Service tax rate determination
This query is : Resolved
01 December 2012
If a person raised invoice for service rendered in the year 2008 and the payment is recieved in 2009, then which rate shall be considered for determining service tax liability? 12.36% (in 2008) or 10.3% (in 2009)?
02 December 2012
It also depends upon date of payment. If payment made in 2008 then rate of 2008 will be applicable. Otherwise of 2009
03 December 2012
Thank u sir. I mentioned payment is made in 2009 (when rate was 10.3%). I needed the "Service tax rule No." in support of the view.
03 December 2012
In the current scenario the law as stated in Section 67A clearly states that the rate of service tax shall be the rate in force as applicable at the time when taxable service has been provided or agreed to be provided. In the period aforementioned in the query the law however was not clear as to the applicable date whether on rendition or payment basis. However regard may be had to the following case law of Reliance Industries v. CCE Rajkot (2008) where the CESTAT Ahmd. held that the rate applicable would be the date of service rendition:-
In the case of Reliance Industries Ltd. v. CCE, Rajkot [2008] 15 STT 29 (AHD. - CESTAT), the
assessee was receiving consulting engineering services. The rate of service tax was 5 per cent
prior to 14-5-2003 and it was enhanced to 8 per cent from 14-5-2003 and further enhanced to 10
per cent with effect from 10-9-2004. The original authority confirmed the demand of service tax
along with interest and also imposed penalty of equal amount on the ground that even in respect
of the services received on dates prior to 14-5-2003, the rate of service tax shall be as on the date
of billing for payment. The Commissioner (Appeals) upheld the order of the original authority.
The Tribunal held that the liability to service tax is on account of rendering of the services. There
are variations in matters relating to manner of collection when compared to other taxes. It shall be
normally paid by the person rendering services but in certain cases it shall be paid by the recipient
of the services. Similarly, it need not be paid on the date of rendering of services but,
subsequently, at the time of receiving the service charges. When the service tax is introduced for
the first time on any service, in respect of the services already rendered on the dates prior to
introduction of service tax, even if the payments are received on a subsequent date, no tax shall
be leviable. Similarly, in absence of specific provision, the rate of tax applicable to service tax
shall be rate prevailing on date of rendering services. In central excise also, the duty on clearances
for any month (other than March) becomes payable within a few days in the following month.
The rate of duty is what is applicable on the date of clearance and not on the date of payment.
Therefore, the Tribunal held that the linking of the rate of duty to the one prevailing on the date of
billing or date of payment was not legally justified.
In the case of Reliance Industries Ltd. v. CCE, Rajkot [2008] 15 STT 29 (AHD. - CESTAT), the
assessee was receiving consulting engineering services. The rate of service tax was 5 per cent
prior to 14-5-2003 and it was enhanced to 8 per cent from 14-5-2003 and further enhanced to 10
per cent with effect from 10-9-2004. The original authority confirmed the demand of service tax
along with interest and also imposed penalty of equal amount on the ground that even in respect
of the services received on dates prior to 14-5-2003, the rate of service tax shall be as on the date
of billing for payment. The Commissioner (Appeals) upheld the order of the original authority.
The Tribunal held that the liability to service tax is on account of rendering of the services. There
are variations in matters relating to manner of collection when compared to other taxes. It shall be
normally paid by the person rendering services but in certain cases it shall be paid by the recipient
of the services. Similarly, it need not be paid on the date of rendering of services but,
subsequently, at the time of receiving the service charges. When the service tax is introduced for
the first time on any service, in respect of the services already rendered on the dates prior to
introduction of service tax, even if the payments are received on a subsequent date, no tax shall
be leviable. Similarly, in absence of specific provision, the rate of tax applicable to service tax
shall be rate prevailing on date of rendering services. In central excise also, the duty on clearances
for any month (other than March) becomes payable within a few days in the following month.
The rate of duty is what is applicable on the date of clearance and not on the date of payment.
Therefore, the Tribunal held that the linking of the rate of duty to the one prevailing on the date of
billing or date of payment was not legally justified.
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