Point of taxation

This query is : Resolved

MADHAN_2184 (Querist)
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10 April 2012
I need some clarification in service tax invoice raising.

The resent budget were changed the service tax rate 10% to 12% but the point of taxation applicable or not. because our engineer went site and completed the work before 31.03.2012 but now we raising the service tax invoice to them 12%+2%+1% but the customer agree to pay service tax 10%+2%+1% while signing the contract and also service rendered before 31.03.2012. please clarify

Thanks & Regards
B Madhan

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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10 April 2012 As per the Rule 4 of the Point of Taxation Rules: Determination of point of taxation in case of change in effective rate of tax:
a) In case Taxable Service Has been provided before the change in effective Rate:-
i) Where the Invoice for the same has been issued and the payment received after the CHANGE IN EFFECTIVE RATE, the point of taxation shall be date of payment or issuing of invoice,whichever is earlier.

Based on the above provision i think you are correct but i have also doubt because Date of service tax liability arises should be sure based on the above provision but Rate of the service tax which has to collect is it as on the date of providing of the service or as on the date of raising of Invoice? However i think the rate of service tax should be collect rate as on the date of invoice issued or payment collect whichever is earlier so i think 100% you are correct but i have small doubt and clarification so wait for some other expert's explanations.
OM SAI SRI SAI JAI JAI SAI

Mihir Doshi

Mihir Doshi (Expert)
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10 April 2012 Dear,

Calculation is very simple in case of services provided before 31 March 2012.

If invoice is raised later (after 31st March) and payment is also received later (after 31st March), then rate of service tax would be the earlier of payment or invoice date. Here both the date fall after 31st March. So, rate of service tax is 12%.

Thanks
Mihir Doshi

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CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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10 April 2012 Agree with Mr. Mihir.

Rule 4 of Point of Taxation Rules, 2011

Determination of point of taxation in case of change in effective rate of tax - Notwithstanding anything contained in rule 3, the point of taxation in cases where there is a change in effective rate of tax in respect of a service, shall be determined in the following manner, namely:-

(a)in case a taxable service has been provided before the change in effective rate of tax,-

(i)where the invoice for the same has been issued and the payment received after the change in effective rate of tax, the point of taxation shall be date of payment or issuing of invoice, whichever is earlier; or

(ii)where the invoice has also been issued prior to change in effective rate of tax but the payment is received after the change in effective rate of tax, the point of taxation shall be the date of issuing of invoice; or

(iii)where the payment is also received before the change in effective rate of tax, but the invoice for the same has been issued after the change in effective rate of tax, the point of taxation shall be the date of payment;

(b) in case a taxable service has been provided after the change in effective rate of tax,-

(i)where the payment for the invoice is also made after the change in effective rate of tax but the invoice has been issued prior to the change in effective rate of tax, the point of taxation shall be the date of payment; or

(ii)where the invoice has been issued and the payment for the invoice received before the change in effective rate of tax, the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier; or

(iii)where the invoice has also been raised after the change in effective rate of tax but the payment has been received before the change in effective rate of tax , the point of taxation shall be date of issuing of invoice.

In Nutshell,
There may be 3 situations-
1.Rendering of Service
2.Issue of invoice for such service
3.Receipt of payment for such service

In case, any 2 out of above 3 situation complete before then rate of tax will be 10.30% otherwise it would be 12.36%.
Further, If payment is made on or before 31/03/2012 through an instrument, like cheque, by the receiver, then it should be credited in the account of the provider within 4 days from 01/04/2012.