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Query on point of taxation-service tax

31 March 2012

Dear Tax Expert

I have some query on POT for new levy of Service Tax Rate w.e.f.1.4.2012.( Refer Circular No-154/5/2012-ST) dt 28/03/2012)

suppose we are providing continuous service under works contract composition scheme.

1-If we raised invoice on 25th March 2012 and payment received 4th April 2012.

In this case Service Tax will be payable on old rate or new rate .--------

2-If we have received the payment on 25th March 2012 and Invoice raised on 4th April

In this case Service Tax will be payble on old rate or new rate ----------

3-If we have received mobilization advance /Security deposit on 25th Mar 2012 ,Service Tax will be payble or not at what rate .......................

Please advice us in this regard

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7 Replies

Raj "DRAG" (Final Student) (61 Points)
Replied 31 March 2012

Dear Aswini

For All questions, it is 10.3% only i sir. because invoice & Amount recd which ever is earlier will be apply as tax payable.

Regards

Vinoth

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Raj "DRAG" (Final Student) (61 Points)
Replied 31 March 2012

sorry i think inv is raised with in 14 days,

so inv date is only applicable, hence for next 2 it is new rate applicable,

Harshal Fifadra (Chartered Accountant) (1489 Points)
Replied 31 March 2012

As per Rule 3 of Finance Act ,1994 the service tax would arise at the earliest of the following :

Issuing of an invoice for service provided or to be provided OR

Where the invoice is not issued within 14 days of the completion of the provision of the service, the point of taxation shall be date of such completion. OR

Date of actual receipt of payment, to the extent of such receipt, if this date is earlier to the above clause. OR

Where any advance is received, POT shall be the date of receipt of each such advance.

CASE 1 : Service tax payable at old rate as invoice is raised before the payment for the service provided

CASE 2 : Service tax payable at old rate as payment is received in advance before the invoice is raised

CASE 3 : Service tax payable at old rate as even though it is advance it would be taxable under new POT RULES

ok ...

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CA.Ganesh (Practicing Chartered Accountant) (308 Points)
Replied 05 April 2012

Service tax rate will be old rate in all cases

1 Like

CA Ganesh Karthik (Chartered Accountant) (368 Points)
Replied 06 April 2012

In simple words, if 2 of the 3 events have taken place before the change in rate, the old rate will only apply.

ie. Completion of Service, Raising of Invoice, Payment - Out of these 3 activities, if 2 are completed within 31st March, the rate of tax will be 10% else 12%

Others may pls offer their comments if they disagree with me.

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Aswini Kumar Pani (Manager) (25 Points)
Replied 06 April 2012

Thanks to all for your prompt reply...........

saikiran (CA) (96 Points)
Replied 06 April 2012

Dear Aswini Kumar,

The said circular does not apply to the works contract. That circular will be applicable to the specified 8 services. And in your case old rate is applicable as rightly said by harshal, ganesh, ganesh karthik