Liability of Swachh Bharat Cess

[Pawan Agarwal]

In case of reverse charge mechanism what will be point of taxation.

In case i have received manpower service in October 2015 (before applicability of SB cess)and I am paying service tax on 06.12.2015 (after applicability of SB cess) , whether SB Cess will be applicable on the bill.

[Ganeshan Kalyani]

SBC will be applicable as point of taxation for reverse charge is date of payment to the service provider and you have made payment after the introduction of SBC.

[KASTURI SETHI]

I agree with the views of Sh.Ganeshan Kalyani, Sir.

[DR.MARIAPPAN GOVINDARAJAN]

What is the date of invoice for the manpower service received in October 2015?

When did you pay the invoice amount?

[Pawan Agarwal]

Date of Invoice is 26th Oct'2015

[Pawan Agarwal]

Invoice payment date is in Dec15

[DR.MARIAPPAN GOVINDARAJAN]

Since the service received and the invoice received is before 15.11.2015 i.e., the date of effect of SBC, SBC is not applicable to your case.

[KASTURI SETHI]

Sh. MARIAPPAN GOVINDARAJAN Ji,

Sir, Had questioner, Sh.Pawan Aggarwal given complete facts at the first instance, he would have got fool proof reply much earlier.

[Ganeshan Kalyani]

Kasturi Sir and Mariappan Sir I would like to refer Rule 7 of Point of taxation rules 2011 which states that the point of taxation in respect of person liable to pay tax as a recipient of service is the date of payment to the service provider. In light of the said provision I infer that the payment to service provider is made after the introduction of SBC and the point of taxation in this case is in December I.e. After the introduction of SBC and hence SBC is applicable in the present case. With due respect I request you to please discuss with your point of view.

[KASTURI SETHI]

Sh.Ganeshan Kalyani, Ji,

Sir,

I have re-examined the whole issue date-wise. You are 100% right.For Reverse Charge Mechanism, Rule 7 POT Rules is applicable. There is no hitch in admitting that I was in the wrong. It happened in a hurry. It should not have happened on my part. I was thinking about Rule 5 or 4 . Here is relevant extract of Board's circular in support of your contention.

Q. 19 How would liability be determined in case of reverse charge services where services have been received prior to 15.11.2015 but consideration paid post 15.11.2015?

Ans. In respect of reverse charge mechanism, SBC liability is determined in accordance with Rule 7 of Point of Taxation Rules, as per which, point of taxation is the date on which consideration is paid to the service provider. Thus, SBC liability in such case will be 0.5% X Value of taxable service.

Thanks a million for rectification and that too quickly.

K.L.SETHI

[SUDHIR KUMAR]

Dear All.

Please read the following points related to Swachh Bharat Cess:

What would be the point of taxation for Swachh Bharat Cess?
Following are possible scenarios for point of taxation of SBC:

– In cases where payment has been received and invoice is raised before the service becomes taxable, i.e. prior to 15th November, 2015, there is no lability of Swachh Bharat Cess.

– In cases where payment has been received before the service became taxable and invoice is raised within 14 days, i.e. upto 29th November, 2015, even then the service tax liability does not arise.

– Swachh Bharat Cess will be payable on services which are provided on or after 15th Nov, 2015, invoice in respect of which is issued on or after that date and payment is also received on or after that date.

– Swachh Bharat Cess will also be payable where service is provided on or after 15th Nov, 2015 but payment is received prior to that date and invoice in respect of such service is not issued by 29th Nov, 2015.

[KASTURI SETHI]

Each and every problem regarding SBC has been solved in FAQ issued in November, 2015 by the Board.

[Ganeshan Kalyani]

Thanks Kasturi Sir. I respect you and your knowledge. Your replies are full proof and I always learn from them and it enriches my knowledge.

[Pawan Agarwal]

Thanks to all respected seniors for providing solution.

[Shyam Naik]

Dear All, Why should not Section 67A be not applicable and accordingly no SBC is applicable to services provided prior to 15/11/15.How can the POTR have overriding effect over express provision of the Act.

[KASTURI SETHI]

Sh.Shyam Naik,

The assessee has to follow the rule until or unless it is struck down by the Court.

AI Summary

Point of taxation for Swachh Bharat Cess: payment date triggers SBC liability under reverse charge when paid after introduction.
Applicability of Swachh Bharat Cess under reverse charge is determined by Rule 7 of the Point of Taxation Rules, which fixes the point of taxation as the date of payment to the service provider; consequently, where payment is made after introduction of the cess although service and invoice predate it, SBC liability arises. The Board's FAQ affirms that SBC for reverse charge services is determined by Rule 7, making payment date decisive for SBC chargeability.