Applicablity of Service tax rates

[Murari Agrawal]

Dear experts,

our event will be held in the month of June, 2015. We are collecting course fee in advance advance with existing service tax rates. Question is if the notification for enhanced service tax is issued prior to the date of event, what rate will be applicable for charges collected prior to notification date. Thanks.

[Ganeshan Kalyani]

Finance Act 2015 has got assent of President. the notification for the effect will soon be published by CBEC. However till the time notification is published to give effect to new rate, the existing rate shall be applicable. you can collect the fee with existing rate as you have raised a bill / invoice in the current period I.e. before any notification is issued for new rate. It cannot be said correctly but it may come in July month or it may be effective soon.

[rishi mohan]

The new Service Tax rate of 14% has been proposed In the Finance Bill, 2015 by the Hon’ble Finance Minister on 28-02-2015. The new Service Tax rate 14% is not effective immediately and shall come into effect only from a date to be notified later. The existing rate of Service Tax is 12.36% (Inclusive Cesses) shall be applicable till the new rate come into effect.

[Vinay Sharma]

As per notification no. 14/2015 new rate 14% of service tax is applicable w e f 1st June 2015.

In your case as per Point of Taxation Rules the point of taxation is receipt of advance. therefore if advances received upto 31st May it will attract rate of 12.36% and thereafter 14%.

[CSSANJAY MALHOTRA]

Rule 4 of Point of Taxation Rules . Determination of point of taxation in case of change of rate of tax.-

Notwithstanding anything contained in rule 3, the point of taxation in cases where there is a change of rate of tax in respect of a service, shall be determined in the following manner, namely:-

(a) in case a taxable service has been provided before the change of rate,-

(i) where the invoice for the same has been issued and the payment received after the change of rate, the point of taxation shall be date of payment or issuing of invoice, whichever is earlier; or

(ii) where the invoice has also been issued prior to change in tax rate but the payment is received after the change of rate, the point of taxation shall be the date of issuing of invoice; or

(iii) where the payment is also received before the change of rate, but the invoice for the same has been issued after the change of rate, the point of taxation shall be the date of payment;

(b) in case a taxable service has been provided after the change of rate,-

(i) where the payment for the invoice is also made after the change in tax rate but the invoice has been issued prior to the change of tax rate, the point of taxation shall be the date of payment; or

(ii) where the invoice has been issued and the payment for the invoice received before the change of tax rate, the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier; or

(iii) where the invoice has also been raised after the change of rate but the payment has been received before the change of rate, the point of taxation shall be date of issuing of invoice.

Now you have to look into when the Invoice has been issued as your case would fall under clause (b)(ii) or (iii).

 

 

AI Summary

Point of taxation determines which service tax rate applies based on timing of advance payment and invoice issuance. Applicability of service tax upon a rate change is determined by the Point of Taxation Rules, which fix tax liability by reference to the date of receipt of payment or date of issuing an invoice depending on whether payment, invoice issuance and provision of service occur before or after the change of rate. The controlling inquiry is when the invoice was issued and when payment was received relative to the effective date of the new rate; advances received before the rate change are subject to the pre change rate unless the point of taxation shifts under the Rules.