Point of taxation

[Guest]

Hello

Under the existing Point of Taxation Rules, 2011, Point of taxation for a CA firm is on receipt basis.

There is a change in effective rate of tax from 10.3% to 12.36%.

As per the proposed amendments and notification no. 4/ 2012 dated 17th March 2012, cash basis is available for assessees having taxable turnover of less than 50 lakhs.

My query is what is the effective rate of tax applicable when

1. service is rendered by the CA before March 31, 2012 and

2.invoice is raised before March 31, 2012 and

3. the payment is received after April 5, 2012

For above purposes, please consider the taxable turnover of CA firm as exceeding 50 lakhs per annum.

Awaiting replies

[RadheyShyam Mangal]

Pl refer the following recent circular which will clarify 

Circular No.154/5/2012 – ST Dated: 28^th March 2012

Subject: - Clarification on Point of Taxation Rules - regarding.     

1.     Notification No.4/2012 - Service Tax dated the 17^th March 2012 has amended the Point of Taxation Rules 2011 w.e.f. 1^st April 2012, inter- alia, amending Rule 7 which applied to individuals or proprietary firms or partnership firms providing taxable services referred to in sub-clauses (g), (p), (q), (s), (t), (u), (za) and  (zzzzm) of clause (105) of section 65 of theFinance Act, 1994. Rule 7 determined the point of taxation in such cases as the date of receipt of payment. The provisions have been amended both in the Point of Taxation Rules 2011 and the Service Tax Rules 1994 such that from 1^st April 2012 the payment of tax shall be allowed to be deferred till the receipt of payment upto a value of Rs. 50 lakhs of taxable services. The facility has been granted to all individuals and partnership firms, irrespective of the description of service, whose turnover of taxable services is fifty lakh rupees or less in the previous financial year.

2.     Representations have been received, in respect of the specified eight services, requesting clarification on determination of point of taxation in respect of invoices issued on or before 31^stMarch 2012 where the payment has not been received before 1^st April 2012.

3.     The issue has been examined. For invoices issued on or before 31^st March 2012, the point of taxation shall continue to be governed by the Rule 7 as it stands till the said date. Thus in respect of invoices issued on or before 31^st March 2012 the point of taxation shall be the date of payment.

4.     Trade Notice/Public Notice may be issued to the field formations accordingly.

5.     Please acknowledge the receipt of this circular. Hindi version to follow.

 

[Guest]

Dear Sir

In view of the clarificatory circular issued, should  the rate of 12.36% be applied. Kindly clarify.

[RadheyShyam Mangal]

Here in specified services of CA, since the service has been rendered before March,12 and bill has also been raised, the tax rate would be 10.3%, and point of taxation for deposit of tax will however be from the date of receipt of payment.

AI Summary

Point of taxation: invoices issued before the amendment remain payment-based, preserving the original service tax rate despite later payment. For invoices issued on or before 31 March under the pre-amendment regime, the point of taxation remains the date of receipt of payment; consequently, for specified professional services rendered and invoiced before that cutoff the tax rate in force at the time of supply and invoicing applies, while tax deposit obligations arise on receipt of payment.