LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Exemption under service tax rule 1994, 6(1)

Vinay (Pro) (26 Points)

04 January 2012

Hi Everybody

Recently there were some amenments to service tax rules regarding payment of service tax on bill basis. I am curious to know whether any services are expemted under this amendment because in my line of work payments are delayed a lot, sometimes even by 2-3 years.

Reply
Follow
Share

5 Replies

Hari Wadhwa (CA in Practice) (485 Points)
Replied 04 January 2012

Hi Vinay

(1) Point of Taxation Rules 2011 are applicable on ALL the services. However, Rule 7(c) has been inserted by the Government to keep certain specified services out of the accrual system of service tax levy like: -

- Architects

- Interior Decorators

-Practicing CA, CS & CWAs

- Scintific & Legal services

-Legal Consultancy

-Consulting engineers

That is , these services providers (eligible form of assessees only) have to pay tax as & when payment is received ( & NOT on accrual basis).

Eligible Assessees: -

The benefit is available to "Individuals", "Proprietorship concerns" & "Partnership Concerns" only.

Further,

if "Individuals", "Proprietorship concerns" & "Partnership Concerns" provides any services other than specified above would NOT be eligible for cash basis.

(For details , pls read Rule 7(c) of Point of Taxation Rules, 2011

https://arxadvisors.com/userfiles/POINT%20OF%20TAXATION%20RULES.pdf

(2) Also, Rule 7 provides that service receivers liable to pay tax on reverse charge basis should also pay tax ON ACTUAL PAYMENT BASIS, subject to some conditions. (For details refer Rule 7)

https://arxadvisors.com/userfiles/POINT%20OF%20TAXATION%20RULES.pdf

(3) In case of exports also, point of taxation will be DATE OF RECEIPT of PAYMENT against exports of services, subject to some conditions. ( For details read Rule 7)

https://arxadvisors.com/userfiles/POINT%20OF%20TAXATION%20RULES.pdf

1 Like

CA Prabhat Gupta (Manager (Indirect Taxes)) (821 Points)
Replied 05 January 2012

Agree with above. The above changes were inserted in Point of Taxation Rules, 2011 vide Notification No.25/2011-ST dated 31.03.2011. The same can be viewed on CBEC official website below:

https://www.servicetax.gov.in/st-notfns-home.htm

1 Like

Vinay (Pro) (26 Points)
Replied 05 January 2012

Thank you so much Hari and Prabhat.

As I understand, my line of work falls in real estate category [65(105)(v)] which is not covered under this exemption. Is there anyway to request ST department to add this category under exemption because, like I mentioned earlier, payments are sometimes delayed a lot and it is not justified to pay something one hasn't received or is even not sure to receive. Even if they ask us to pay on the same date or month in which we receive the payment, it will be better and more comfortable.

Hari Wadhwa (CA in Practice) (485 Points)
Replied 17 January 2012

Mr Vinay

There is no option for you to pay the service tax on payment basis as requesting the department in your specific case would NOT WORK as even the department is not having any powers to permit any specific service provider to follow any specific practice without having authority by law or any notification or trade circular issued there under.

Besides, no adjustment of service tax is permissible under the Point of Taxation Rules, 2011 for Bad Debts (i.e, if service provider is not able to recover the payment &/or service tax from the service receiver, it has to be paid by service provider out of pocket- ( NO Liniency)

1 Like