Service tax rate in reverse charge mechanism?

rates 1224 views 13 replies

SANJAY

CHARTERED ACCOUNTANTS

943 Points Posted on 04 June 2015

Dear Members,

Please resolve that if reverse charge mechanim applied and service provider issued the invoice in the month of may and also service is provided in the month of may itself and also payment made to service provider in the month of may, then should service receiver pay the service tax at old rate i.e. 12.36% or new rate i.e.14%?

And what if the service is provided in the month of may and invoice is issued by the service provider in the month of June also the payment made to service provider in the month of June?

please help soon.

Replies (13)

CMA Poornima Madhava

CMA

13117 Points Posted on 04 June 2015

If service is provided, invoice is raised and payment is received in May itself, then old rate only is applicable.
If service is provided in May, invoice is raised and payment is made in June, then new rate is applicable

Lalit Sangani

M.Com. Asst. Manager Account

736 Points Posted on 05 June 2015

What If service is provided in May, invoice is raised in may and payment is made in June, then what rate of duty will be applicable ?

CMA Poornima Madhava

CMA

13117 Points Posted on 05 June 2015

@ Lalit: It is not duty but service tax. In this case, old rate is only applicable

CA. Ankit Chandrakar

chandrakar.ankit@gmail.com

1287 Points Posted on 05 June 2015

Originally posted by : SANJAY

Dear Members,

Please resolve that if reverse charge mechanim applied and service provider issued the invoice in the month of may and also service is provided in the month of may itself and also payment made to service provider in the month of may, then should service receiver pay the service tax at old rate i.e. 12.36% or new rate i.e.14%?

And what if the service is provided in the month of may and invoice is issued by the service provider in the month of June also the payment made to service provider in the month of June?

please help soon.

The Point Of Taxation (POT) in Reverse Charge Mechanism shall be the "date of payment", however if payment is not made within 3 months of invoice, the POT shall be the day immediately following the said period of three months.

Therefore, in your first case as the payment was made in May'15 only, the applicable rate SHALL BE 12.36% (subject to abatement, if any) only.

Now, if the payment is made in June'15, the applicable rate under Reverse Charge Mechanism (subject to abatement, if any) SHALL BE 14% irrespective of date of invoice.

Thanks!!!

CMA Poornima Madhava

CMA

13117 Points Posted on 05 June 2015

@ Ankit: When I answered Lalit, i totally forgot about RCM. Thanks for pointing out.

CA. Ankit Chandrakar

chandrakar.ankit@gmail.com

1287 Points Posted on 05 June 2015

Originally posted by : Poornima Madhava
	@ Ankit: When I answered Lalit, i totally forgot about RCM. Thanks for pointing out.

You're welcome.No issues at all!!!

Ravinder

practicing chartered accountant

38 Points Posted on 05 June 2015

if two out of three occurred before june 2015 rate -12.36%

and if two out of three occurred after may 2015 rate - 14 %

1. compeltion of services

2. invoice

3. payment

Ravinder

practicing chartered accountant

38 Points Posted on 05 June 2015

if two out of three occurred before june 2015 rate -12.36%

and if two out of three occurred after may 2015 rate - 14 %

1. compeltion of services

2. invoice

3. payment

CA. Ankit Chandrakar

chandrakar.ankit@gmail.com

1287 Points Posted on 05 June 2015

Very well said Ravinder, but your point holds good in general cases where service provider has to pay service tax.

However, in a reverse charge scenario, payment date shall be considered for checking the effective rate of service tax.

Ravinder

practicing chartered accountant

38 Points Posted on 05 June 2015

Originally posted by : CA. Ankit Chandrakar

Very well said Ravinder, but your point holds good in general cases where service provider has to pay service tax.

However, in a reverse charge scenario, payment date shall be considered for checking the effective rate of service tax.

Ankit u r right in case of RCM

Lalit Sangani

M.Com. Asst. Manager Account

736 Points Posted on 06 June 2015

what if transporter is not provided invoices to service receiver till the effective date of service tax, how can payment to be made to the transporter.

CA. Ankit Chandrakar

chandrakar.ankit@gmail.com

1287 Points Posted on 07 June 2015

Lalit, please be more specific in the query. Is your query regarding payment to transporter or applicability of service tax???

Lalit Sangani

M.Com. Asst. Manager Account

736 Points Posted on 11 June 2015

dear ankit,

My query is if transporter service provided in may month but invoice provides in june how can service receiver make payment to transporter before 31/05/2015, because new service tax rate is applicable from 1/6/15 on basis of payment to transporter.