FAQ on reduction of service tax rate in view of Notification No 8/2009 – ST dated 24.02.2009

Notification No 8/2009 – ST dated 24.02.2009 has been issued to exempt the service tax that is in excess of 10%. On the other hand this is reduction of service tax rate from the existing rate of 12% to 10%.

  1. What is the effective date for the new rate?

Ans. The new rate is effective from 24.02.2009 on all services.

  1. Whether all the receipts that is to be received after 24.02.2009 is taxable at 10%?

Ans. No, the receipts pertaining to service provided after 24.02.2009 is liable for service tax at 10% and not for the receipts pertaining to service provided prior to that rate.

  1. In case the service is provided on 10.02.2009 and the bill is also raised on the same day charging service tax at the rate of 12%, and amount is to be realized in March. At what rate service tax has to be paid to the department?

Ans. It is very important to note that in case of service tax, the point of levy is on the service provided and point of collection is on realization. Therefore the service tax has to be paid at the rate prevailing at the time of provision of service on the date of realization. Therefore the service tax has to be paid at 12%.

  1. In case consideration was received in advance and the service tax was paid on the same at 12% for the service to be provide in March 2009, whether service tax can be refunded?

Ans. Any service provided or to be provided is covered under the taxable service. Therefore when the consideration is received in advance for provision of certain service, it is deemed taxable service that is provided, therefore the same is not eligible for refund.

  1. In case the bill is to be raised on 25.02.2009 for the service provided on 10.02.2009, then the service tax has to be charged at what rate?

Ans. The date of billing is not the criteria for deciding the rate of service tax, but the rate prevailing on the date of provision of service ( completion of service) is rate to be adopted. In this case since the service was provided on 10/02/2009, when the rate of service tax was at 12%, therefore 12% has to be charged although billed and to be realized after 24.02.2009. However services provided from 10th till 25th Feb would be at 10%.

  1. X, a security agency has to Rs. 3000 for its client for proving the taxable service for the month of February 2009.How the service tax has to be charged?

Ans. In such case the consideration has to be bifurcated from 01.02.2009 to 24.02.2009 and has to charge service tax at 12% (Rs. 2379) and for the balance at 10%

  1. In case an ongoing turnkey or a composite contract. How the rate reduction is to be given effect?

Ans. In case of turnkey or a composite contract the works executed till 23.02.2007 has to be charged at 12% and the work done there after can be charged at 10%. Usually the time gap between the completion of work and raising of RA Bills (Running Bill) will be more than 30days, therefore the bill raised after 24.02.2009 can also have 12%. No changes if opted for composition.

  1. In the construction industry, usually the retention amount shall be with hold by the principle and shall be released only after the completion of the project. Now if the retention pertaining to RA Bills raised prior is 24.02.2009 is paid in March 2009, at what rate service tax has to be paid?

Ans. Since the service tax has to be paid on the rate applicable as on the date of provision of service for the retention amount paid in March 2009 service tax has to be paid at 12% itself.

  1. Whether there is any reduction in composition rate of service tax of 4% for the contractors and also the special rate of 0.6 and 1.2 in case of Air travel agent?

Ans. No, there is no any reduction in these special rates of service tax. However rates that arise out of the abatement under 1/2006-ST dated 01.03.2006 will change accordingly.

  1. Whether the rate reduction is applicable in case of Import of Service also?

Ans. Yes, this if for the reason that section 66A deems the service provided in case of import of service as taxable service in the hands of recipient and all the provision of the Chapter V is applicable for the same. Since the reduction is by way of exemption to section 66, reduction is applicable to import of service also.

Case

Rate prevailing at the time of provision of service

Rate prevailing at the time of Billing/Invoicing

Rate prevailing at the time Realization of the consideration

Applicable rate of service tax

I

12%

12%

10%

12%

II

12%

10%

10%

12%

III

10%

10%

10%

10%

IV

10%

12%

10%

12%

V

10%

10%

12%

12%

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0 responses to “FAQ on reduction of Service Tax Rate”

  1. Alifhm says:

    Sir what is the limit for VAT audit?

  2. Mahantesh says:

    Sir:
    Plz send me the ST tares and filing dates, for the FY 2008-09 and 09-10.

    Thanks Regards
    Mahantesh

  3. Mahantesh says:

    Sir:
    Plz send me the ST tares and filing dates, for the FY 2008-09 and 09-10.

    Thanks Regards
    Mahantesh

  4. upesh says:

    What is the present service tax rate applicable to air travel agent on domenstic and international tickiting service

  5. armaan says:

    sir
    I am not convinced with the above one of query.If service tax payment has been recevied in advance and service tax paid at 12 % but the service for same is provided in march 2009.Applicable rate will be 10% and refunds shall apply but subject to doctrine of unjust enrichment.
    this can be inferred from the case law of reliance industried ltd.-2008-15SSTT29-TRI

  6. V K Choudhary says:

    Subject: – Non Taxability of Reimbursement of Medical Expenditure in Government Hospital

    As per Proviso to section 17 (2) Medical facility:- The value of perquisite in the following cases shall not be taxable, namely:-

    iQuery
    1.Whether the medicine/ pathological test is part of the medical treatment availed from Govt. Hospital /local authority and treatment of reimbursement of such expenses is exempt from tax under provision 17(ii) a and is beyond the limit of Rs. 15,000/- in all cases.
    2.V.K.Choudhary
    Chartered Accountant
    9818658333
    Vijaychoudhary2000@hotmail.com

  7. Rajesh says:

    Service Tax is applicable on sales commssion. even through it exceeds 10lakshs p.a.

  8. Sandeep Kanoi says:

    This notification is applicable to all the services mentioned in clause 105.

  9. Animesh Verma says:

    Dear Sir, I am working in a Conolidator of Air Ticketing and as per my knowledge early Government separetly isssued a notification specially for Air Travel Agent if there is any change. Can you please tell me whether this time too they issue such notification or the notification issued on 24th Feb'09 is applicable for all services mentioned in clause 105

  10. Sandeep Kanoi says:

    Dear Vivek, The above is not the clarification issued by service Tax department. Its based on queries normally asked by our readers. In respect of services rendered after 23.02.2009 s.t. is applicable @ 10.30% and notification for the same can be found at https://www.taxguru.in/service-tax/notification-fo

  11. Vivek says:

    What is the authenticity of the FAQ made above? Has the service tax department come out with some clarification for the same? Many of my clients are not willing to pay 12.36% on services rendered upto 23-2-09.

  12. Prashant Sawant says:

    I am working in Air Travel Agency where i would like to know whether the reduction in service tax w.e.f 24.02.2009 is applicable or not to services we render. Also provide me ant notification or circular in which specifically mentioned the details for my query if you have. I'll be really thankful to you if you revert on it asap as our huge payments are held up due to this issue.

    Thanks,
    Prashant Sawant
    Cell No.9969936359