Applicability of service tax

[Guest]

Dear Sir, As per rule of Service tax, service tax is payable to Govt is on Payment received basis.Suppose our practice is to bill to any party is on quarterly basis and at the time billing the service is non taxable as per service tax law. after one month of billing ( suppose bill raised on 01.04.07 , up to 30.06.07 but service tax is applicable wef on 15.05.07 ) service tax become applicable on it. What would be the service tax treatment ? 1. When till today payment of bill not recd. 2. When payment of bill recd. same day i.e. 01.04.07 for full quater w/o service tax as service tax not levied on it. Thanks Manoj

[Guest]

In my opinion any service bill should be raised with in 14 from the date of service completed. If bill raised from 1st April to 30th June and if tax applicable only from 15th May in such case proportionatly ST is applicable retrospective effect i.e. from 15th May, you will have to raise the bill for service tax for the service incurred from 15th May onwards

[Madhukar N Hiregange]

The rate of tax as on the date of provding of the servcie is relevant. Not the date of billing. Not billing would result in not following rules. But liability would not be attarcted for the past period. Even if you recive the money after 2 years there would be no liability.

[Guest]

Taxable event under service tax law is the event of providing of service and point of taxability is fixed as ‘receipt of money, whether advance or otherwise’. Thus, in my view, in respect of new taxable service, service tax is to be paid for the proportionate period of service, after the levy is introduced irrespective of when the bill is raised or amount is received. However, in case of existing taxable service, in my view, once the service charges amount (including advance received) is reported and tax paid at the applicable rates on the basis of ‘receipt’ of money, any subsequent revision in rate of tax or introduction of new levy like cess etc will not have any impact on receipts already reported though the service continue to be rendered after the date of revision in rate/introduction of cess. Taxable event under service tax law is the event of providing of service and point of taxability is fixed as ‘receipt of money, whether advance or otherwise’. Thus, in my view, in respect of new taxable service, service tax is to be paid for the proportionate period of service, after the levy is introduced irrespective of when the bill is raised or amount is received. However, in case of existing taxable service, in my view, once the service charges amount (including advance received) is reported and tax paid at the applicable rates on the basis of ‘receipt’ of money, any subsequent revision in rate of tax or introduction of new levy like cess etc will not have any impact on receipts already reported though the service continue to be rendered after the date of revision in rate/introduction of cess.

AI Summary

Service Tax Applies Proportionately from Taxable Date, Regardless of Billing or Payment Timing. Liability Tied to Service Date. A discussion on the applicability of service tax when billing occurs quarterly, and the service becomes taxable after billing. The initial query seeks guidance on service tax treatment when payment is received before or after the tax becomes applicable. Respondents advise that service tax should be applied proportionately from the date it becomes applicable, regardless of billing date. They emphasize that liability is based on the date of service provision and receipt of payment. Any subsequent tax rate changes or new levies do not affect already reported receipts. The consensus is that service tax is payable from when the service becomes taxable.