Point of taxation rules,2011 and determination of point of taxation under service tax law

By | November 1, 2013

Point of taxation rules,2011 and determination of point of taxation under service tax law

Point of taxation – means the point in time when a service shall be deemed to have been provided. With effect from 01/07/2011 it became compulsory for all service providers to adopt the rules of point of taxation rules,2011.

Determination of point of taxation as per rule 3:-

Time of issue of invoice Point of taxation unless otherwise specified
Within the specified period i.e.( 30 days or 45 days for banking and financial institution) from the date of completion of service. Earlier of the following two dates :

1)Time of issuance of invoice or

2)Date of payment to the extent it is received

If invoice is not issued within (30 days or 45 days for banking and financial institution) from the date of completion of services. Earlier of the following two dates :

1)Date of completion of provision of services or

2)Date of payment to the extent it is received

Determination of point of taxation in case of change in effective rate of tax :

S. No. Time of provision of taxable service Date of issue of invoice Time of receipt of payment Point of taxation

 

1 Before the change in effective rate of tax After the change in effective rate of tax After the change in effective rate of tax Earlier of the following two dates :

a)      Date of issuance of invoice or

b)      Date of payment of invoice

Prior to change in effective rate of tax After the change in effective rate of tax Date of issuance of invoice

 

After the change in effective rate of tax Prior to change in effective rate of tax Date of payment
2 After the change in effective rate of tax Prior to change in effective rate of tax After the change in effective rate of tax Date of payment
Prior to change in effective rate of tax Prior to change in effective rate of tax Earlier of the following two dates :

a)      Date of issuance of invoice

b)      Date of payment of invoice

After the change in effective rate of tax Prior to change in effective rate of tax Date of issuance of invoice

 

Date of payment shall be the earlier of the following dates:-

a)      The payment is entered in books of accounts

b)      The payment is credited in the bank account of the person liable to pay tax

Determination of point of taxation in case of continuous supply of service.-

(1) In case of continuous supply of service, the whole or part of which is determined or payable periodically or from time to time, shall be treated as separately provided at the date on which the payment is liable to be made by the service receiver, if such date is specified in the contract.

(2) If, before the time specified in sub-rule (1), the person providing the service issues an invoice or receives a payment, the service shall, to the extent covered by the invoice or the payment made thereof, be deemed to have been provided at the time the invoice was issued or the payment was received, as the case may be, whichever is earlier.

 Explanation 1.- For the purposes of this rule, wherever any advance, by whatever name known,  is received by the service provider towards the provision of taxable service, the point of  taxation shall be the date of receipt of each such advance.

Explanation 2.- For the purposes of this rule, in respect of services taxable under section 66A  of the Act, the point of taxation under sub-rule (2) shall be the date on which the invoice is  received, or the payment is made, as the case may be, whichever is earlier.

Continues supply of services

Any services which is provided or agreed to be provided continuously or on a recurrent basis under a contract for a period exceeding 3 months with the obligation for payment periodically or from time to time or

Where the central government, by a notification in the official gazette, prescribe provision of a particular service to be a continues supply of service, whether or not subject to any condition.

Central government has notified following services as continues supply of services for the purpose of point of taxation rules, 2011:

  • Telecommunication services
  • Service portion in execution of a works contract

Payment of service tax – service tax provider has to discharge its tax liability as per point of taxation rules 2011 compulsorily with effect from 01/07/2011. Service tax liability accrues at the time of provision of taxable services whereas liability to make payment arises in terms of rule 3 of point of taxation rules, 2011.

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