Just a moment...

Report
ReportReport
Welcome to TaxTMI

We're migrating from taxmanagementindia.com to taxtmi.com and wish to make this transition convenient for you. We welcome your feedback and suggestions. Please report any errors you encounter so we can address them promptly.

Bars
Logo TaxTMI
>
×

By creating an account you can:

Report an Error
Type of Error :
Please tell us about the error :
Min 15 characters0/2000
Add to...
You have not created any category. Kindly create one to bookmark this item!
0 /50 characters
Create New Category
Hide
Title :
Description :
+ Post an Article
Post a New Article
Title :
0/200 char
Description :
0 char
Category :
Co Author :

In case of Co-Author, You may provide Username as per TMI records

Delete Reply

Are you sure you want to delete your reply beginning with '' ?

Delete Issue

Are you sure you want to delete your Issue titled: '' ?

Articles
Back

All Articles

Advanced Search
Reset Filters
Search By:
Search by Text :
Press 'Enter' to add multiple search terms
Select Date:
FromTo
Category :
- 0 - Views
THERE IS RATE CHANGE # RETURN UTILITY # NO MORE UTILITY
Date 09 Sep 2015
Written By
Taxpayers Struggle with Online Returns Due to Service Tax Rate Change from 12.36% to 14% Since June 2015
The article discusses the challenges faced by taxpayers due to changes in service tax rates, particularly when filing returns online. It highlights the complexities introduced by rate changes, such as the transition from a 12.36% to a 14% service tax rate effective June 1, 2015. Taxpayers who received advances and paid tax at the old rate must now pay the differential tax. The online return utility, however, only accepts the current statutory rate, causing difficulties in accurately reporting tax liabilities. The article calls for updates to the return utility to accommodate these issues and prevent taxpayer inconvenience.

Introduction:-

“Online” - the most used word in modern world; whether it is a “person” or a “procedure”, everyone and everything is online now. Compliance procedures of most of the legal provisions have become online, somewhere it is optional and somewhere it is mandatory. In the service tax too, concept of online filing of return was first introduced for big taxpayers; w.e.f. 1.10.2011. Since then, the service tax return utility has been a classical example of both efficient data compiler and technical hurdles. The Service tax which itself is so much complicated containing a plethora of provisions, becomes scarier when a rate change takes effect. This becomes even more mind boggling when the rate change happens in between of a year. The after effects of this rate change proved a pain most when filing the service tax return. This article explains this pain of tax payers.

Analysis of legal provisions:-

The change in rate of service tax is the most complicated thing faced by the assessees. Last change in the service tax rate was in the year 2012-13 which was perhaps the most complicated change as there was transformation of service tax law by way of introduction of negative list concept. However, since then, things have simplified much as the transitional period has passed. Here, in this article, we are talking about the effect of rate change while filing the service tax return online. Before coming to the point, it would be better to discuss the provisions applicable in case of change in the rate of service tax. According to Point of Taxation Rules, 2011; if any advance is received against a service to be provided in future, the service tax is to be paid at the time of receipt of such advance. However, if the service is not yet provided and invoice is also not issued and there is change in rate of service tax; the service tax has to paid on the entire value as per new rate. Thus, the advance on which tax was earlier paid with old rate; will now be subject to new rate. This can be understood with the help of following example:-

Advance Received ₹ 50000/-

Date of advance 1.4.2015

Service tax rate 12.36%

Service tax paid on 5.5.2015 50000 * 12.36% = ₹ 6180/-.

Change in rate of service tax 1.6.2015

New rate of service tax 14%

Date of provision of service 1.7.2015

Date of issue of invoice 5.7.2015

In above case, since the provision of service and issue of invoice (i.e. two events) are after the change in rate; new rate will be applicable on the entire service value. Thus, now the service tax payable on advance will be calculated as follows:-

50000*14% = ₹ 7000/-.

Since service tax of ₹ 6180/- has already been paid by 5.5.2015; differential service tax of ₹ 820/- (being 7000-6180) would be now payable.

The question is how and where this differential service tax of ₹ 820/- will be represented in the ST-3 return.

History of problems in return utility:-

In 2012-2013, the return utility (July-Sept) had the facility of inserting an additional row and mentioning that differential rate of tax; thereby showing the additional tax to be paid in a particular month for a particular service. It had the facility of inserting any rate irrespective of the fact that statutory rate of service tax applicable as on date is different. Thus, in the given example, in the year 2012-13; we could show both the transactions of taxes paid and rates applied. There was facility in the return utility to consider the change in the rate of service tax and all the relevant details could be presented by way of inserting a new row below the main details.

Later on, the return utilities have undergone changes. In the later period till now, the return utility does not accept any rate other than the statutory rate applicable. Thus, now, if one tries to enter any rate other than the rate applicable as on date, the utility does not accept the same and the return gets void. Thus the return filer has to strictly follow the application of statutory rate only. For this the data of that particular period had to be adjusted so that net tax paid for that particular period could be arrived in the return.

Rate change w.e.f. 1.6.2015:-

W.e.f. 01/06/2015, the rate of service tax has been increased to 14% from 12.36%. Thus, a no. of assessees who have received advances and have already paid service tax on the same with old rate; will now be required to pay the differential tax. It is worth noting here that the last few return utilities are not accepting the rate of tax if it is other than statutory rate. However, since there was no change in the rate of service tax during this period, this problem did not come in limelight. Now, when there is change in service tax rate, again, the same problem would be faced since there will be two sets of service tax rates applicable for the same taxable service and no mechanism in the online utility to display the same.

While parting:-

Online filing has made the life of tax payers easier and hassle free; however, at the same time one or other fault in the return utility creates the hassle and it becomes a tough job to file the returns online. One such fault is being discussed in this article which can create problems in the coming month. There is still time in the due date of filing the ST-3 return. The authorities can manage to update the return utility as soon as possible. If it is not updated, a no. of online return filers will be harassed with no fault at their end.

0 answers
Sort by

Old Query - New Comments are closed.

Hide

No Replies are present for this Article

Recent Articles