Facts:
Date of Service Provided: 28.03.2012
Date of invoice: 04.04.2012
Date of Payment: 07.04.2012
Service Tax rate changed w.e.f. 01.04.2012 from 10% to 12%.
Now POT shall be 04.04.2012 as per Rule 4 of POT Rules, 2011. What should the applicable rate of Service Tax be in this case?
Please explain the reasoning.
Please refer to the following provisions before discussion:
As per Sec. 68 of the Finance Act, 2012,
Every person providing taxable service to any person shall pay service tax at the rate specified in section [66B] in such manner and within such period as may be prescribed.
As per Sec. 66B of the Finance Act, 2012,
There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.
As per Rule 2(e) of Point of Taxation Rules, 2011 (POT Rules)
"point of taxation" means the point in time when a service shall be deemed to have been provided;
Considering the above, here is the reasoning:
1) As per Tule 4 of the POT rules, if the service is provided prior to the change in effective rate of tax, then the point of taxation shall be date of payment or issuing of invoice, whichever is earlier. Hence, the service is deemed to be provided on 4th April 2012, considering rule 2(e) as above.
2) Since as on 4th April 2012, the rate of Service Tax is 12%, the Service is chargeable at 12%.
Please revert if this logic does not suffice.
Shouldnt Sec 67 of Fin Act, 1994 apply here
Sec 67: The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of
exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided.
In my opinion, the above section talks only about actual provisioning of the service and not the deemed provision as per POT Rules. Thus, Rule 4 need not be referred in this situation.
The Applicable Rate should be 10%.
Please give your view on this.
Dear Saurabh,
It is to be noted that when there are two provisions in law, the specific provision will prevail over the general provision.
Hence, for the situation of change in rate of Service Tax after providing the service, the specific provision of Rule 4 of POT rules will prevail over the general provision of Section 67, since the Rule 4 is created for a specific purpose.
Hence, in my opinion, the rate applicable is 12%, since Invoice is raised and payment is received after the rate has been amended.
CAclubindia
