First question that comes to our mind is that “Increase in the rate of ST from 14.5% to 15% is it change in rate or a service taxed for the first time?”
For this reason, refer N/n 10/2016 of service tax. It aims to insert explanation in Rule 5 in the following words-
Explanation 1. This rule shall apply mutatis mutandis in case of new levy on services
Explanation 2. New levy or tax shall be payable on all the cases other than specified above. (only relevant excerpts produced from notification)
KKC is a new levy so Rule 5 and not Rule 4 shall apply!
For Normal Charge Mechanism-Rule 5
i. Invoice and payment received before 01/06/2016 No service tax!
ii. Payment received before 01/06/2016 and Invoice issued within 14 days from the date when the service becomes taxable for the first time i.e., 14th June 2016.
For reverse charge mechanism Rule 7 of Point of taxation rules shall apply.
Generally, point of taxation shall be the date of payment for service.
Provided that if payment is made after three months then point of taxation shall be following day immediately after three months.
But again notification 21/2016 of service tax inserts a provision in Rule 7 that- to the extent there is change in the liability to pay tax as a recipient of service(RCM), in case service has been provided and invoice issued before such change (levy of KKC is change in liability), but payment is made after change-POT should be date of Invoice.
Following table would help-
|
Rule |
Date of service |
Date of Invoice |
Date of Payment |
Applicability of KKC |
|
Erstwhile Rule 7 |
20.05.2016 |
25.05.2016 |
04.06.2016 |
POT is date of payment, so yes KKC applicable. |
|
Amended Rule 7 |
20.05.2016 |
25.05.2016 |
04.06.2016 |
POT is date of invoice, so No KKC applicable. |
[Remember that as per R. 66B, ST shall be levied on service provided or agreed to be provided (advance payment) and so erstwhile Rule 7 was against the essence of Rule 66B]
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