Point of Taxation

August 14, 2016   admin  GST India
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Point of Taxation

Type of ServicePoint of Taxation
Provision of IntangiblesWhen a payment in respect of such use or the benefit is received by the provider in respect thereof, or an invoice is issued by the provider, whichever is earlier
New Introduced servicesTax is not leviable to the extent
invoice has been issued and payments have been received before introduction of such service
Where payment is received before levy but invoice is issued after the date of levy provided invoice is issued within 14 days of receiving the payment
All other cases, General Rule
This rule shall apply mutatis mutandis in case of new levy on services.
New levy or tax shall be payable on all the cases other than specified above.
In case of specified persons (reverse charge mechanism)Date on which payment is made
If the payment is not made within three months of date of invoice, then, Point of Taxation shall be earlier of:
Date of invoice; or
Date of provision of service when such invoice is not raised within 30/45 days of such provision of service
In case of Associated enterprisesWhere person providing services is located outside India: POT shall be the earlier of:
Date of making payment; or
Date of debit in the books of account of the person receiving such service.
All other cases, General Rule
In other case when point of taxation is not determinable as per above provisions (when date of invoice and date of payment both are not available)Point of Taxation shall be on the basis of best judgement of Central Excise Officer after considering accounts, documents etc and considering the submission of the assessee
All other cases (General Rule) General Rule, defined as earliest of the following:
Time of issuance of invoice
Time of completion of the provision of services, if invoice is not raised within 14 days of such services.
Time when payment is received

Effective rate in case of change in rate of tax (existing services)

RuleEvent prior to change of effective rateEvent subsequent to change of effective ratePoint of Taxation
Provision of service, issuance of Invoice and receipt of paymentN.A.N.A.
4(a)(i)Services renderedInvoice issued and payment receivedIssuance of Invoice or receipt of payment, whichever is earlier
4(a)(ii)Services rendered and invoice issuedPayment receivedIssuance of Invoice
4(a)(iii)Services rendered and payment receivedInvoice issuedReceipt of Payment
4(b)(i)Invoice issuedPayment received and Services renderedReceipt of payment
4(b)(ii)Invoice issued and payment receivedService providedIssuance of Invoice or receipt of payment, whichever is earlier
4(b)(iii)Payment receivedInvoice issued and services renderedIssuance of Invoice

Notes:

  • For the purposes of this rule, wherever any advance, by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.
  • Invoice to be issued:
  • Within 30 days of “completion of service”
  • For banking /financial institution or any other providing service in relation to banking – within 45 days of completion of service.
  • By way of relief, in case of individuals and firms, in case of aggregate value of taxable services provided in a year being Rs 50 lakhs or less, option to pay service tax on payment basis up to taxable services up to such limits is available vide Service Tax Rules, 1994.
  • In case service provider receives up to Rs. 1000 in excess of the invoice amount; there is no need to raise fresh invoice
  • Exporter of service is not required to pay tax if payment is received within period specified or extended period as allowed by RBI.
  • ‘Date of Payment’ has been specifically defined under Rule 2A: –
Situation Service provided after change in effective rate of tax
In normal case Dates of entry into books of account or actual credit whoever is earlier.
In case of change of rate or new levy between said two dates [Rule 5] Date when amount is actually credited in the bank; if it is credited more than four days after date of such change.

 

Impact of Krishi Kalyan Cess

As the effective rate of tax on services is to be increased from 14.5% (14% Service Tax + 0.5% SBC + 0.5% KKC) to 15% (14% Service Tax + 0.5% SBC + 0.5% KKC) w.e.f June 1, 2016 the applicable rates in different scenarios in case of existing taxable services are as under:

Time of Provision of Service *Time of InvoicingTime of PaymentPoint of Taxation RuleRate of Service Tax
Before Rate ChangeAfterAfter4(a)(i)New
Before Rate ChangeBeforeAfter4(a)(ii)Old
Before Rate ChangeAfterBefore4(a)(iii)Old
After Rate ChangeBeforeAfter4(b)(i)New
After Rate ChangeBeforeBefore4(b)(ii)Old
After Rate ChangeAfterBefore4(b)(iii)New

*Before / Before Rate change means before 01.06.2016 in the above chart.  Similar reading is to be made for After the rate change (i.e. after 01.06.2016)

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