Service tax

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ejaz naiyer (Querist)
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12 July 2012 I want to know whether Proprietor Business has to pay service tax on the basis of point of taxation rule or on the receipt basis. My one friend told me that individual is exempt from the new rule. And hence liable to pay tax ( Financial Year 2011-12) on receipt basis only not on invoicing basis.

Is it correct? please help me.

MJ Krishnamurthy

MJ Krishnamurthy (Expert)
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13 July 2012 Mr Ejaz naiyer,
As soon you receive payments ST liability arises. If you do not receive advances as soon as you issue an invoice and that too within 14 days of completing the service(see rule3).....MJK

Arun Gulati

Arun Gulati (Expert)
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14 July 2012 with due regards, I dont agree with Mr. MJK view..as per proviso to Rule 6 service tax rules, 1994 provides that in case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services by him up to a total of rupees fifty lakhs in the current financial year when the payment is received. Therefore, if your taxable turnover is less then 50 lakhs pay on payment basis.

And one more things, provision to raise invoice has been increased from 14 days to 30 days.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Your question is about how service tax liability is determined for a proprietorship (i.e., individual business) — whether it's on a receipt basis or as per the Point of Taxation Rules (POTR), 2011, especially during FY 2011–12.

Let’s break this down clearly.

✅ Short Answer:
Yes, your friend is correct — during FY 2011–12, individuals and proprietary firms were temporarily allowed to pay service tax on a receipt basis, not on invoice basis.

📜 Legal Background (As of FY 2011–12):
🔹 1. Point of Taxation Rules, 2011 (effective 1 April 2011)
These rules say that service tax liability arises at the time of issuing the invoice or receiving the payment, whichever is earlier.

However...

🔹 2. Relaxation for Individuals / Proprietors / Partnerships
To ease compliance for small service providers, the CBEC (now CBIC) issued a notification providing an exception to individuals and proprietary concerns:

🟢 Notification No. 25/2011-ST dated 31.03.2011
Allows individuals, proprietorship firms, and partnership firms to pay service tax on receipt basis (instead of POT rules), till 30th June 2012, provided:

The service provider is an individual or firm

Turnover is below ₹50 lakh

The service provided is not under reverse charge

📌 So in FY 2011–12:
Type of Service Provider Tax Liability Basis
Individual / Proprietor / Firm Receipt Basis (if opted)
Company / LLP / Body Corporate Point of Taxation Rules

📝 Important Notes:
The receipt basis option was available only up to 30 June 2012.

From 1 July 2012, with the Negative List regime, most providers had to follow POTR, except for certain notified small service providers.

If you're a proprietorship and your turnover was under ₹50 lakh, you could opt for receipt basis (with declaration) during FY 2011–12.

✅ Final Answer:
✔️ Yes, if you're a proprietor and your turnover was below ₹50 lakh, you were allowed to pay service tax on receipt basis (not on invoice basis) during FY 2011–12, under Notification 25/2011-ST.

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