We have received a Professional Fees Invoice from one of our Vendor dated 25th of March 2012 and we have deducted the TDS and issue the Cheque to Vendor on 29th of March 2012.
The same cheque has been presented to Bank by the Vendor and cleared in bank on 10th of April 2012.
for the above reason Vendor has raised a supplimentory invoices to us with regard to Change in the Service Tax Rate wef 01.04.2012.
In the above case what is the actual rate of Service Tax? 10.3% or 12.36%? Is there any curculars in this regard?
06 June 2012
Presuming that 'date of service' is prior to 31/03/2012 and the invoice is raised on 25/03 2012, 'point of taxation' is the invoice date and the applicable rate is 10.30%.
06 June 2012
In this case I understand that Payment has already been made to Service provider on 29.03.2012 itself, although the cheque was cleared on 01.04.2012. Therefore, rate of ST as 10.3% shall apply.
Now if You assume that payment has been received by Service provider on 10.04.2012 then rate of tax shall be 12.36%. Related Circular is as follows:
Circular No. 158/9/ 2012 – ST
F.No 354/69/2012- TRU
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Tax Research Unit
Room No 146, North Block, New Delhi
Dated : 8th May 2012
To
Chief Commissioner of Customs and Central Excise (All)
Chief Commissioner of Central Excise & Service Tax (All)
Director General of Service Tax
Director General of Central Excise Intelligence
Director General of Audit
Commissioner of Customs and Central Excise (All)
Commissioner of Central Excise and Service Tax (All)
Commissioner of Service Tax (All)
Madam/Sir,
Subject: - Clarification on Rate of Tax - regarding.
1. The rate of service tax has been restored to 12% w.e.f. 1st April 2012. Representations have been received requesting clarification on the rate of tax applicable wherein invoices were raised before 1st April 2012 and the payments shall be after 1st April 2012. Clarification has been requested in case of the 8 specified services provided by individuals or proprietary firms or partnership firms, to which Rule 7 of Point of Taxation Rules 2011 was applicable and services on which tax is paid under reverse charge.
2. The rate of service tax prevalent on the date when the point of taxation occurs is rate of service tax applicable on any taxable service. In case of the 8 specified services and services wherein tax is required to be paid on reverse charge by the service receiver the point of taxation is the date of payment. Circular No 154/5/2012 – ST dated 28th March 2012 has also clarified the same. Thus in case of such 8 specified services provided by individuals or proprietary firms or partnership firms and in case of services wherein tax is required to be paid on reverse charge by the service receiver, if the payment is received or made, as the case maybe, on or after 1st April 2012, the service tax needs to be paid @12%.
3. The invoices issued before 1st April 2012 may reflect the previous rate of tax (10% and cess). In case of need, supplementary invoices may be issued to reflect the new rate of tax (12% and cess) and recover the differential amount. In case of reverse charge the service receiver pays the tax and takes the credit on the basis of the tax payment challan. Cenvat credit can be availed on such supplementary invoices and tax payment challans, subject to other restrictions and conditions as provided in the Cenvat Credit Rules 2004.
4. Trade Notice/Public Notice may be issued to the field formations accordingly.
5. Please acknowledge the receipt of this circular. Hindi version to follow.
06 June 2012
Yes , for the reason that had the cheque been cleared before 4th april then situation would have been in your favour and 10.3% would have been applicable. If cheque was issued quite earlier and if the service provider has defaulted in depositing the same then you need to take a stand that because of his ignorance you shall not entertain the claim.
As correctly said by Mr. Warrier, the payment of professional fees does not have any relevance if both service and invoice raised before 01/03/2012. The clearance of cheque plays role only when any one of two has not been completed. hence, in your case, even if the payment is received after 04th april 2012 then also it will be 10.30% if the service pertains to the period before April 2012.
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