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:
CA. Vikas Khandelwal,
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