What is the ‘Point of Taxation’ for the levy of Service Tax?
Point of taxation was introduced vide Notification No. 18/2011 dated 01.03.2011.
Point of taxation as per Rule 2(e) of the Point of Taxation Rules is "the point of the time when the service shall be deemed to have been provided."
As for the point when the liability arises, Point of Taxation Rules, 2011, state multiple points at which tax may be levied on the assessee. Depending on the circumstances, it may be the date on which the service was rendered, the invoice was issued, the consideration was received or an advance for the service was paid, usually, whichever comes earlier.
Rule 3(a), Proviso to Rule 3(a), Rule 3(b) and the explanation to Rule 3 elucidate the point further. As per Rule 3(a), if there is an issue of an invoice and then a subsequent completion of service or receipt of payment, then the point of taxation is the "point of issue of invoice".
Again, under Rule 3(a), if the service has been completed, and the invoice is issued within 14 days, then the Point of taxation is the "time of Invoice".
In regard to the proviso to Rule 3(a), if the service has been completed, but the invoice has not been issued within 14 days, then the Point of taxation is the "Date of completion of service".
As per Rule 3(b) and the explanation to Rule 3, if an advance payment is received first, and then the invoice or completion of service occurs, then the point of taxation is the "time of receipt of payment"
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