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Brief case studies on change in rates of service tax

Arijit Ghose 
on 02 June 2015

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Change in Effective Rate of Taxation- Service Tax

On account of some errands to be run which I have postponed for almost a year, I find myself travelling today (ie June2nd, 2015) to Kolkata from Mumbai. I was not much pleased about the prospects of travel at this time of the year, given the excruciating heat and humidity in the City of Joy which has my relatives and friends brooding. So on the morning of June1, 2015 as were discussing about packing our luggage, my father made a remark about the possibility of making an extra payment towards fare in the wake of Change in Service Tax Rates from 12% to 14% effective from June 1, 2015.

The 3 tier AC tickets (Howrah-CST Duronto) were purchased about a month back on May 1st. Initially at the news, I started making a calculation of the same and then I realised my error and triumphantly announced to my Dad that one need not pay anything extra. He expressed his surprise and asked the reasons behind my contention.

Point of Taxation Rules- 4

“Baba, such change in rates of taxation is governed by Service Tax- Point of Taxation Rules, 2011. According to it, Rule 4 (b) has laid down the criterion- Since we have received the Invoice (the ticket)- Before Change Date and the Payment has been made prior to the change in rates of taxation, the Point of Taxation would be The Earlier Date but since both are same ie May 1st, the effective rate on that date is applicable- 12%.”

“Hmm. What about if a taxable Service has been provided before the change in effective rate? Last week our company arranged a visit by 1 of our prospective clients from Delhi to our factory at Chiplun. We arranged the stay at a Hotel, but are yet to make the payment.

I hope you have received an invoice on the same. If you have received it then you need not pay the enhanced rate of taxation as you will get covered by Ruke 4 (a) (ii).

Here is a chart of Rule 4 explaining the other situations that might arise:

Where there is a change in effective rate of tax in respect of a service

Rule 4 (a)- Taxable Services Provided- Before- the change in effective rate

Invoice Issue Date

Payment Received Date

Point of Tax Date

i

After Change

After Change

The Earlier Date

ii

Before Change

After Change

Date of Invoice

iii

After Change

Before Change

Date of Payment

>> 

>>>> 

>>>> 

Rule 4 (b)- Taxable Services Provided- After the change in effective rate

Invoice Issue Date

Payment Received Date

Point of Tax Date

i

Prior to Change

After Change

Date of Payment

ii

Before Change

Before Change

The Earlier Date

iii

After Change

Before Change

Date of Invoice

>> 

>>>> 

>>>> 


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