Dear Experts,
We have made provision from 1.1.2012 to 31.03.2012 on Service Tax of Royalty @ 10% under reverse charge machenism and payment made to foreign in may 2012. As per finance bill 2012 the rate of service tax is 12% from 1.4.2012. Now i am confuse what will be the rate of charged either it is 10% or 12% for service receiver under reverse charge machenism beacuse service tax liability should be payment basis. Pl clerify.
Thanks
Dear Ram
As per the provisions of Rule 7 of Point of Taxation Rules 2012 in case of a person liabile to pay tax under reverse charge mechanism, the date if payment is very important.
In your case, there will be two possibilities:-
1) If the Foreign Vendor is your associated Enterprises- In this case if the person providing the service is located outside India, the point of taxation shall be:-
a) Date of debit in the books of account of the service receiver i.e. date on which the transaction is recorded in the books of the service receiver in India, OR
b) date of making payment,
whichever is earlier.
2) If the Foriegn Vendor is not Associated Enterprises:- In this case, the date of payment to the vendor will be the point of taxation and the rate of tax will be the rate in force on the date of payment to Vendor.
CAclubindia
