Service tax liability

[Krishan Gopal]

Dear Sir,

we have imported services from Associate enterprises and as per section 67A we had booked our service tax liability on custom rate at the time of booking bill and the same was discharged on due date.

Now, we have to make payment of the same service (import) but now the exchange rate is higher than the aforesaid custom rate.

Please suggest, whether we have to create addition liability of service tax on account of payment made on higher exchange rate.

 K.Gopal-9911052902

[sanjeev bajaj]

Second Provisio of Rule 7 of Point of Taxation Rules, 2011 clearly defines the point of taxation. Hence, earlier of two is the point of taxation in the case of assocated enterprise. Once, the point is determined and the value has been fixed then due to currency fluctuation, the same cannot be increase or decreased. Increase or decrease can be made according to Service Tax Rules, 1994 in case of renegotioaion, deficiency etc.

 

further, the amount excess paid is due to currency fluctuation.

[MANDAVILLI RAMAKRISHNA]

very good question. the excess amount to be paid due to exchange fluctuation and not towards additional services taken. so not required to pay additional tax.

[Krishan Gopal]

Sir,

We are already paying service tax on addition amount due to exchange fluctuation from last three years now whether we should  pay or not service tax on the same

Krishan Gopal

[sanjeev bajaj]

Stop paying now

AI Summary

Point of taxation: exchange-rate fluctuations do not alter the taxable value fixed at the point of taxation for imported services.
Under the Point of Taxation rule (Second Proviso to Rule 7 of the Point of Taxation Rules, 2011), the earlier of two events fixes the taxable point and value for imported services from associated enterprises; subsequent exchange-rate fluctuations do not change that fixed taxable value. Only adjustments specified under the Service Tax Rules, 1994 (e.g., renegotiation or deficiency) permit alteration of tax liability; excess payments due solely to currency fluctuation do not create additional service tax liability.