Whether service tax is applicable or not?

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varun bansal (Querist)
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08 October 2012 Whether service tax is applicable in the following cases?

Service provided on 12.03.2012
(This service becomes taxable from
01.04.2012)

a) Invoice issued on 28.03.2012
Payment received on 15.04.2012

b) Invoice issued on 20.03.2012
Payment received on 15.04.2012

c) Invoice issued on 12.04.2012
Payment received on 15.04.2012

d) Invoice issued on 20.04.2012
Payment received on 15.04.2012

e) Invoice issued on 20.04.2012
Payment received on 25.03.2012

Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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08 October 2012 According to the Point of taxation Rule 5: Payment of Service tax in cases of new services: provision is as follows.
Where a service,not being a service covered by rule 6(i.e Continuous supply of service) is taxed for the first time then,----

a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable;

b) no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within the period referred to in rule 4A of the service tax rules,1994
As per rule 4A of the service tax rules,1994 an invoice is required to be issued within 14 days from the date of completion of service or from the date of receipt of any payment of taxable service,whichever is earlier.

According to the above rule: liability of service tax payable for your cases is

First check the following for your cases to applicability of service tax based on the above rule: To confirm applicable or not first check
i) is payment made before such service became taxable;
If no then applicable
If yes then check is invoice issued before such service became taxable; if yes, then not applicable; if no then check is it according to the Rule 4A(above said); if yes, then not applicable; if no then applicable. Now answers to your cases:

a) Applicable, Because payment not received before such service became taxable

b) Applicable, Because payment not received before such service became taxable

c) Applicable, Because payment received after such service became taxable as well as invoice also issued after and not according to Rule 4A

d) Applicable, Because payment received after such service became taxable as well as invoice also issued after and not according to Rule 4A

e) Applicable, Because eventhough payment received before such service became taxable invoice not issued according to the Rule 4A.

In one word For all cases of you service tax applicable because of except for case 'e' all the cases doesn't not satisfied the first check, for case 'e' first check satisfied but not satisfied the second check i.e invoice not according to Rule 4A.

OM SAI SRI SAI JAI JAI SAI

varun bansal

varun bansal (Querist)
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10 October 2012 But as per POT Rules 2012 an invoice is required to be issued with in 30 Days of completion of service or payment received whichever is earlier (in short 14 days is replaced by 30 days). Further in respect of your your point b) As per Rule 5 of POT Rules: "No tax shall be payable if payment has been receeived before service becomes taxable and invoice has been issued with in 14 days from the date when the service is taxed for the first time". According to the language invoice is required to be issued up to 14th April since the date when the service is taxed for the first time is 01.04.2012.

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Dintakurthi Tirumala

Dintakurthi Tirumala (Expert)
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10 October 2012 Yes, the 14 days will be substitute with 30 days you are correct,sorry to my mistake.

I said point b) as per Rule 5 i said specified period from the date of completion of service or receipt of payment which is earlier not from the applicability of such service.

So according to the correction to my mistake i.e 30 days instead of 14 days and according to the above provision for your cases except in the case of 'e'(assumed service is provided/completed after 25th March 2012) for all the cases service tax applicable because of for all other cases payment is received after such service liable for service tax.

OM SAI SRI SAI JAI JAI SAI