Reverse Charge

[sunil jain]

Query regarding point of taxation under service tax on reverse charge:

 

What will be the point of taxation for a service receiver if bill is not received by the service receiver for a long period say more than 6 months however the receipt of service is completed every month?

 

  As per rule 7 of point of taxation rules, PoT for 'Recipient of service' is the date on which payment is made. However if payment is not made within 6 months from date of invoice then the said rule shall not apply. 

This means that rule 3 of PoT rules will apply which says that if invoice is not issued within prescribed time then PoT shall be date of completion of service. 

Now the question is how can 'Recipient of service' pay service tax from back date that is from the date of completion of service when he has not received the invoice. Also how can he be treated as a defaulter in paying service tax when the invoice is not being received. 

[PAWAN KUMAR]

As per my view, service has been provided.

For this service you have either issued the service order/work order to your service provider in which the price for subject service was negotiated between you and the service provider.

Based on that price, the part of serivce which has been completed monthly, you will have to worked out the service tax liability arise on your side under reverse charge and pay it along with the interest applicable irrespective of whether invoice has issued or not.

 

[sunil jain]

Thanks, it is ok we know the service amount, tax liability can be ascertained, but our concern is where we receive the bill, we have six months time to pay, but when we have not received the bill, we should be allowed to wait for 6 months, and thereafter we may be allowed to pay tax.

If we take example- service for April,13, bill received in May,13 and we pay in Oct,13 then service tax liability arises in Nov,13. But if bill is not received, then our liability would arise in May,13 itself (although non receipt of bills for 6 months would be known by Nov only) or in Nov,13 only.

Kindly guide on this issue.

Thanks,

CA. R.K. Aggarwal

[Mukesh Shah]

Dear Mr Sunil

The tax invoice should be raised by service provider within 30 days of completion of service. The concept of "completion of service" is a very subjective matter.

Now, if the invoice is received in April-13, the clock starts from that date for 6 month computation. Suppose invoice is received in October-13 dated April-13, then it is advised to get the invoice changed to current date and avoid complication in TDS and STax both. 

 

AI Summary

Point of Taxation Under Service Tax: Rule 7 vs Rule 3 in Delayed Invoice Situations for Reverse Charge Services A query was raised regarding the point of taxation under service tax on reverse charge when the service receiver does not receive the invoice for over six months, despite the service being completed monthly. According to Rule 7, the point of taxation is the payment date, but if payment isn't made within six months of the invoice date, Rule 3 applies, making the completion date the point of taxation. Respondents suggested calculating tax liability based on the service order price and paying with interest, regardless of invoice receipt. They advised ensuring timely invoice issuance to avoid complications.