APPLICABILITY OF INTEREST FOR SERVICE TAX UNDER RCM

[Ramachandran Chandru]

Request the experts to clarify on the following:

1) Whether payment of service tax for services received under RCM is liable right from the day on which amount is paid

for the services consumed (or) it is due from the date on which the service bill is accounted in the books of account.

2) Whether non-payment of service tax under RCM will attract interest/penalty to be paid.

[Nash Industries I Pvt Ltd]

The month in which the payment is made and attracts interest for the delayed payment

[Ganeshan Kalyani]

1) Service tax liability under reverse charge becomes liable when the payment of invoice amount is made to the vendor.

2) yes

Thanks.

[KASTURI SETHI]

Dear Querist,

Point-wise reply is as under:-

(1) As per Rule 7 of Point of Taxation Rules is the date of payment. If the payment is not made within three months from the date of invoice, the date immediately following the said period of three months.In case of “associated enterprises”, where the person providing the service is located outside India, the point of taxation shall be the date of debit in the books of account of the person receiving the service or date of making the payment whichever is earlier.]

(2) Yes.

[DR.MARIAPPAN GOVINDARAJAN]

Payment of interest is automatic and penalty is leviable on adjudication.

AI Summary

Reverse charge service tax liability arises on payment; delayed payment attracts interest and possible penalty.
Service tax under the reverse charge is triggered by the date of payment under Rule 7 of the Point of Taxation Rules; if payment is not made within three months of the invoice, the point of taxation is the day after that three month period. For associated enterprises with the provider outside India, the point of taxation is the earlier of the debit in the recipient's books or the date of payment. Delayed payment attracts interest automatically and penalties are leviable on adjudication.