Point of taxation based question

Queries 1274 views 2 replies

yashsr

2285 Points Joined April 2011

As we know, Service Tax Point of Taxation Rules changed from 30/06/2011. Earlier it was on receipt basis and now it is the earliest of receipt, provision of service and invoice subject to the fact that if invoice is issued w/n 14 days from date of provision of service, then date of invoice if date of receipt is not earlier.

Now, the question that I want to ask is what if I've raised an invoice and provided service in May 2011 but the receipt is pending even today. Since at that time, point of taxation was receipt basis, it definately would not be charged in that quarter. However, will it be deemed to be charged on 1st July or will it only be charged when the amount is received by the provider?

Replies (2)

Pinky Agarwal

Chartered Accountant

426 Points Joined August 2010

Dear Sir,

As per rule 9 of point of taxation rules,2011 -

(i) where the provision of service is completed; or

(ii) where invoices are issued

prior to the date on which these rules come into force, then the date on which payment will receive will be the point of taxation.

Provided you have opt for applying POT from July, 2011.

Regards,

Pinky Agarwal.

CA Umamaheswara Rao

Chartered Accountant

72 Points Joined July 2011

Dear Sir,

Point of taxation rules come in to force from 1/4/2011 not from 30/06/2011

But the relief provided with respect to POT is

for the services provided full on or before 30/06/2011. The option to apply POT left with service provider or receiver as the case may be.

In short the rule provides an option to deposit service tax on realisation basis for services which are provided in full on or before 30/06/2011 only.

In your case the service is provided in full in May 2011 ie. befor 30/06/2011 so it is at the option of the service provider to apply POT so you can wait up to receipt.

So you can pay service tax by applying POT or you can wait till receipt by applying receipt basis.