Pradeep Jain - Chartered Accountant

Query

(kavita thanvi) Posted On: 09 Apr, 2012

since service has been rendered before 31.03.12 and bill has also been raised before 31.3.12, only the payment has been received after 1.4. 12, the effective rate of tax will be 10.30%?

The Chartered Accountants are paying service tax on receipt basis as per Rule 7 of Point of Taxation Rules. As per the recent amendments in budget 2012, the amendment has been made vide Notification No. 04/2012-ST, dated 17/03/2012 in Rule 2 of Point of Taxation Rules, in which the following rule has been inserted:- ‘2A. Date of payment.—For the purposes of these rules, “date of payment” shall be the earlier of the dates on which the payment is entered in the books of accounts or is credited to the bank account of the person liable to pay tax: Provided that — (A) the date of payment shall be the date of credit in the bank account when — (i) there is a change in effective rate of tax or when a service is taxed for the first time during the period between such entry in books of accounts and its credit in the bank account; and (ii) the credit in the bank account is after four working days from the date when there is change in effective rate of tax or a service is taxed for the first time; and (iii) the payment is made by way of an instrument which is credited to a bank account, (B) if any rule requires determination of the time or date of payment received, the expression “date of payment” shall be construed to mean such date on which the payment is received;‟. Hence, in case of change in rate of duty, date of payment will be point of taxation and consequently, in case referred by you the service tax is payable on rate applicable on the date of payment. It will be after April 1, 2012. Further it is also clarified by Circular No. 154/5/2012-ST, dated 28/03/2012. It clarifies that the Notification No. 04/2012-ST, dated 17/03/2012 has amended Point of Taxation Rules as well as Rule 7 which applied to the individuals or proprietary firms or partnership firms providing specified eight services taxable services of section 65 of the Finance Act, 1994 which also includes the services provided by practicing chartered accountants. Rule 7 determined the point of taxation in such cases as the date of receipt of payment. The issue has been examined for invoices issued on or before 31st March 2012, the point of taxation shall continue to be governed by the Rule 7 as it stands till the said date. Thus in respect of invoices issued on or before 31st March 2012 the point of taxation shall be the date of payment. Following the same, the service tax will be payable @ 12% as the payment is after April 1, 2012. We hope that the above will satisfy your query.

Comments

since service has been rendered before 31.03.12 and bill has also been raised before 31.3.12, only the payment has been received after 1.4. 12, the effective rate of tax will be 10.30%?

Query