Pradeep Jain - Chartered Accountant

Query

(deepak gupta) Posted On: 12 Jan, 2012

Builder company: As per agreement builder issued a Letter dated 18 october 2011 to buyer mentioning: On start of first floor roof payment of Rs. 139200 should paid upto: 31 october-2011 & even no work is started on that date. Actual payment received on 08 December-2011 Which date is to be considered for service tax as per point of taxation rules 2011. Pls clarify Thanks

Commercial or industrial construction service and construction of residential complex service has been notified as Continuous supply of service. As per Point of Taxation rules, in case of continuous supply of service, the point of taxation shall be (a)The time when the invoice for the service provided or to be provided is issued; Provided that where the invoice is not issued within fourteen days of the completion of the provision of the service, the point of taxation shall be date of such completion. (b)In a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment. Explanation 1. – For the purpose of this rule, where 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. Explanation 2. - For the purpose 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. As per your query, the agreement provides that a letter is issued to the buyer mentioning that “On start of first floor roof payment of Rs. 139200 should be paid up to 31 October-2011 & even no work was started on that date.” Thus, as per given information buyer should pay for first floor roof till 31 October, 2011. So event in this case is date as per contract on which payment is to be made i.e. 31 October, 2011. In case of continuous provision of service is date of completion of service is end of event (i.e. date on which payment as per contract is to be made). As per Point of Taxation Rules, 2011, Point of taxation shall be earlier of date of issuing of invoice or date of making advance payment, whichever is earlier. But if invoice id not issued till 14 days of completion of service, then point of taxation shall be date of completion of service or date of advance payment, whichever is earlier. In the given case, service is deemed to be completed on 31st October, 2011. If the builder issues invoice within 14 days of such completion (i.e. till 14November, 2011), then point of taxation shall be date of issue of such invoice or 8 December, 2011(date of making advance payment) whichever is earlier i.e. date of issue of invoice. But if the builder fails to issue invoice till 14th November, 2011 then point of taxation shall be earlier of 31st October (provision of service) or 8th December (date of advance payment); which will be 31st October 2011.

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