Point of taxation rules 2011 - ca final - november 2011 atte

01] POINT OF TAXATION RULES 2011 - SERVICE TAX (POT) NOT APPLICABLE FOR NOV 11 ATTEMPT.

02] TAXABLE EVENT UNDER SERVICE TAX: - ONLY 4 NOV 11 ATTEMPT:

Taxable Event in Service Tax

Opening sentence of section 65(105) reads as follows, 'taxable service' means any service provided or 'to be provided'.

In view of above, following are taxable events—

(a)       Entering into contract for service - Entering into contract for providing service. Once you enter into a contract, it is certainly 'service to be provided. (Service tax is actually payable after payment is received from customer, even if contract is entered into and service is already provided. However, receipt of payment or advance for service is not a 'taxable event').

(b)       Provision of service - This will happen in cases where contract for providing service was entered into before the service became taxable, but service was provided after the service became a 'taxable service'.

Since 'service to be provided' is also taxable event, service tax becomes payable as soon as advance payment is received, even if service is provided later.

Receipt of payment from service receiver is not 'taxable event' - The service tax is actually payable only after payment/advance is received from customer/client. Even then, receipt of payment for service or advance is not a taxable event. It only defers the tax liability.

CREDIT ONLY AFTER PAYMENT IS MADE TO SERVICE PROVIDER - Credit of input services can be availed only after the output service provider makes payment of value of input services and the service tax payable on it, as shown in invoice of input service provider. [Rule 4(7)]. [In case of excise duty, credit is available as soon as goods are received in the factory. There is no condition that credit can be availed only after payment is made to supplier of goods].

This peculiar provision has a specific purpose. The reason for this provision is that as per Service Tax Rules, the service tax is payable only after the amount is actually received by the service provider. Thus, the service provider of input services will be liable to pay service tax only when the person who has availed the service (output service provider in this case) pays the amount of his invoice.

Mere payment of service tax to service provider is not sufficient – Suppose the invoice is for Rs 100 and service tax is Rs 12.24, can you avail Cenvat credit if you pay only Rs. 12.24 to the input service provider? The answer is no, as the words used are ‘value of input services and the service tax payable on it’.

PLEASE NOTE:

01 – ALL TOPICS DONE IN CLASS DURING SERVICE TAX LECTURES ARE RELEVANT FOR NOV 11 ATTEMPT.  The only thing is – all discussions on POINT OF TAXATION RULES 2011 – becomes irrelevant.

02 – Students can refer bangar available for nov 11 attempt but those pages which covers POINT OF TAXATION RULES ARE 2 B IGNORED and REPLACED BY ABOVE PROVISIONS.