POINT OF TAXATION ??

[abbas mukhi]

SIR,

OUR COMPANY HAS CONTRACT WITH OTHER PARTY FOR RENTING OF IMMOVABLE PROPERTY FOR PERIOD OF 30 YEARS

AS PER AGREEMENT WE HAVE 'RIGHT TO RECEIVE' ADVANCE PAYMENT FOR THE 'PARTICULAR PERIOD'

BEFORE STARTING OF PARTICULAR PERIOD WE ARE 'ISSUING REMINDER' TO PARTY FOR 'REMITTANCE OF PAYMENT'

ON RECEIVING AMOUNT WE PREPARE SALE ACCOUNT FOR BOOKING INTO ACCOUNTS

WHAT IS POINT OF TAXATION FOR SERVICE TAX IN ABOVE TRANSACTION ??

[KASTURI SETHI]

Pl. go through Explanation to Rule 3 Point of Taxation Rules, 2011 (as amended) which is amended below:-

Explanation - For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.”.

[Ganeshan Kalyani]

I agree with the views submitted by Sri Kasturi Sir. The point of taxation for service provider is the point of each time the payment is received. Thanks.

[CSSANJAY MALHOTRA]

I also validate the views of Sh. Kasturi ji.

[abbas mukhi]

@ Kasturi Shethi Sir, Whether our service falls within the "continuous supply of service" ??

and Position will remain the same if we "issue demand note" instead of "reminder for payment"

Thanks....

[abbas mukhi]

and sir, if party not paid at all what will the "POINT OF TAXATION"

[KASTURI SETHI]

Sh.Abbas Mukhi Ji,

Point-wise reply is as under:-

1. Whether your service falls under the continuous supply of service ? It can be be decided only after perusing terms conditions of the agreement.

2. The department is concerned with the date of invoice. Otherwise there is a difference between the two wordings. Reminder means you have already taken first action for realization of the amount. Reminder is an other attempt to realise the amount.

3. If the service receiver does not make payment, the point of taxation will be the date of issue of invoice. Service tax is on billed amount.

[Ganeshan Kalyani]

To put it in simple way, the point of taxation for service provider is the date of issue of invoice or the date of receipt of amount for the service provider or to be provided. Hope this clarifies your query. Thanks.

[KASTURI SETHI]

Sir,

With due respect I would like to say that there is no relaxation for service provider. There is relaxation for Service Receiver under RCM and Small Service Provider (Restricted to limited no. of invoices). SP has to pay ST on billed amount regardless of the situation whether he receives payment from SR or not. Govt. has done so in order to curb the misuse of "RECEIVABLES" in Balance Sheet (in P& L Account). The assessees used to do window dressing. Govt. cannot keep track when the consideration will be received and payment ST will be made.

[Ganeshan Kalyani]

Agreed Sir service provider has to pay service tax on raising invoice whether payment is received or to be received. I request to querist to refer Sri Kasturi Sir's reply over my reply dated 23.02.2016. Thanks.

[abbas mukhi]

@ Kasturi Sir and Ganeshan Sir,

I think i have not explained my situation correctly

Sir, i am re reiterating my situation clearly.

1.We are providing service of "Renting of Immovable Property for long term period (say 30 years)

2.As per the terms of contract we have "RIGHT TO RECEIVE"(ONLY RIGHT TO RECEIVE) rent in advance before starting of "PARTICULAR PERIOD (SAY 01.03.2016 TO 28.02.2017)

3.Before Starting "PARTICULAR PERIOD" we are issuing "DEMAND NOTE"(REQUEST LETTER FOR REMITTANCE) for example we issued such demand note (letter) on 25.03.2016 (FOR SERVICE PERIOD OF 01.03.2016 TO 28.02.2017)

4.On receipt of Advance we prepare "SALE ACCOUNT" for booking into our Accounts (it is our internal document, we are not issuing the same to the party).

5.Sir, What will be 'POINT OF TAXATION" for above transaction?? and will make any difference if we issue demand note (letter) on 05.03.2016 (After Starting of Service Period)

NOTE:-On receipt of advance, we issue "RECEIPT TO PARTY"

Please guide to us on this issue.......

AI Summary

Company Seeks Clarification on Taxation Point for 30-Year Property Rental: Payment Receipt or Invoice Issuance? A company has a 30-year contract for renting immovable property and seeks clarification on the point of taxation for service tax. The company has the right to receive advance payments before the rental period begins and issues reminders or demand notes for payment. The main query is whether the point of taxation is the date of payment receipt or the invoice issuance. Responses indicate that the point of taxation is the date of receipt of payment or invoice issuance, even if payment is not received. The discussion also touches on whether the service qualifies as a continuous supply of service.