TaxTMI 
TaxTMI 
TaxTMI 
In ordinary case, the point of taxation i.e. liability to pay service tax arise on earlier of the following two i.e. date of Invoice or Date of Payment. In Rule 7 there was an exception that 8 specified services provider and under reverse charge mechanism the point of taxation (liability to pay) will arise only on the basis of date of payment.
Impact after change in rate: Circular No.158/9/2012 dated 8th May, 2012 has been issued by the department clarifying the applicability of rate of tax in case of individuals, proprietary firms or partnership firm providing 8 Specified Services on which Rule 7 of Point of Taxation Rules applies and in cases where tax is paid by the Service Receiver under reverse charge mechanism.
Clarification regarding the applicability of Rate of Tax was sought where invoice is issued on or before 31st March 2012 and payment against which is received on or after 1st April 2012 as in respect of aforesaid cases.
Department vide its Circular No. 154/5/2012-ST dated 28th March 2012 mentioned that in case of 8 specified services on which Rule 7 of the Point of Taxation Rules applies, the Point of Taxation shall continue to be governed by Rule 7 of the said rules which shall be the date of receipt of payment. Thus in respect of invoice issued on or before 31st March 2012 the point of taxation shall be the date of payment.
Further, clarifying the above situation and in addition cases where Service Tax is paid under reverse charge mechanism in respect to applicability of Rate of Tax where invoice is issued on or before 31stMarch, 2012 and payment is received on or after 1st April, 2012. Department vide Circular No. 158/9/2012 dated 8th May, 2012 clarified that the Rate of Service Tax prevalent on the date when the Point of Taxation occurs is the rate of Service Tax applicable on any Taxable Service.
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 mechanism by the service receiver, points of taxation occurs to be the date of payment. Thus, if the payment is received or made, as the case maybe, on or after 1st April 2012, the service tax needs to be paid @12% as prevailing on the date of receipt of payment.
Also, it has been clarified that to recover the differential amount due to change in Rate of Service Tax,a Supplementary Invoice may be issued to reflect the new rate of tax. Also, in case of reverse charge mechanism CENVAT Credit can be availed on the basis of such supplementary invoice and tax payment challan.
