Pot and interest

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curious (Querist)

30 January 2016 Need expert advice in below situation... "A" is a taxable service provider who provided taxable services to "B" in Mar'15 and the same is acknowledge by "B". "A" didn't raise any invoice within 30 days and also not received any kind of consideration from "B". Now " A" wants to raise the invoice in relation to the service provided in Mar'15. My query is what should be the rate of tax? either 12.36% or 14.5%. Is it true that POT rule 4 has overridden effect over rule 3 in the given situation as tax rate has changed from 12.36%to 14%and then 14.5%. Will there be any interest payable in the given situation? if yes then from which date it will be calculated?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

31 January 2016 1 14.5% will be the service tax rate.
2 interest will be payable from the date of invoice or the date of receipt of payment which ever is earlier.

curious

curious (Querist)

31 January 2016 Thank you Seetharaman sir. Does it mean that as per the stated problem if "A" Raises today a invoice for the service provided in mar'15 @14.5% for which no payment has been received then there will be no service tax interest payable?

Suresh Ramaswamy

Suresh Ramaswamy (Expert)

05 February 2016 Under Point of Taxation Rules the date of rendering of service will be the date for calculation of liability. Under POTA the liability to pay service tax accrues on the occurrence of certain events, in this case the rendering of service. Since no invoice has been issued, nor duty paid it is a technical default. Any invoice issued after 1st June 2015, should levy Service Tax @ 14%. Invoices issued after 15th November 2015 should also include Swatch Bharat Cess of 0.5% Therefore the effective rate of taxation is 14.5%.

It is assumed that the ST - 3 Return for the period ended 31st March 2015 has already been filed. If not, an option is open to pay the service tax @ 12.36% and pay interest at the prescribed rates from 1st April 2015 - file the belated ST - 3 on current date with late fee. But if the ST - 3 has already been filed, then the only option is to issue invoice in current period with tax @ 14.5%.

With effect from 1st April 2011, the concept of receipt of consideration no longer is relevant except in case of consideration received in advance. The liability to pay the duty arises on the date of the invoice and has to be discharged by the 6th of the subsequent month, except in case of March when the liability has to be discharged on 31st March.

Irrespective of the receipt for the invoice issued, the liability should be discharged immediately. Interest will be payable, technically, from the date of liability under Point of Taxation Rules, that is 1st April 2015.

curious

curious (Querist)

05 February 2016 Thank you so much Suresh. You explained the concept very well. I appreciate this.

Suresh Ramaswamy

Suresh Ramaswamy (Expert)

06 February 2016 You are most welcome

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