Sponsored
    Follow Us:
Sponsored

As per the negative list regime which came into effect from 1st July, 2012 several services have been additionally notified under reverse charge mechanism. Partial reverse charge mechanism has been brought up in certain cases in case of works contract, supply of manpower etc.

It is well understood the rate of determination of service tax shall be governed by Point of taxation Rules, 2011. I intend to discuss two most significant rules that have wide applicability. These are Rule 3 and Rule 7. Rule 3 can be said as general rule while Rule 7 applies only in respect of reverse charge mechanism (previously also for export of services).

A simple analysis (without technical jargon – to engage on the essence) of rule 3 shall be that the Point of taxation shall be earlier of Date of Issuance of Invoice or date of receipt of payment. Where invoice not issued as per Rule 4A period, date of invoice above shall be replaced with date of completion of service. (In case of continuous supply of service, date of payment linked event shall be considered date of completion of service).

Now, for reverse charge cases, normally Rule 3 shall not apply but Rule 7 shall apply. Rule 7 simply considers the date of payment as Point of taxation. Date of payment shall be earlier of credit in bank account of Service provider or payment book entry (as per Rule 2A).

Only in a single case it shall not be date of payment and Rule 3 shall apply even for reverse charge mechanism and that is when the payment is not made within a period of six months of the date of invoice.

For example:- Say the invoice for supply of manpower was issued on 5.7.2012 but the payment has not been made till 5.1.2013 (i.e. within 6 Months) rather it is made on say 15.2.2013 in such case rule 7 shall not apply and instead Rule 3 shall apply.

Therefore, Point of taxation will be now 5th July, 2012 instead of 15.2.2013 and service tax shall be paid with interest computed from 5th August, 2012 to actual date of deposition of service tax. Further, the Cenvat will still be available from date of challan and not as per invoice as per Cenvat Credit Rules, 2004.

Read Other Articles from CA Ankit Gulgulia (Jain)

———————

CA Ankit Gulgulia – Author is practicing Chartered Accountant in New Delhi and specialising in Indirect Taxes, Corporate Laws and Transfer Pricing. He can be reached at [email protected].

Sponsored

Author Bio

CA Ankit Gulgulia (Jain) is Celebrated Chartered Accountant practicing since 2010. He is Founder of Ankit Gulgulia & Associates, Chartered Accountants serving Clients PAN India and Across the Globe. He is Fellow Member of Institute of Chartered Accountants of India, Certified IFRS & Busin View Full Profile

My Published Posts

Gujarat HC delivers Two in One Reliefs for Real Estate Industry in India Taxability of Transfer of Development Rights in Positive List, Negative List & GST ERA 10% Tax on LTCG on Equity Shares & EOFs with Sample Calculation GST on Printing Industry – A Detailed Analysis & Item Wise Rate Table Study Valuation of supply under CGST Act, 2017 and Rules thereof– A Simplified Analysis View More Published Posts

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Sponsored
Sponsored
Ads Free tax News and Updates
Sponsored
Search Post by Date
December 2024
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
3031