TMI BlogImportant Caution for Professional like CA/CMA (8 category) - Rate of Tax on old invoice raised upto 31st March 2012 to revised to 12% , hence issue supplementary invoicesX X X X Extracts X X X X X X X X Extracts X X X X ..... Important Caution for Professional like CA/CMA (8 category) - Rate of Tax on old invoice raised upto 31st March 2012 to revised to 12% , hence issue supplementary invoices - By: - CS Swati Dodhi - Service Tax - Dated:- 12-5-2012 - - In ordinary case, the point of taxation i.e. liability to pay service tax arise on earlier of the following two i.e. date of Invoice or Date of Payment. In Rule 7 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was an exception that 8 specified services provider and under reverse charge mechanism the point of taxation (liability to pay) will arise only on the basis of date of payment. Impact after change in rate: Circular No.158/9/2012 dated 8 th May, 2012 has been issued by the department clarifying the applicability of rate of tax in case of individuals, proprietary firms or partnership f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm providing 8 Specified Services on which Rule 7 of Point of Taxation Rules applies and in cases where tax is paid by the Service Receiver under reverse charge mechanism. Clarification regarding the applicability of Rate of Tax was sought where invoice is issued on or before 31 st March 2012 and payment against which is received on or after 1 st April 2012 as in respect of aforesaid cases. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department vide its Circular No. 154/5/2012-ST dated 28 th March 2012 mentioned that in case of 8 specified services on which Rule 7 of the Point of Taxation Rules applies, the Point of Taxation shall continue to be governed by Rule 7 of the said rules which shall be the date of receipt of payment. Thus in respect of invoice issued on or before 31 st March 2012 the point of taxation sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be the date of payment. Further, clarifying the above situation and in addition cases where Service Tax is paid under reverse charge mechanism in respect to applicability of Rate of Tax where invoice is issued on or before 31 st March, 2012 and payment is received on or after 1 st April, 2012. Department vide Circular No. 158/9/2012 dated 8 th May, 2012 clarified that the Rate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Service Tax prevalent on the date when the Point of Taxation occurs is the rate of Service Tax applicable on any Taxable Service. Thus in case of such 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 mechanism by the service receiver, points of taxation occurs to be the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of payment . Thus, if the payment is received or made, as the case maybe, on or after 1 st April 2012, the service tax needs to be paid @12% as prevailing on the date of receipt of payment. Also, it has been clarified that to recover the differential amount due to change in Rate of Service Tax, a Supplementary Invoice may be issued to reflect the new rate of tax. Also, in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reverse charge mechanism CENVAT Credit can be availed on the basis of such supplementary invoice and tax payment challan. - Reply By DEV KUMAR KOTHARI as = It seems that the circular is contrary to legal provisions. The rate of service tax applicable can only be on the day of rendering of service, it cannot be any other day. Receipt of payment on a subsequent day or on a prior day (in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of advance) cannot change the date of rendering of service. The point of taxation is only to fix the liability of payment/ deposit of ST in some cases, on receipt basis. The liability is incurred to pay service tax on the date of service rendered, and not on the date of receipt of payment. Suppose tax is removed, and service is not taxable on the day of payment, but was taxable on the day w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen service was rendered, the service provider will be liable topay service tax in respect of services rendered when tax was applicable though tax may not be applicable when payment is received. Therefore, services rendered till 31.03.12 should be considered as taxable at old rates prevailing at the time of rendering of services. This point will also be relevant for tax l;iability in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new law which came into force on 28.05.12 when the FB became FA on assent of President. services which were not taxable tll 27.05.12 , will not become taxable merely becasue payment is received on or after 28.05.12. Readers are requested ot discuss the issue and related issues with practical examples and more details. The collection of the same may be deferred in some cases or clas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of cases Dated: 30-5-2012 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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