St-applicability
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
20 March 2012
1.New service Tax rate applicable w.e.f.?
2.Rate of ST under WCT- Composite?
3.Whether Cess applicable?
4.Work done before 15/3/2012 but invoice submn. and payment after 15/3/2012. Which rate will applicable for ST calculation?
Please advise
2.Rate of ST under WCT- Composite?
3.Whether Cess applicable?
4.Work done before 15/3/2012 but invoice submn. and payment after 15/3/2012. Which rate will applicable for ST calculation?
Please advise
20 March 2012
1. 01/04/2012 . See notification 2/2012 dated 17/03/2012.
2. 4.944% (including cess and she cess)of the entire contract value. See notification 10/2012 dated 17/03/2012.
3. Yes
4. Pre budget rates.
2. 4.944% (including cess and she cess)of the entire contract value. See notification 10/2012 dated 17/03/2012.
3. Yes
4. Pre budget rates.
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Querist : Anonymous
Querist :
Anonymous
(Querist)
20 March 2012
We are property developers regd under WCT composite scheme. Presently we are charging ST @4%+cess from customers while taking advance agst. booking of apartment.
So after 01.04.12 we have to collect 4.944%. Is it reqd. to collect the difference amount from customers (old rate-New rate) agst advance received before 01.04.12
Invoice we will raise after completion only. It may take another 2 years.So how we will show ST in invoice
Please suggest suitable solution for the above
So after 01.04.12 we have to collect 4.944%. Is it reqd. to collect the difference amount from customers (old rate-New rate) agst advance received before 01.04.12
Invoice we will raise after completion only. It may take another 2 years.So how we will show ST in invoice
Please suggest suitable solution for the above
25 July 2025
This is an important query related to **transition of Service Tax rate** under **Works Contract – Composite Scheme** in 2012, particularly for **property developers** collecting advances and raising invoices later.
Let’s address your concerns step-by-step in the context of applicable **notifications, rules**, and **Point of Taxation Rules (POTR), 2011**, as they stood in **March–April 2012**.
---
## 🔹 Q1: **What is the new Service Tax rate applicable w\.e.f.?**
✔️ **Answer**:
The **new rate of service tax** became applicable **from 01.04.2012**, as per:
* **Notification No. 2/2012 – ST dated 17.03.2012**
* Increased from **10% + 2% EC + 1% SHEC = 10.30%**
to
**12% + 2% EC + 1% SHEC = 12.36%**
---
## 🔹 Q2: **What is the Service Tax rate under WCT - Composite Scheme?**
✔️ **Answer**:
Under the **composite scheme** for works contracts (as per **Notification No. 10/2012-ST dated 17.03.2012**), the rate is:
* **4.8% + 2% EC + 1% SHEC = 4.944%**
(i.e., **40% of gross value** × **12.36%**)
**Previously** it was **4% + cess = 4.12%**
---
## 🔹 Q3: **Is Education Cess (EC) & SHE Cess applicable?**
✔️ **Yes**, both **Education Cess (2%)** and **Secondary & Higher Education Cess (1%)** were applicable **on top of service tax** in 2012.
Total Effective Rate under WCT (Composite) = **4.944%**
---
## 🔹 Q4: **Work done before 15.03.2012, but invoice & payment after – Which rate applies?**
### ✳️ **Applicable Rule**:
**Point of Taxation Rules (POTR), 2011**
### ✔️ Answer:
If **service is provided before 15.03.2012**, and **invoice & payment both are after** that date → the **new rate will apply**, i.e., **4.944%**
BUT—if you **received any advance** before the rate change, you can apply **old rate (4.12%)** on that advance portion.
---
## 🔸 Important Rule:
| Event | Before 01.04.2012 | After 01.04.2012 |
| ---------------- | --------------------- | ---------------- |
| Service Provided | ✔️ | ❌ |
| Invoice Raised | ❌ | ✔️ |
| Payment Received | ❌ | ✔️ |
| Applicable Rate | **New Rate (4.944%)** | |
So, if **all three events** happen after the new rate comes into force, you must apply **new rate**.
---
## 🟩 Your Real Query: You’ve collected **advances before 01.04.2012**, invoices will be raised after 2 years. What rate should be applied?
### ✅ Suggested Treatment:
1. **Advance received before 01.04.2012**:
* Applicable rate: **4.12%**
* Issue receipt voucher with this rate
* Mention in ledger and service tax return as tax already paid
2. **Invoice raised after 01.04.2012**:
* You may adjust service tax already paid on advance under Rule 6(3) of **Service Tax Rules, 1994**
3. **Balance to be collected later (on invoice)**:
* Will attract **new rate: 4.944%**
### ❗ Should You Collect Difference from Customers?
* **Legally, you cannot revise the tax amount on an advance already received**, if tax was paid as per then-prevailing rate.
* However, if your contract with customers includes a **tax clause (subject to revision)**, you *may* be able to raise differential demand.
* **Most developers absorbed the difference**, unless explicitly agreed upon in the agreement.
---
## 🧾 In Your Invoice (after 2 years), show like:
| Description | Amount |
| ----------------------------------- | ------ |
| Gross Value | ₹X |
| Less: Already taxed advance (4.12%) | ₹Y |
| ST on balance at 4.944% | ₹Z |
Maintain **clear working papers** and **auditable reconciliation** for ST already deposited.
---
## ✅ Summary:
| Aspect | Your Situation | Action |
| ---------------------- | ----------------------- | --------------------------------------- |
| Old Rate | 4.12% (before 01.04.12) | Apply to advances received before |
| New Rate | 4.944% (from 01.04.12) | Apply to balance payable/invoiced later |
| Cess | Yes | Included in both rates |
| Recovery of difference | Depends on agreement | Usually not recoverable |
---
Let me know if you need:
* Sample invoice format for this scenario
* Advance adjustment working
* Service tax reconciliation template
Would you like me to draft a sample clause for your customer agreements regarding tax rate changes?
Let’s address your concerns step-by-step in the context of applicable **notifications, rules**, and **Point of Taxation Rules (POTR), 2011**, as they stood in **March–April 2012**.
---
## 🔹 Q1: **What is the new Service Tax rate applicable w\.e.f.?**
✔️ **Answer**:
The **new rate of service tax** became applicable **from 01.04.2012**, as per:
* **Notification No. 2/2012 – ST dated 17.03.2012**
* Increased from **10% + 2% EC + 1% SHEC = 10.30%**
to
**12% + 2% EC + 1% SHEC = 12.36%**
---
## 🔹 Q2: **What is the Service Tax rate under WCT - Composite Scheme?**
✔️ **Answer**:
Under the **composite scheme** for works contracts (as per **Notification No. 10/2012-ST dated 17.03.2012**), the rate is:
* **4.8% + 2% EC + 1% SHEC = 4.944%**
(i.e., **40% of gross value** × **12.36%**)
**Previously** it was **4% + cess = 4.12%**
---
## 🔹 Q3: **Is Education Cess (EC) & SHE Cess applicable?**
✔️ **Yes**, both **Education Cess (2%)** and **Secondary & Higher Education Cess (1%)** were applicable **on top of service tax** in 2012.
Total Effective Rate under WCT (Composite) = **4.944%**
---
## 🔹 Q4: **Work done before 15.03.2012, but invoice & payment after – Which rate applies?**
### ✳️ **Applicable Rule**:
**Point of Taxation Rules (POTR), 2011**
### ✔️ Answer:
If **service is provided before 15.03.2012**, and **invoice & payment both are after** that date → the **new rate will apply**, i.e., **4.944%**
BUT—if you **received any advance** before the rate change, you can apply **old rate (4.12%)** on that advance portion.
---
## 🔸 Important Rule:
| Event | Before 01.04.2012 | After 01.04.2012 |
| ---------------- | --------------------- | ---------------- |
| Service Provided | ✔️ | ❌ |
| Invoice Raised | ❌ | ✔️ |
| Payment Received | ❌ | ✔️ |
| Applicable Rate | **New Rate (4.944%)** | |
So, if **all three events** happen after the new rate comes into force, you must apply **new rate**.
---
## 🟩 Your Real Query: You’ve collected **advances before 01.04.2012**, invoices will be raised after 2 years. What rate should be applied?
### ✅ Suggested Treatment:
1. **Advance received before 01.04.2012**:
* Applicable rate: **4.12%**
* Issue receipt voucher with this rate
* Mention in ledger and service tax return as tax already paid
2. **Invoice raised after 01.04.2012**:
* You may adjust service tax already paid on advance under Rule 6(3) of **Service Tax Rules, 1994**
3. **Balance to be collected later (on invoice)**:
* Will attract **new rate: 4.944%**
### ❗ Should You Collect Difference from Customers?
* **Legally, you cannot revise the tax amount on an advance already received**, if tax was paid as per then-prevailing rate.
* However, if your contract with customers includes a **tax clause (subject to revision)**, you *may* be able to raise differential demand.
* **Most developers absorbed the difference**, unless explicitly agreed upon in the agreement.
---
## 🧾 In Your Invoice (after 2 years), show like:
| Description | Amount |
| ----------------------------------- | ------ |
| Gross Value | ₹X |
| Less: Already taxed advance (4.12%) | ₹Y |
| ST on balance at 4.944% | ₹Z |
Maintain **clear working papers** and **auditable reconciliation** for ST already deposited.
---
## ✅ Summary:
| Aspect | Your Situation | Action |
| ---------------------- | ----------------------- | --------------------------------------- |
| Old Rate | 4.12% (before 01.04.12) | Apply to advances received before |
| New Rate | 4.944% (from 01.04.12) | Apply to balance payable/invoiced later |
| Cess | Yes | Included in both rates |
| Recovery of difference | Depends on agreement | Usually not recoverable |
---
Let me know if you need:
* Sample invoice format for this scenario
* Advance adjustment working
* Service tax reconciliation template
Would you like me to draft a sample clause for your customer agreements regarding tax rate changes?
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