Point of taxation rules

vipul jain (EFFORTS NEVER FAIL) (2894 Points)

29 October 2012  

 

SERVICE TAX – POINT OF TAXATION RULES

For Nov. / Dec. 2012 Exams

 

 

RULE – 1

The Rules come into effect from 01-04-2011. Option has also been given to follow rules from 01-07-2011.


 

RULE -2 -> DEFINITIONS

Continuous Supply of Service[Rule 2(c)] It means any service which is provided, or to be provided Continuously under a contract, for a period exceeding 3 months with the obligation for payment periodically or from time to time.


 

RULE 2A: DATE OF PAYMENT

Date of payment =

  • D/o entry in the books of account of the assessee or
  • D/o credit in the Bank pass Book, 
  • Whichever is EARLIER.

Proviso :-

(A)   D/o payment is D/o credit in the Bank Pass Book

  1. When there is a change in effective rate of tax or when a service is taxed for the first time during the period between Cash book entry and pass book entry.
  2. When the pass book entry is after 4 working days from the date of change in effective rate or from the date of first time levy of tax.
  3.  When the payment is made by way of an instrument ( cheque, DD, etc ) credited to bank account.

(B)   For purpose of any rule requiring the determination of “Date of Payment”, such date will be the date of receipt of payment.


 

RULE – 3 DETERMINATION OF POT

 

RULE

EVENT

POINT OF TAXATION

3(a)

If Invoice is issued within 30 days of completion of service.

Date/Time of invoice

3(a) proviso

If Invoice is NOT  issued within 30 days of completion ofservice

Date of completion of service

3(b)

If any payment is received ( including advance ) before the date of completion of service or date of invoice.

Date of receipt of Payment.

 

 

Determination of POT in case of CONTINUOUS SUPPLY OF SERVICE

 

EVENT POINT OF TAXATION
If Invoice is issued  Date/Time of invoice
If Invoice is Not issued within 30 days of completion of service. Date of completion of service
If any payment is received ( including advance ) before the completion of service or date of invoice Date of receipt of payment

 


 

RULE - 4  DETERMINATION OF POT IN CASE OF CHANGE IN EFFECTIVE RATE OF TAX

 

Rule 4 shall have overriding effect over the provisions of Rule 3. The POT in cases where there is a change in effective rate of tax in respect of a service, shall be determined in the following manner --

 

(A) Services provided before change in effective rate of tax

 

RULE EVENT POINT OF TAXATION
4(a)(i) Invoice issued and payment is received after change
  • Date of payment, or
  • Date of Invoice,
  • whichever is earlier
4(a)(ii) Invoice issued before change but payment received after change Date of Issue of Invoice
4(a)(iii) Invoice issued after change but payment received before change Date of Payment

 

 

(B) Services provided after change in effective rate of tax

RULE EVENT POINT OF TAXATION
4(b)(i) Invoice issued and payment is received after change
  • Date of payment, or
  • Date of Invoice,
  • whichever is earlier
4(b)(ii) Invoice issued before change but payment received after change Date of Payment
4(b)(iii) Invoice issued after change but payment received before change Date of Issue of Invoice

 

RULE 5 --  PAYMENT OF TAX IN CASE OF NEW SERVICES 

 

RULE EVENT POINT OF TAXATION
5(a) Invoice issued and payment received before service became taxable NO Service Tax
5(b) Payment received before service became taxable and invoice issued within 14 days of the date when the service is taxed for the first time. NO Service Tax

 

RULE -7 -- DETERMINATION OF POT IN CASE OF SPECIFIED SERVICES OR PERSONS

 

RULE EVENT POINT OF TAXATION
7 In reverse charges cases falling u/s 68(2),  Date of payment
Proviso - 1 If service receiver does not make payment within 6 months from the date of invoice

As per Rule 3,4,5,or 8, as the case may be.

Proviso - 2 Service provider outside and the Service Receiver in India are "Associated enterprises"
  • Date of debit in the books of the service receiver or
  • Date for making payment,
  • whichever is earlier

 

Rule 8-A  DETERMINATION OF POT IN OTHER CASES

( Residual Rule )

 

  • Date of invoice / payment not available
  • CEO may call for production of any other document
  • Hear the assessee
  • And then determine POT to the best of his judgment. 

 

 

 

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