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Interesting query on service tax rate transition

yashsr (CA) (2270 Points)

10 July 2015  


One company pays its reverse charge service tax liability on accrual basis(rather than payment basis as mentioned under Rule 7) since it is very difficult to keep track of payments as compared to keeping track of invoices. So for eg. if an invoice is received dated April and the payment of that invoice is made on June, the Company would have made the payment in April itself rather than June. The Company is following this policy since many years.

However, in this year could be a problem because in April the rate of Service Tax was 12%(plus cess) whereas in June it is 14%(no cess). So there could be a case that the Company is accused of short paying Service Tax to that extent. But the Company maintains that since it is following this policy since a long time, it will not deviate from its policy.
Is the Company in default? Or is this behaviour acceptable?

 1 Replies

CMA Poornima Madhava (CMA) (12985 Points)
Replied 10 July 2015

Rule 7 says Notwithstanding anything [contained in rules 3, 4, or 8]. So it is very obvious that there is no other option. When rules for POT under RCM is expressly provided, how can anyone follow some other method. Moreover, in this case, since there will be revenue loss to the Govt, I don't think it will be acceptable.
However, i would await other views too....
1 Like

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