Should i charge service tax to follow point of taxation rule

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Neha Agarwal (Querist)
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23 April 2015 One of my client has recently got registration on 20.04.2015 & started providing services under "work contract". I want to know Service tax will be charged according to point of taxation rules where(invoice issued with in 30 days from the date of completion of service, date of invoice & date of receipt of payment which ever is earlier) or according to rule (6) of section 1994 where (service tax is payable on receipt basis when turnover doesn't exceeds Rs: 50 lac during Financial Year). Please clarify it, should I charge service tax according to Point of taxation rule or rule (6) of 1994 of Finance act as mentioned above?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 April 2015 Service tax has to be paid according to Point of taxation Rule.

Adoption of Point of Taxation rules for services which would shift the basis for tax collection from “cash” towards “accrual” basis as with Central Excise duty.

Neha Agarwal

Neha Agarwal (Querist)
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23 April 2015 Raman ji, I also confuse when I read below article as mentioned: "In case of Individual, Proprietor, Partnership firms whose aggregate value of taxable services provided from one or more premises is Rs:50 lac or less during the financial year, In this case service tax will be paid on receipt basis as per finance act 1994 rule (6) of rule 68, here point of taxation will not be considered

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 April 2015 Yes up to 50 lacs it can be paid on cash basis.

As per Point of Taxation Rules were made w.e.f. 1-4-2011 mainly to provide that service tax will be payable on accrual basis. The exception is that where value of taxable services in previous year were less than ` 50 lakhs, service tax can be paid on receipt basis (i.e. cash basis) instead of accrual basis.

Neha Agarwal

Neha Agarwal (Querist)
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23 April 2015 My client has recently got registration as proprietor on 20.04.2015. I want to know which procedure should he follow to pay of service tax (receipt basis) or according to POT rules. Assuming his turnover will be below than 50 lac during FY 15-16 then he should pay tax on receipt basis????

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 April 2015 Yes he can pay on receipt basis considering the turnover.

Neha Agarwal

Neha Agarwal (Querist)
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23 April 2015 Ok, thanks a lot. I was very confused about it when I came across this article. By the way if my client pay tax according to Point of taxation rule intentionally assuming turnover is below than 50 lac, not pay tax on receipt basis. Any problem in future by CBEC????

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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23 April 2015 No problem for complying with Point of taxation Rule.

Neha Agarwal

Neha Agarwal (Querist)
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23 April 2015 Thanks a lot seetharaman ji. Self study always makes me confuse. People from Ca club like you are great.

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