Case Law Details
The question before us is what would be the rate of tax where (a) the service is provided by the chartered accountants prior to 01.04.2012; (b) the invoice is issued by the chartered accountants prior to 01.04.2012 but (c) the payment is received after 01.04.2012.
In the present case there is no dispute that all the services were rendered before 01.04.2012 and even the invoices were raised before that date and it was only that the payment was received after the said date. In such a case, according to the petitioner, Rule 4(a)(ii) of the Point of Taxation Rules, 2011, applies and the point of taxation shall be the date of issuance of the invoice. The service tax authorities however rely on two circulars issued by the Tax Research Unit of the CBEC –Circular No.154 dated 28.03.2012 and Circular No.158 dated 08.05.2012 and which say that ” in case of 8 specified services provided by individuals or proprietary firms or partnership firms and in case of services wherein tax is required to be paid on reverse charge by the service receiver, if the payment is received or made, as the case maybe, on or after 1st April 2012, the service tax needs to be paid @12%.
Rule 4 of the Point of Taxation Rules, 2011 which has continued even after 01.04.2012 provides for a specific situation namely determination of the point of taxation in case of change in effective rate of tax. The words earlier used in the Rule were ―change of rate‖. In the place of these words, the words ―change in effective rate of tax were inserted w.e.f. 01.04.2011. This was done by the Point of Taxation (Amendment) Rules, 2011 vide notification No.25/11-ST dated 31.3.2011. The petitioner has pointed out to sub-clause (ii) of Clause (a) of Rule 4. This Rule applies notwithstanding anything contained in Rule 3 which provides for the determination of point of taxation. As per Rule 4, whenever there is a change in the effective rate of tax in respect of a service, the point of taxation shall be determined in the manner set out in the Rule. Clause (a) provides for a case of taxable service which was provided before the change in effective rate of tax has taken place. Clause (b), in contrast provides for a case of a taxable service which has been rendered after the change in the effective rate of tax has taken place. W.e.f. 01.07.2012, there has been a change in the effective rate of tax from the earlier 10% to 12%. In the petitioner’s case, the dispute is only with reference to the services provided by the chartered accountants before 01.04.2012. Clause (a) of Rule 4 would therefore govern its case. This clause provides for three further situations. Clause (i) covers a case where an invoice for the service was issued and the payment was also received after the change in the effective rate of tax. In such a case, the date of payment or the issuance of the invoice, whichever is earlier, will be deemed to be the date on which the service was rendered and that will be the point of taxation. The present case is not governed by this sub-clause. Sub-clause (iii) takes care of a case where the payment is also received before the change in the effective rate of tax, but the invoice for the same was issued after the change. In such case the point of taxation shall be the date of payment which will be deemed to be the date on which the service was provided. The petitioner’s case is not governed by this sub-clause either.
The case of the petitioner is governed by sub-clause (ii). Under this clause where the taxable service has been provided before 01.04.2012 and the invoice was also issued before 01.04.2012, but the payment is received after 01.04.2012, then the date of issuance of invoice shall be deemed to be the date on which the service was rendered and, consequently, the point of taxation.
The result of the discussion will be that where the services of the chartered accountants were actually rendered before 01.04.2012 and the invoices were also issued before that date, but the payment was received after the said date, the rate of tax will be 10% and not 12%. The circulars in question have not taken note of this aspect, and as noted earlier have proceeded on the erroneous assumption that the old Rule 7 continued to govern the case notwithstanding the introduction of the new Rule 7 which does not provide for the contingency that has arisen in the present case.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
what is a penality if servive tax paid late, service tax on rent
personal name rent received