TaxTMI 
TaxTMI 
Applicability of rate of Service tax for the taxable services provided prior to 1st June 2015, but billed and received payments at a later date – An analysis
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....pplicability of rate of Service tax for the taxable services provided prior to 1st June 2015, but billed and received payments at a later date – An analysis<br>By: - Indian Commerce<br>Service Tax<br>Dated:- 9-6-2015<br><br>Introduction: The Finance Bill, 2015 has received President's assent on 14th May 2015, increasing the rate of Service tax to 14% w.e.f. 01st June 2015 by amending Section 66....
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....B. It is now important to understand the applicability of the new rate, particularly when a taxable service provided is prior to change in rate of tax, since, charging Service tax from 1st June 2015, for the taxable services provided prior to that, is conflicting. An overview of Rules and Act relates to the applicability of rate of Service tax A (i) Point of taxation Rules, 2011 Rule 4(a)(i) o....
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....f Point of Taxation Rules, 2011, determination of point of taxation in case of change in rate of tax; states as: "Where the invoice for the same has been issued and the payment received after the change in the effective rate of tax (1st June 2015, in this case), the point of taxation shall be the date of payment or issuing of invoice, whichever is earlier" According to this rule, the invoice and....
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.... the receipt of payment occurring after 1st June 2015, the rate of tax @ 14% should be applied, even though services was rendered prior to 1st June 2015. ii) Rule 6 of Service tax Rules, 1994 for Payment of Service tax As per this Rule, the service tax shall be paid by the 5th or 6th of the month immediately following the month in which services are provided or deemed to be provided as per the r....
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....ules framed in this regard. Since, Rule 6 still exists, it can be concluded that Point of Taxation Rules, 2011 are still relevant for determining the due date for payment of service tax. B) Section 67A was introduced subsequently by Finance Act, 2012, w.e.f 28th May 2012, reads as, "The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax....
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.... or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided. According to this Section, for the services completed prior to the change in the rate of tax (1st June 2015, in this case), the applicable rate of service tax shall be the one prevailing at the time when a taxable servic....
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....e is provided or agreed to be provided (date prior to 1st June 2015). Similarly, this Act also covers services agreed to be provided, it would even be applicable in a case where advance is received before the change in the effective rate of tax for a taxable service to be provided in the future, i.e. the rate in force on the date on which the advance amount is received. Conflict of application, ....
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....between Point of Taxation Rules, 2011 and Section 67A Whether one has to charge Service tax at the rate prevailing when the services was agreed to be provided as per Section 67A or charge Service tax at the rate applicable on that date of invoice or receipt of payment whichever is earlier, as per Point of Taxation Rules 2011. Conclusion: In general, a rule cannot override the Act and further in....
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.... this case the said Act was introduced at a later date after the introduction of this Rule. Secondly, with effect from 1st July 2012, Rule 5B of the Service Tax Rules, 1994, which provides for determination of service tax rate with reference to the point of taxation rules is deleted, even through it become redundant after the introduction of Section 67A, w.e.f 28th May 2012. Following the flow o....
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....f change that have taken place since 2011, till now, it can be said that for the determination of rate of tax, it should be only according to Section 67A (namely the rate of service tax in force or as applicable at the time when the taxable service has been provided or agreed to be provided.) This should be clarified with the proper illustrations by the CBEC at the earliest, to avoid any future l....
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....itigation. Reply By PAWAN KUMAR as = Dear Sir, Kindly explain the situation in case of reverse charge (Full & Partial). Whether the rate is to be applied on date of payment or as per rule 4. Dated: 10-6-2015 Reply By Indian Commerce as = Similarly, as per Point of taxation Rules, when a service received prior to change in effective rate of tax (e.g.10th May 2015), If the bill received in ....
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....current month (e.g. 10th June 2015) and payment made to the service provider in current month (e,g, 02nd June 2015), the new rate @ 14% should be adopted. However, as per Section 67A of Finance Act 1994, the rate prevailing at that period (i.e.,12.36%) should be adopted. As referred in my article, it is once again a conflict between the act and rule. In general a rule cannot override the Act, he....
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....nce it should be handled appropriately. The CBEC should clarify these issues at the earliest. Dated: 10-6-2015<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....