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St on reverse charge- provision to be created for new rate?

Sinduja (Article Clerk) (26 Points)

16 May 2012

As per CBEC CIRCULAR NO-158/9/ 2012-ST, Dated: May 8, 2012 , in case of reverse charge, point of taxation is date of payment. But due to change in tax rate, up to March'12 , expense is booked and ST liability created @ 10.3%. But when payment for these invoices are made in future, ST @ 12.36% is applicable. Does this warrant making provision in books as on 31-Mar-12 for the differential service tax of 2.06% (12.36- 10.3)??

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3 Replies

Kapil (CA) (68 Points)
Replied 16 May 2012

if payment to be made after 31st mar 12, then the same is to be discharged @ 12.36%. Hence the same required the provision of differential amount.

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Sinduja (Article Clerk) (26 Points)
Replied 16 May 2012

Is there any notification or any other announcement made for this?

Pinky Agarwal (Chartered Accountant) (426 Points)
Replied 16 May 2012

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 : 8^th May 2012

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

The rate of service tax has been restored to 12% w.e.f. 1^st April 2012. Representations have been received requesting clarification on the rate of tax applicable wherein invoices were raised before 1^st April 2012 and the payments shall be after 1^st 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.
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 28^th 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 1^st April 2012, the service tax needs to be paid @ 12%.
The invoices issued before 1^st 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.
Trade Notice/Public Notice may be issued to the field formations accordingly.
Please acknowledge the receipt of this circular. Hindi version to follow.