The new Point of Taxation rules brings in the accrual concept in the Service tax wherein the point of taxation is the earliest of the following (1) Provision of Services (2) Receipt of Payment and (3) raising of invoice.
In this context please help me in finding out the tax liability in the following case.
A builder providing Construction of Complex service receives payment form the allottees of the flats on the basis of various stages of completion of the project like 20 % on completion of basement 20% on completion of first floor etc. A client who should have paid 60% of the total amount before 31.03.2010 had actually paid only 40% say Rs 4.00 lacs instead of Rs 6.00 lacs. The actual % completion of the project is 60% as on 31.03.2010. Suppose if the said Client make the payment of balance Rs.2.00 lacs in the month of June 2011, how would we calculate the tax liability.
(1) whether the builder is deemed to have provided 60% of the service and as such liable to pay the tax on the balance Rs 2.00 lacs by 5th of May, 2011OR
(2) whether the liability arises only when the client makes the payment
A timely advice on this issue will be highly appreciated
CS Saju Philip
CAclubindia
