Rate of service tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 April 2012 As per the Notification withdrawn, new service tax rate of 12.36% is applicable.

And as per Rule 7 of POT Rules, 2007 in case of specified services, Point of Taxation is on receipt basis.

What shall be the effective rate of tax for the services provided by them & bills issued before 1st April, 2012 for which payment is still not received ? POT shall be after change in rate of tax....on receipt of pymt basis...
As on the original bills issued earlier Rate of Tax charged would be 10.3% ?

Old rate or new rate shall apply for the services provided before change in rate of tax & bills issued ?

CA Prashant Gupta

CA Prashant Gupta (Expert)
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04 April 2012 On receipt of bill after 1st April 2012, new rate will be applicable and you have to reverse calculate the service tax amount on amount received.

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CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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04 April 2012 It has been recently clarified by CBEC vide Circular No. 1564/5/2012 dt. 28.03.2012 that in respect of eight specified service where invoice has been issued before 01.04.2012 the point of taxation shall be date of payment. This view is also supported from Rule 4 of POT.

Further later on after enactment of Finance Bill New Section 67A shall be applicable which links change in rate of tax with provision of service......

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Mihir Doshi

Mihir Doshi (Expert)
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05 April 2012 Dear Nikhil,

Would you elaborate your example, as I am not able to catch the meaning.

Thanks in advance

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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05 April 2012 Dear Author,
We have to consider following 3 concepts for applicability of rate of service tax-
1. When the service is rendered?
2. Date of the invoice bill
3. payment for receiving such service

If any 2 of out of 3 above have been completed upto 31st march 2012 then old rate of 10.30% shall be applicable.

It has to be kept in mind that if the payment is made before 31 st march 2012 and only one of the criteria is not met, then the payment should be credited in the account within 4 days from 01st april 2012.

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CA Nikhil Jhanwar

CA Nikhil Jhanwar (Expert)
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05 April 2012 At present for deciding the applicable rate of tax Rule 4 of point of Taxation Rules, 2011 is applicable. This Rule has clearly explained by Mr. Amit S. Kedia

Further In This Budget New Section 67A has been inserted. As per This section applicable rate of service tax shall be the rate as applicable when the taxable service has been provided. Thus even if invoice has been issued and payment has been received after effective date of change in rate of service tax then also old rate of Service tax shall apply. Since this Section will come into force after enactment of Finance Bill, till then Rule 4 of Point of Taxation Rules shall be apply. As a matter of fact both Rule 4 and Section 67A are contrary for similar issue.

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