Any One could you please explain what are the rules applicable for COntinues services under point of taxation,
CA Prabhat Gupta
(Manager (Indirect Taxes))
(821 Points)
Replied 21 December 2011
Point of Taxation Rules (PTR) were formulated vide Notification No.18/2011-ST dated 01.03.2011. Further, certain amendments are being carried out in these rules vide Notification No. 25/2011-ST dated 31.03.2011
As per Rule 2(c) of the said rules, “continuous supply of service” means any service which is provided, or to be provided continuously, under a contract, for a period exceeding three months, or where the Central Government, by a notification in the Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition.”
The following services have further been notified as “continuous supply of services” in terms of clause 2(c) of the rules vide notification No. 28/ST-2011 dated 01.04.2011:
(a) Telecommunication service [65(105)(zzzx)]
(b) Commercial or industrial construction [65(105)(zzq)]
(c) Construction of residential complex [65(105)(zzzh)]
(d) Internet Telecommunication Service [65(105)(zzzu)]
(e) Works contract service [65(105)(zzzza)]
Thus these services will constitute “continuous supply of services” irrespective of the period for which they are provided or agreed to be provided. Other services will be considered continuous supply only if they are provided or agreed to be provided continuously for a period exceeding three months.
As per Rule 6 of Point of Taxation Rules, 2011 (before amendment), (1) in case of continuous supply of service, the whole or part of which is determined or payable periodically or from time to time, shall be treated as separately provided at the date on which the payment is liable to be made by the service receiver, if such date is specified in the contract.
(2) If, before the time specified in sub-rule (1), the person providing the service issues an invoice or receives a payment, the service shall, to the extent covered by the invoice or the payment made thereof, be deemed to have been provided at the time the invoice was issued or the payment was received, as the case may be, whichever is earlier.
Vide Notification 25/2011, Rule 6 has been aligned with the revised rule 3 and the date of completion of continuous service has been defined within the rule. This date shall be the date of completion of the specified event stated in the contract which obligates payment in part or whole for the contract. Moreover, it has been provided that this rule will have primacy over rules 3, 4 and 8.
Amended Rule 6 is as follows, “6. Determination of point of taxation in case of continuous supply of service.-Notwithstanding anything contained in rules 3,4 or 8, in case of continuous supply of service, the `point of taxation’ shall be,-
Provided that where the invoice is not issued within fourteen days of the completion of the provision of the service, the point of taxation shall be date of such completion.
(b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment.
Explanation 1. – For the purpose of this rule, where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the service receiver to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service.
Explanation 2.- For the purpose of this rule, wherever any advance, by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance”
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