For the purpose of charging service tax on any service, the incidence of levy is on person rendering of a taxable service which is termed as point of taxation. Usually people have confusion regarding the point in time when a service is deemed to be provided and thereby service tax is to be deposited. Therefore the Rule 2(e) is summarized below:
*is even if payment might be received after 01.04.2011 but service was provided or billed before the said date will be subject to old rule.
# is that if Invoice is not issued within 14 days of completion of service, then Date of Invoice will be changed to Date of Completion of service
$ is that if Invoice is not issued within 30 days or 45 days in case of banks and financial institutions of completion of service, then Date of Invoice will be changed to Date of Completion of service
Reverse Charge Mechanism – Rule 2(1)(d):
Date of Payment, if the payment is received within 6 months. In other cases, the normal rule of taxation will apply.
Export of service:
Date of Payment, if the payment is received within the time limit prescribed by RBI. In other cases, the normal rule of taxation will apply.
Individual/Firms whose aggregate value of taxable service is less than Rs 50 Lakhs in previous year
Date of Payment – upto taxable service of Rs. 50 Lakhs only.
Individual/Firms providing services of Architect, CA, CS, ICWAI, Legal Consultancy, Consulting Engineer or Interior Decorator:
Date of Payment
Associated Enterprises (Holds >=20% Share Capital)
Date of credit in books or date of payment whichever is earlier
Continuous Supply of Services
The persons falling in continuous supply of service [Rule 2(c)] i.e. services provided where contract is of more than 3 months or prescribed by Central Government will be collecting tax on date of completion of service. Date of Completion of service is the milestone fixed by the provider as to when payment for the service becomes due. For eg, in case of telephone service, date of completion of service will be the date when bill is issued to the subscriber for payment of dues.
Date of Payment [Rule 2A]
Now the date of payment of service tax will be date of payment entry in books or date on which amount is credited in bank account, whichever is earlier. But if there is change in the service tax rate or for the first time tax is imposed and the payment in bank is credited after 4 working days, then date of payment shall be date of credit in bank account only.
(Author ‘Sagar Gupta’ is an innovative leader in delivering corporate advisory & solutions and can be reached at email@example.com)