SERVICE TAX

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SERVICE TAX

• Point of Taxation Rules, 2011

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Contents

• Erstwhile Rules
• Point of Taxation Rules, 2011
• Guidelines relating to availing credit
• Guidelines relating to payment of service Tax
• Bibliography

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Erstwhile Rules

• Availing of Service Tax Credit
• Rule 4 (7) of Cenvat Credit Rules, 2004 states
  that The Cenvat Credit in respect of input
  service shall be allowed, on or after the day
  which payment is made of the value of input
  service and the service tax paid or payable as is
  indicated in invoice, bill or , as the case may
  be, challan referred to in rule 9.

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Erstwhile Rules

• Payment of Service Tax
• Invoice should be issued within 14 days from the
  date of completion of taxable service or receipt
  of any payment towards the value of such taxable
  service, whichever is earlier.
• The Service tax shall be paid to the credit of
  the Central Government immediately following the
  calendar month in which the payments are
  received, towards the value of taxable services.
• In case of Associated enterprises, on accrual
  basis and not on payment basis.

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Point of Taxation Rules, 2011

• With effect from 01.07.2011.
• Point of Taxation shall be
• The date of invoice or payment, whichever is
  earlier, if the invoice is issued within the
  prescribed period of 14 days from the date of
  completion of the provision of service.
• The date of completion of the provision of
  service or payment, if the invoice is not issued
  within the prescribed period as above.
• If any advance is received for provision of
  taxable service, then the date of receipt of such
  advance.

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Point of Taxation Rules, 2011
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Point of Taxation Rules, 2011

• Continuous Supply of services
• A service is said to be Continuous supply of
  service only if they are provided or agreed to be
  provided continuously for a period exceeding
  three months.
• The following services are notified as
  Continuous supply of Services
• Telecommunication service
• Commercial or industrial construction
• Construction of residential complex
• Internet Telecommunication service
• Works contract service

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Point of Taxation Rules, 2011

• Continuous Supply of services
• The point of Taxation is similar to other
  services.
• If the provision of the whole or part of the
  service is determined periodically on the
  completion of an event in terms of a contract,
  which requires the service receiver to make any
  payment to service provider, the date of
  completion of each such event as specified in the
  contract shall be deemed to be the date of
  completion of provision of service.
• If any advance is received, then the date of
  receipt of such advance.

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Point of Taxation Rules, 2011

• Where there is change of Tax rate.
• If the taxable service is provided before the
  change of rate
• Date of invoice or date of payment whichever is
  earlier
• If payment is received before change of rate but
  the invoice for the same has been issued after
  the change of rate, then the point of taxation
  shall be the date of payment.
• If the taxable service is provided after the
  change of rate
• Date of payment or date of invoice whichever is
  later.

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Point of Taxation Rules, 2011

• Exemptions
• Export of service Rules, 2005 Shall be the date
  of receipt provided the receipt shall be within
  the period specified by the RBI.
• Individuals or Firms providing the following
  services shall be the date of receipt of
  payment.
• CA/CWA/CS
• Architect or Scientific and Technical Consultant
• Interior decorators.

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Point of Taxation Rules, 2011

• Exemptions
• 3. Reverse charge Mechanism
• Shall be the date of payment provided the payment
  is made within a period of six months of the date
  of invoice.
• Shall be the date of credit or date of payment
  whichever is earlier in case of Associated
  enterprises where the person providing the
  service is located outside India.

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Point of Taxation Rules, 2011

• Credit availment
• Credit can be taken on the basis of invoices
  issued on or after 01.04.2011 provided payment is
  made within three months.
• Invoices raised before 01.04.2011 shall be on
  payment basis.
• If credit is availed based on the invoice and
  payment is not made within three months, then
  credit shall be reversed along with interest.

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Guidelines relating to availing credit

• Credit can be availed on the basis of invoice
• All invoices can be included in the ISD challan
  provided there are no reversals.
• Inform us if there is any non payment of invoice
  for reversal of credit
• Invoices can be handed over to us immediately
  after accounting for availing credit.
• No change with respect to Non-resident payments
  and GTA.

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Guidelines relating to payment of service Tax

• No change in GTA and Non resident payments.
• Invoice shall be raised within 14 days from the
  date of completion of service.
• No exemption to services provided to Group
  Companies.
• Example Co. A has provided SAP sharing service
  to its subsidiary B for the month of July 2011
  and raised the invoice on 15.09.2011. Service
  tax liability arises on 31.07.2011 itself and
  suppose to remit Service Tax on or before
  06.08.2011 even though A has not raised invoice
  on B.

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Notifications and Circulars referred

• Notification No. 18/2011 ST dated 01.03.2011
• Notification No. 03/2011 ST dated 01.03.2011
• Notification No. 25/2011 ST dated 31.03.2011
• Circular No. F.No. 341/34/2010-TRU dated
  31.03.2011
• Notification No. 41/2011 ST dated 27.06.2011
• Service Tax Rules, 1994
• Notification No. 13/2011-CE (NT) dated 31.03.2011.