Budget changes

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GAURAV GOPAL BADWE (Querist)
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01 April 2012 From when new rate of Service tax will be applicable.
Shall we reiase the service tax invoice @ 12% from 01.04.2012 onwards?

Please also mention the notification for these new changes.

Regards,

Ajay Mishra

Ajay Mishra (Expert)
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01 April 2012 Hi

Effective rate of Service tax increased from 10.30% to 12.36% vide Notification No. 02/2012-ST with effect from 1st April 2012.
Introduction of Negative List  How to determine which service is taxable or not:-ALL Services {S. 65B (44)} would be chargeable to Service tax except the following:-
• Certain services specified in Negative List (17 Services) – S.66D
• Certain services (34 specified services) specified under Mega Exemption List vide Notification No.– 12/2012-ST, Dated: March 17, 2012
• Certain Services specified under Abatement vide Notification No.- 13/2012-ST, Dated: March 17, 2012  Percentage of abatement has been specified on the fulfilment of certain conditions for 11 specified services.
When New Service not taxable due to Negative list:-
Rule 5 of Point of Taxation Rules 2011 amended vide Notification No 4/2012-ST applicable from 1st April 2012 vide which New service is not taxable only when
• Invoice has been issued and the payment received against such invoice before such service became taxable
• Payment has been received before the service becomes taxable and invoice has been issued within 14 days of the date when the service is taxed for the first time.
In what situation Old rate of Service tax i.e. 10.3% would be applicable:-
In terms of Rule 4 of Point of Taxation Rules 2011 read with new Rule 2A i.e. Date of Payment vide Notification No 4/2012-ST applicable from 1st April 2012, Rate of Service Tax will be determined keeping broad parameters in mind i.e. Service has been completed on or before 1stApril, 2012 and :-
• If the invoice is issued prior to 1/4/2012 but the payment is received after 1/4/2012 then, the rate of Service Tax will be 10.30%
• If the invoice is issued after 1/4/2012 but the payment is received prior to 1/4/2012, the Rate of Tax will be 10.30% only if cheque is credited in the Bank Account by 5th April, 2012
Important Changes in Service Tax Rules, 1994 vide Notification No. 3/2012-ST (Applicable w.e.f. 01/04/2012)
• Rule 2(cd) “Partnership firm” includes a limited liability partnership;
• Rule 4A (1) Invoice should be raised within 30 days (earlier 14 days) from the date of completion of service or receipt of payment and 45 days for banks and financial institutions
• Rule 4A - proviso inserted - Invoice not required to be issued if amount received is up to Rs. 1,000 in excess of the amount indicated in the Invoice.
• Rule 6  Service tax on Collection basis - Individuals and partnership firms (including LLP) - aggregate value of taxable services is less than Rs. 50 lakhs in the previous FY, the service provider shall have the option to pay tax on collection basis on taxable services up to Rs. 50 lakhs in the current financial year
• Rule 6 (4B)  Adjustment of excess service tax paid - Excess amount paid can be adjusted without any limitation or condition unless excess amount is on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification

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