KKC in invoice of 31/5/16

[Sanjay Aggarwal]

Dear Sir,

A service provider has raised the invoice on 31.05.2016 for service performed by them and they are charging the KKC in the invoice dated 31.05.2016. and the fact is that the payment will be made to them in june 2016.

now my question is, eventhough payment will be made to them in june 2016, CAN THEY CHARGE KKC ON INVOICE DATED 31.05.2016 ?

[Ganeshan Kalyani]

Ideally they should not. They should raise supplementary invoice instead. Thanks.

[KASTURI SETHI]

I agree with Sh.Ganeshan Kalyani, Sir. KKC cannot be charged in the invoice issued on 31.5.2016, especially, in view of the fact that KKC is leviable from 1.6.. 2016.

[Rajagopalan Ranganathan]

Sir,

If KKC is charged in the invoice dated 31.5.2016 it is without authority of law. Suppose you make payment of amount shown in the invoice on 31.5.2016 itself then you can refuse to pay KKC. However if the payment in respect of the invoice dated 31.5.2016 is made on or after 1.6.2016, then your service provider has to raise a supplementary invoice charging KKC on you in view of the provisions of rule 5 of Point of Taxation Rules, 2011 " no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable". As per Explanation 1 apended to this rule the same rule shall apply mutatis mutandis in case of new levy on services.

Since in your case payment in respect of the invoice issued on 31.5.2016 is made on or after 1.6.2016 your service provider has to pay KKC since payment of the invoice has been received on or after 1.6.2016. This payment of KKC can be passed on to you through a supplementary invoice. At the same time if you are an output service provider you can avail the credit of such KKC and utilise it for payment of KKC on your output service.

[bhart b sharma]

the raising of invoice is of no avail as the amount payable on account of provision of service is being remitted at a later date, i.e., after the date when the new Cess becomes payable. therefore, the payment of Cess will be the date for accountal of settlement of tax arrears, if any. In case payment is received after 1st June when the new CEss is levied; the assessee would have no option. as the assessee knows in advance that the money is not yet arrived in his account and would be coming after 1.6.2016, therefore no chances to be taken. Charging of new Cess leviable w.e.f a later date which incidentally falls just the next day, is of no penal consequence. But non-payment of KK Cess by due date would be a risky venture for the assessee. therefore, as a matter of caution also, it would be advisable to charge cess in bill. this is no offence as payment has to arrive after the due date of levy of new Cess.

[CSSANJAY MALHOTRA]

Nicely explained by all experts, purely is a case of Tax charged without authority of law. Collection of same has to be on supplementary Invoice from the date of new levy i.e. June 01, 2016 onwards...

[Ganeshan Kalyani]

Sir the topic is very interesting for experts but a challenge for a querist. In the corporate office of a company there is separate team who does accounting of punching invoice. They raise a query to a tax expert. It becomes challenging to explain the law especially those applicable in transition time. They doubt expert or the law.

[Sanjay Aggarwal]

agreed, Sir

[KASTURI SETHI]

NOTIFICATION No. 35/2016-Service Tax

New Delhi, the 23rd June, 2016

G.S.R. ---(E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994), read with sub-section (5) of section 161 of the Finance Act, 2016 (28 of 2016), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts taxable services with respect to which the invoice for the service has been issued on or before the 31st May, 2016, from the whole of Krishi Kalyan Cess leviable thereon, subject to condition that the provision of service has been completed on or before the 31st May, 2016.

[F.No. B-1/21/2016 - TRU]

(Mohit Tiwari)

Under Secretar

AI Summary

Service Provider Incorrectly Charges Krishi Kalyan Cess Before Effectivity Date; Must Follow Point of Taxation Rules 2011 A service provider issued an invoice dated 31.05.2016, including Krishi Kalyan Cess (KKC), even though the payment was to be made in June 2016. Experts in the discussion agreed that KKC should not be charged on this invoice since it was issued before KKC became effective on 01.06.2016. Instead, a supplementary invoice should be raised after the payment date to reflect the KKC. The consensus was that charging KKC without legal authority is incorrect, and the service provider should comply with the Point of Taxation Rules, 2011, to avoid penalties.