CA Final
36 Points
Joined July 2010
Hi Rahul,
In response to your query firstly please clarify the nature of contract entered , whether it is a service oriented one or works contract, then only tax implications can be adjudged.
As per Rule 3 of Point of Taxation rules,2011 POT would be issuance of invoice or payment whichever is earlier,in case contractor fails to issue invoice within time limits specified in Rule 4-A POT shall be completion of service ( first event specified upon which payment becomes due from your end) or payment whichever is earlier.
However in your case it is a continuous supply of service contract and Rule 4-A of STR,1994 provides for issuance of invoice within 30 days of completion of event specified in contract,therefore contractor had to issue invoice within 30 days of completion of such event defaulting which full amount of ST would be payable on completion of first such event specified in contract upon which payment fell due.
Consider An Example
Contract Date 20 Feb 2013
1st Date of Completion of Event: 20thMarch
2nd Date : 20th May
3rd Date : 20th July
4th Date : 30th Sep
Now As per Rule 4-A invoices should be issued in following order
1st Invoice : Upto 19th April
2nd : Upto 19th June
3rd Upto 19th Aug
4th Upto 29th Oct
IF A CONTRACTOR FAILS TO ISSUE INVOICE IN ABOVE TIME LIMITS, POT SHALL BE 1ST DATE OF COMPLETION OF EVENT I.E 20TH MARCH OR PAYMENT WHICHEVER IS EARLIER.
Accordingly in your case contractor can issue full invoice in october including full amount of ST payable.
Interest and Penalties shall lie upon him.
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