point of Taxation Rules are for determining:
i. Rate of Tax.
ii. Time for Payment of Tax.
d. Shift from cash basis to accrual basis.
e. Rule 6 of Service Tax Rule - Service tax to be paid by 5th / 6th of the month immediately after the month in which service is deemed to be provided as per the rules framed in this regard.
f. Point of Taxation - “the point in time when a service shall be deemed to have been provided.”
Determination of the Point of Taxation
Point of Taxation:
a. Standard Situation, and
b. Special Cases.
Standard Situation:
Rule 3 -
Point of taxation shall be the earliest of the following events:
a. Date of invoice - where invoice is issued within 14 days of completion of services.
b. Where invoice is not issued within 14 days of completion, date of completion of service.
c. Date of receipt of payment including receipt of advance, if any.
Special Cases:
a. Change in rate of tax.
b. Introduction of new service.
c. Continuous supply of services.
d. Export/ Import of Services.
e. Associated Enterprises.
f. Specified services.
g. Intellectual property.
h. Transitional provisions.
Standard Situation:
|
Date of Completion of Service |
Date of Invoice |
Date on which payment received |
Point of Taxation |
Comments |
|
April 25, 2011 |
May 05, 2011 |
May 10, 2011 |
May 05, 2011 |
Invoice issued in 14 days before receipt of payment |
|
April 25, 2011 |
May 15, 2011 |
May 10, 2011 |
April 25, 2011 |
Invoice not issued within 14 days |
|
April 25, 2011 |
May 15, 2011 |
April 30, 2011 |
April 30, 2011 |
Invoice not issued within 14 days but payment is received before invoice |
|
April 25, 2011 |
May 05, 2011 |
April 5, 2011(part) and May 5, 2011(remaining) |
April 5, 2011 and April 25, 2011 for respective amount |
Invoice not issued within 14 days Part payment before completion, remaining later |
Special Case - Continuous Services
Rule 6 -
Continuous Supply of Service
a. Services provided or to be provided under a contract.
b. Services provided or to be provided for a period exceeding 3 months.
c. Certain specified services.
i. Telecommunication Services.
ii. Commercial or industrial construction.
iii. Construction of residential complex.
iv. Internet telecommunication services and
v. Works contract services deemed as continuous services.
Point of taxation shall be earliest of:
a. Date of invoice- where invoice is issued within 14 days of completion of services.
b. Where invoice is not issued within 14 days of completion, date of completion of service.
c. Date of receipt of payment including receipt of advance, to the extent of payment is received.
Completion of Service
Where billing is based on completion of milestone(s), which trigger payment under the contract, The milestones identified in contract would be deemed as date of completion of service.
Special Case - Introduction of a new service
Rule 5 -
1. Such new service do not be taxed if :
a. Invoice has been issued before such service become taxable.
b. Payment is received before such service become taxable.
2. No tax payable on such service if:
a. Payment is received before such service become taxable
b. Invoice is issued within 14 days of completion of service.
Special Case - Intellectual Property Service
Rule 8 -
Includes
Royalties and payments pertaining to copyrights, trademarks, designs or patents, where whole consideration is not ascertainable at the time when service was performed.
Point of taxation shall be earliest of
a. Date of receipt of payment by the service provider.
b. Date of issue of invoice.
Special Case - Transitional Provisions
Rule 9 -
1. Rule shall not apply if either of the following event takes place prior to April 1, 2011
a. Provision of service is completed; or
b. Issuance of Invoice.
2. If either of the activity has taken place on or before June 30, 2011
a. Provision of services is completed; or
b. Issuance of Invoice.
Option of the service provider to pay tax on the date of receipt of payment/ date on which payment is made.
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