Saturday, April 14, 2012

AVOID 12.36 % APPLY 10.30 % SERVICE TAX RATE ! HOW ? WHEN ?


on Saturday, April 14, 2012

Now it is clear to all the new service tax rate 12.36% is applicable from 01.04.2012. But generally there is perception in mind of people that where service has been provided before 31.03.2012 , 10.30 % service tax rate to be charged and where service has been provided after 01.04.2012, Service tax rate must be charged 12.36 % .But this is not the Fact .New Rates applicability is Governed by Point of Taxation rules (rule-4) .CA. Vikas Khandelwal has decoded the related rules in simple and tabulated manner for us .


DETERMINATION OF ‘RATE OF TAX’ AND ‘POINT OF TAXATION” IN CASE OF RATE OF CHANGE OF TAX 

(Analysis of Rule 4 of the Point of Taxation Rules, 2011)

With effect from 01.04.2012, Rate of service tax has been increased from 10.3% to 12.36%.Therefore, professionals and assesses must know where the old rate of Service Tax can be applied. Moreover, professionals should be aware of steps to be taken for availing the benefit of old rate of service tax as per the relevant provisions.

For example: if services have been provided prior to 31.03.2012, issuing of invoice prior to 31.03.2012 shall ensure applicability of old rate of Service Tax.This write-up deals with the provisions relating to rate of tax where there is change in effective rate of Service Tax.

Further write-up on change in effective rate of service tax as applicable w .e. f. 01.04.2012 is also given here under and link to download given at the end .

1.0 DETERMINATION OF RATE OF TAX IN CASE OF CHANGE IN EFFECTIVE RATE OF TAX 

1.1 Step 1: Identify following three events: 
  • (i) Date on which taxable services have been provided; 
  • (ii) Date of issue of invoice; 
  • (iii) Date of receipt of payment 

Meaning of Date of Receipt of Payment and Date on which Taxable services has been provided 



(A) Date of receipt of payment: In present context, as per Rule 2A of Point of Taxation Rules, 2012 read with proviso thereof, date of payment shall be as under:


  • (i) If payment is received in cash: The date when the same is recorded in books of accounts or the date when deposited in bank account (if deposited), whichever is earlier.Thus, if payment is received by cash and same is recorded prior to 31.03.2012, date of payment shall be considered to be prior to 31.03.2012 (i.e. on such date when it is recorded in books of accounts).
  • (ii) If Payment is received by an instrument which is credited to a bank (e.g. cheque): In such case, if payment is recorded in books of accounts prior to 31.03.2012 and payment is credited in bank after 31.03.2012, in such case, date on which payment is recorded in books of accounts shall be considered as “date of payment” if Payment is credited in bank by 05.04.2012 (4 working days are allowed from the date of change of rate of tax, 01.04.2012 is Sunday).However, if payment is credited after 05.04.2012, date of credit in bank shall be considered as ‘date of payment’.
In simple words, if payment is recorded in books prior to 31.03.2012 and same is credited in bank by 05.04.2012, date of payment shall be considered to be prior to 31.03.2012(i.e. the date when same is recorded in books of accounts).

where date of credit in bank is after 05.04.2012 then date of credit in bank is to be treated as "Date of Payment " for Point of taxation rules.
Note:In few States Four working days end on 09/04/2012 as 01/04/12 is Sunday, 2/04/2012 is bank holiday for year end closing ,3 and 4 working,5/12/2012 holiday on account of Mahavir jayanti and 06/12/2012 is  holiday on Account of Good Friday 7 th is working but 8th is Sunday so Fourth working day falls on 09/04/2012


(B) Date when services have been provided: This has not been defined in Point of Taxation Rules, 2012. However, it should be interpreted to mean completion of provision of service with respect to which invoice is raised or would be raised.


1.2 Step 2: Determine rate of tax: 
  • (i) Applicability of 10.3 %: If two out of the three events given in step 1 herein above took place prior to 31.03.2012; 
  • (ii) Applicability of 12.36%: If two out of the three events given in step 1 here in above took place on or after 01.04.2012; 
In simple words, if any two events out of three mentioned in step takes place prior to 31.03.2012, old rate i.e. 10.3% shall be applicable. 


2.0 DETERMINATION OF ‘POINT OF TAXATION’ 


Download Point of Taxation Rules related to Service tax rate as explained above and new Service Tax rates wef 01.04.2012 2.1 As mentioned in Step 1 & 2 hereinabove, majority of three events shall decide the rate of tax. Now, date out of such majority dates shall be point of taxation. The same shall be determined as under:

Download Point of Taxation Rules related to Service tax rate as explained above and new Service Tax rates wef 01.04.2012
CA. Vikas Khandelwal, 
610, GD ITL Twin Towers, 
B-08, Netaji Subhash Place, 
Ring Road, Pitampura 
Delhi-110034 
Ph: 011- 27356481, 
M- 91 9899740370 
Download Point of Taxation Rules related to Service tax rate as explained above and new Service Tax rates wef 01.04.2012

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  1. Sir,

    You have explained Rule position clearly but it is unfair on the part of the Govt to frame Rules in such a way as to mandate that, in case of bills raised in Apr 12, service tax becomes payable at new enhanced rate even in respect of services provided or or before 31st Mar.

    They should have provided the date of providing service as criterion for determining the rate of tax

    Yours truly

    ReplyDelete
    Replies
    1. You are correctly said ,but think on other side .

      There are generally few proofs for date of provision of service . If such rules are not made every body show their service provision date in March ,2012.

      But yes this is a hardship case for genuine cases.

      Delete
  2. Dear Sir,
    we will raise a Service Invoice on 15th Apr. 2012 which service period is start from 15.03.12 to 14.04.12. what rate of ST will be raised. we have received 50 % of the agreement on 03.03.2012 without ST but on 31.03.12 we have deposited ST on reverse calculation.

    please clear the positation

    ReplyDelete
    Replies
    1. you should raise two bills one for advance payment 50 % @ 10.3 % and balance bill @ 12.36 %

      Delete
  3. Dear Sir,
    We have raised our invoice on 31/03/2012 with ST @10
    3%. bt we are unable to deposit ST on that particular Invoice before 30/04/2012 due to shortage of money.
    So plz tell me how much days interest on challan we will have to deposit.and also tell me how much penalty we will have to pay for delay in Return

    ReplyDelete
    Replies
    1. interest is 1.5 % per month and penalty is not mandatory but it can be maximum 2 % per month.

      Delete
  4. Dear Vikas,

    Please clarify, what service tax rate is applicable if the Invoices raised before 1 july 2011, if new rate is applicable, then we need to raised Invoices or Debit Note for additional amount of service tax @ 2.06.

    Thanks,
    Manish Saxena

    ReplyDelete
    Replies
    1. You have to check three things first invoice date ,service provided on and payment received

      if any two out of three above falls before 31.03.2012 then old rate 10.30 is applicable .From your query dates and action can not be commented

      Delete
  5. Dear Sir I want to know about ST is applicable from 1st april or when date of annoucement budget. some people apply new rates of ST at the budget announcement date. plz cleat it.


    Thanks

    Arvind Upadhyay

    ReplyDelete
    Replies
    1. It is applicable from 01.04.2012 only

      Delete
  6. My reliance mobile bill period is 3-mar-2012 to 2-apr-2012. The bill was generated on 3-apr-2012. The company has charged the service tax on the bill amount @12.36% for the entire bill period and not on the pro-rata basis, i.e. 10.3% should have been from 3-mar-2012 to 31-mar-2012 and 12.36% from 1-apr-2012 to 2-apr-2012. Please clarify whether my understanding is correct or the company has charged correctly.

    ReplyDelete
  7. What is the abatement percentage for service tax in case of Railway catering services. Before we were charged 50% and now somebody told it as 40%. please clarify.

    ReplyDelete
    Replies
    1. There is no change in abatement for outdoor catering service yet but it is proposed to be reduced to 40 % .Date yet to be notified . Read notification 11/2012 budget notification

      11/2012 Applicable from the date on which section 66B will come into effect.

      Read more: http://www.simpletaxindia.net/2012/03/service-tax-changes-notification-wise.html#ixzz1uUMt2qdh

      Delete
  8. Good and Knowledgeable article

    ReplyDelete
  9. I have commercial property and residential property and render professional service as consultant to a company. Now all together it needs to be below 8L? Or just income from commercial property in order not to bill service tax to my commercial client?

    ReplyDelete
    Replies
    1. yes, exemption under service tax is person wise not service wise . However exemption limit is 10 lakh not 8 lakh

      Delete
  10. I've started consultancy services very recently. I want to confirm. When I've to make payments, I've to deduct 12.36% (TDS) from whole amount and then issue cheque,OR shall I add that Service tax. % amount in to actual payment amount, and then issue cheque.

    ReplyDelete
    Replies
    1. Please give example for your query

      Delete
  11. plz give me a detail of service tax define @12.36% which %age as per service tax

    ReplyDelete
    Replies
    1. BaSIC RATE 12 %

      hIGHER EDUCATION CESS :2 % OF SERVICE TAX =0.24 %
      Secondary education cess =1 % of service tax =0.12%

      Total=12+.24+.12=12.36%

      Delete
  12. Hi,
    From the above query of Mr. Vijay Arora, what I understood is his query is regarding deduction of TDS on whole amount of bill including service tax for e.g. on Rs. 112.36 (100 + 12.36 = Rs. 112.36) or only on Rs. 100

    Thanks,
    Chetan

    ReplyDelete
  13. hi,

    As you know changes in service tax payment, in case of manpower consulting firm , 25% payable by service provider and 75% by service receiver.

    tell me how to calculate service tax and how to incorporate in bill

    please do let me know.

    ReplyDelete
    Replies
    1. for service provider s.tax 3.09 %
      for service receiver s.tax 9.27 %

      Delete
  14. We hav ST regn 4 2 services V received some incentive during Jul 2012 on our investments for the period from 01012012 to 31032012 Should v hav to pay any service tax for that period

    ReplyDelete
    Replies
    1. query is not very much clear ,pls provide complete details

      Delete
  15. dear sir,
    how to calculate service tax.

    ReplyDelete
  16. Hello
    Need some information.
    Im offering a service to a client.

    in this case we are doing a hotel payment for a dinner/cocktail seminar on behalf of the client.
    the client is saying raise a debit note for the total expense incurred in the hotel payment, that way service tax need not be charged.
    can anyone please explain this?
    thanks
    keyan

    ReplyDelete
    Replies
    1. read provision related to pure agent in service tax. If you are doing payment on behalf of client which is also known to him and you are getting same amount as reimbursement then service tax is not applicable.There are few ifs and buts which is best known to you as completed detail with you but basis position i have explained.

      As per sub rule (2) of Rule 5 the expenditure or cost incurred by the service provider as a pure agent of the recipient of the service shall be excluded from the value of taxable service if all the following conditions are satisfied:

      • the service provider acts as a pure agent of the recipient of service when he makes payment to third party for the goods or services procured;
      • the recipient of service receives and uses the goods or services so procured by the service provider in his capacity as pure agent of the recipient of service;
      • the recipient of service is liable to make payment to the third party;
      • the recipient of service authorises the service provider to make payment on his behalf;
      • the recipient of service knows that the goods and services for which payment has been made by the service provider shall be provided by the third party;
      • the payment made by the service provider on behalf of the recipient of service has been separately indicated in the invoice issued by the service provider to the recipient
      of service;
      • the service provider recovers from the recipient of service only such amount as has been paid by him to the third party; and
      • the goods or services procured by the service provider from the third party as a pure agent of the recipient of service are in addition to the services he provides on
      his own account.

      Delete
    2. thanks Mr.Raja Babu.
      below is what we practice:
      1. hotel bill Rs.100
      2. tax @ 12.36%

      when we charge the client
      1. hotel charges 112.36
      2. payment routing fee 10% of that value
      3. service tax 12.36%
      is this correct?

      Delete
    3. more details are required . what service you are providing ?How it is provided . what is your role etc etc ...are you working as travelling agent ?

      Delete
  17. My ISP STAR Cable Net Broadband Service started charging 12.5% service tax from past 3 months. Before that, ISP did not use to charge any service tax. I am not sure if they are even legally eligible to charge service tax from me because they do not give me a computerised bill.
    When I insisted, they gave me a receipt with ST no. as ST/MUM/DIV-VI/INT/129/O4. Is this a valid ST no.?
    How can I verify?

    ReplyDelete
  18. Dear Sir
    I went one clerification for Service tax Deduction for Transportaion Payment. Because we are supply material for site. Site Finance Department Deduction Change the service tax rate. 2011 at the time service tax rate is 10.3%. After 1/4/2012 service tax 12.36%.

    our Contract peroid time supply material transport charge including the service tax. after that change the period he deducting the current period change value of tax
    Kindly sent details

    A.Anbu

    ReplyDelete
    Replies
    1. pls ask in details .what is your status ,whether you are transport company ,what is contract etc etc

      Delete
  19. Dear sir,
    I have a scientific consultancy service and I have paid the service tax @12.36% for the consultancy charges for the year 2012-13. There is a TDS of 10@ by the firm, which is receiving the service from me. I want to know, whether I have to pay additional taxes before March 31. I understand that while calculating the income, I can exclude some expenditures, required to carry out my consultancy service. Am I correct? If yes, then can I include payments for (i) rent of office, (ii) maintenance of office, (iii) electricity bill, (iv)payment to driver and office assistant, etc. It is not possible to maintain the receipts for each of these expenditures.
    Can you throw light on above or show some guidelines in detail.
    regards

    ReplyDelete
    Replies
    1. yes , you can deduct such exp and even more but you have to maintain records for it .As per income tax rules you have to maintain books of accounts.

      further on net income , slab rates will be applicable and you can also claim 80C or other eligible deductions also

      Delete
    2. Thanks. Is this book of accounts to be audited by a CA.? My income from consultancy is max Rs. 12lakhs. What could be other expenses, which I can include?

      Delete
  20. Hi,
    why do some resturants charge 4.94% service tax while some charge 12.36%. Is there any fixed percentage that restuarants charge as service tax. How can we know which resturants charge higher servie tax and which resturants charge lower?

    ReplyDelete