SERVICE TAX Point of Taxation Rules,

Contents Erstwhile Rules Point of Taxation Rules, 2011 Guidelines relating to availing credit Guidelines relating to payment of service Tax Bibliography 2

Erstwhile Rules Availing of Service Tax Credit  Rule 4 (7) of Cenvat Credit Rules, 2004 states that “The Cenvat Credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9.” 3

Erstwhile Rules Payment of Service Tax  Invoice should be issued within 14 days from the date of completion of taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier.  The Service tax shall be paid to the credit of the Central Government immediately following the calendar month in which the payments are received, towards the value of taxable services.  In case of Associated enterprises, on accrual basis and not on payment basis. 4

Point of Taxation Rules, 2011 With effect from Point of Taxation shall be:  The date of invoice or payment, whichever is earlier, if the invoice is issued within the prescribed period of 14 days from the date of completion of the provision of service.  The date of completion of the provision of service or payment, if the invoice is not issued within the prescribed period as above.  If any advance is received for provision of taxable service, then the date of receipt of such advance. 5

Point of Taxation Rules,

Continuous Supply of services:  A service is said to be Continuous supply of service only if they are provided or agreed to be provided continuously for a period exceeding three months.  The following services are notified as “Continuous supply of Services: Telecommunication service Commercial or industrial construction Construction of residential complex Internet Telecommunication service Works contract service 7

Point of Taxation Rules, 2011 Continuous Supply of services:  The point of Taxation is similar to other services.  If the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the service receiver to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service.  If any advance is received, then the date of receipt of such advance. 8

Point of Taxation Rules, 2011 Where there is change of Tax rate.  If the taxable service is provided before the change of rate Date of invoice or date of payment whichever is earlier If payment is received before change of rate but the invoice for the same has been issued after the change of rate, then the point of taxation shall be the date of payment.  If the taxable service is provided after the change of rate Date of payment or date of invoice whichever is later. 9

Point of Taxation Rules, 2011 Exemptions: 1. Export of service Rules, 2005 – Shall be the date of receipt provided the receipt shall be within the period specified by the RBI. 2. Individuals or Firms providing the following services – shall be the date of receipt of payment.  CA/CWA/CS  Architect or Scientific and Technical Consultant  Interior decorators. 10

Point of Taxation Rules, 2011 Exemptions: 3.Reverse charge Mechanism 1. Shall be the date of payment provided the payment is made within a period of six months of the date of invoice. 2. Shall be the date of credit or date of payment whichever is earlier in case of “Associated enterprises” where the person providing the service is located outside India. 11

Point of Taxation Rules, 2011 Credit availment  Credit can be taken on the basis of invoices issued on or after provided payment is made within three months.  Invoices raised before shall be on payment basis.  If credit is availed based on the invoice and payment is not made within three months, then credit shall be reversed along with interest. 12

Guidelines relating to availing credit Credit can be availed on the basis of invoice All invoices can be included in the ISD challan provided there are no reversals. Inform us if there is any non payment of invoice for reversal of credit Invoices can be handed over to us immediately after accounting for availing credit. No change with respect to Non-resident payments and GTA. 13

Guidelines relating to payment of service Tax No change in GTA and Non resident payments. Invoice shall be raised within 14 days from the date of completion of service. No exemption to services provided to Group Companies. Example: Co. A has provided SAP sharing service to its subsidiary “B” for the month of July 2011 and raised the invoice on Service tax liability arises on itself and suppose to remit Service Tax on or before even though “A” has not raised invoice on “B”. 14

Notifications and Circulars referred Notification No. 18/2011 – ST dated Notification No. 03/2011 – ST dated Notification No. 25/2011 – ST dated Circular No. F.No. 341/34/2010-TRU dated Notification No. 41/2011 – ST dated Service Tax Rules, 1994 Notification No. 13/2011-CE (NT) dated