CBEC specifies 'point of taxation' for change in reverse charge liability

[Guest]

Dear Sir,

Please explain in simple way regarding CBEC specifies 'point of taxation' for change in reverse charge liability ,Thanks & Regards.

POINT OF TAXATION (SECOND AMENDMENT) RULES, 2016 - AMENDMENT IN RULE 7

NOTIFICATION NO.21/2016-ST, DATED 30-3-2016.

[KASTURI SETHI]

Under RCM liability of ST has been shifted on Service Receiver either fully or partly. For example ; In Manpower Supply, 100% liability on Service Receiver and in Works Contract Service, liability is shared 50 : 50 between Service Provider and Service Receiver. Now if there is any change in rate of abatement or rate of Service Tax or in percentage of sharing/shifting of liability and Service has been provided prior to the date of change and invoice has been issued prior to that date of change but payment has been received thereafter i.e. after the date of change, the point of taxation will be the date of issuance of invoice.

EXAMPLE :Suppose Rate of ST is hiked from 14 % to 16% w.e.f. 1.4.16, you have provided service on 31.3.16 and invoice has been issued on 31.3.16 but the payment has been received on 1.4.16 or after 1.4.16 you will pay ST on old rate of ST i.e. 14% and not on 16%.

This is just an example for clarification.

[Ganeshan Kalyani]

Nicely explained Sir. This clarifies the essence of the the Notification. Thanks.

AI Summary

Point of taxation: change in reverse charge liability fixes invoice date as tax point even if payment falls later. Where a change in reverse charge liability, service tax rate, rate of abatement, or percentage sharing occurs, and the service was provided and the invoice issued before that change but payment is received after, the point of taxation is the invoice issuance date, so tax is payable at the pre-change rate applicable on that invoice date.