Reverse Charge Applicablity

[SANJAY BAHETI]

As per Notn No 45/2012 dated 07.08.2012, security service was included under reverse charge mechanism. Now my doubt is security service rendered in mo July, 2012 for which invoice is dated 31.07.2012. Payment to party and entry in books is made on 20.09.2012 i.e. after 07.08.2012 when notification come. so in this case whether reverse charge will be applicable ?

[JAMES PG]

Pl refer to Rule 7 of POT Rules, wherein it is said that point of taxation in respect of the persons required to pay tax as recipients of service under sub-section (2) of Sec 68 of the Act shall be the date on which payment is made.

dear sanjay

 

if the security agency has already raised the bill before 07.08.12, the reverse charge will not be applicable, even if the payment has been made after 07.08.12 because point of taxation is date of invoice which is 31.07.12 as mentioned by you

 

if the security agency has already raised their invoice for the services provided by them during July 2012, before 7th August 2012, the service recipient’s liability to make the payment is recognized on the date of invoice and hence the point of taxation shall be the date of such invoice. Hence, if invoice has been raised by the security agency before 7th August 2012, reverse charge will not apply, even if the payment is made by the service recipient after 7th August 2012. But, if the invoice for the services provided from 1st August to 31st August 2012 is raised on 31st August 2012, the date of invoice, i.e. 31st August 2012 would be the point of taxation and hence the service recipient would be liable to make the payment of his portion of service tax liability under reverse charge, though part of the service has been provided before 7th August 2012. In other words, there is no need to split up the liability into pre / post 7th August 2012.

Read more: http://www.simpletaxindia.net/2012/08/reverse-charge-for-directors-security.html#ixzz2DULqcZdu

if the security agency has already raised their invoice for the services provided by them during July 2012, before 7th August 2012, the service recipient’s liability to make the payment is recognized on the date of invoice and hence the point of taxation shall be the date of such invoice. Hence, if invoice has been raised by the security agency before 7th August 2012, reverse charge will not apply, even if the payment is made by the service recipient after 7th August 2012. But, if the invoice for the services provided from 1st August to 31st August 2012 is raised on 31st August 2012, the date of invoice, i.e. 31st August 2012 would be the point of taxation and hence the service recipient would be liable to make the payment of his portion of service tax liability under reverse charge, though part of the service has been provided before 7th August 2012. In other words, there is no need to split up the liability into pre / post 7th August 2012.

Read more: http://www.simpletaxindia.net/2012/08/reverse-charge-for-directors-security.html#ixzz2DULqcZdu

I agreed with Mr. Khandelwal..

AI Summary

Reverse charge applicability: invoice date versus payment date determines liability for security services under notification.
Where security services were supplied before a notification but invoiced before that notification, the invoice date is the point of taxation and reverse charge will not apply even if payment occurs after the notification; if the invoice is raised after the notification, the invoice date governs and the service recipient may be liable under reverse charge for the invoice period without splitting liability between pre and post notification service.