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krishi kalyan cess on pending payments

Service Tax - By: - Suriyanarayanan Iyer - Dated:- 21-6-2016 - 1) This article seeks to examine the constitutional validity of rule 5 of the Point of Taxation Rules as amended, being applied to Krishi kalyan Cess introduced from 01.06.2016. 2) Relevant statutory provisions in Finance Act, 1994 are reproduced below. Quote SECTION [66B. Charge of service tax on and after Finance Act, 2012. -There shall be levied a tax (hereinafter referred to as the service tax) at the rate of [fourteen per cent.] .....

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ere the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as ma .....

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isions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation. - For the purposes of this section, - (a) [ consideration includes - (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may .....

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ount and any form of payment by issue of credit notes or debit notes and [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called Suspense account or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.]] SECTION [67A. Date of determination of rate of tax, value of taxable service and rate of exchange. - The rate of service tax, value of a taxab .....

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r levy of tax as applicable at the time of rendering the service. This provision was in complete alignment with rule 4 of the Point of Taxation Rules dealing with change in rates of tax. 4) Section 67A was amended and a sub-section (2) was inserted in 2016. The amended section 67A is as below. Quote SECTION [67A. Date of determination of rate of tax, value of taxable service and rate of exchange. - (1) The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the .....

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xation Rules which is interpreted to mean that all pending payments to service providers as on 01.06.2016 will suffer Krishi Kalyan Cess introduced in Finance Act, 2016 effective from 01.06.2016 read as below before its amendment in 2016. Quote RULE [5. Payment of tax in case of new services. - Where a service is taxed for the first time, then, - (a) no tax shall be payable to the extent the invoice has been issued and the payment received against such invoice before such service became taxable; .....

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ecause of the above explanations, it is being stated that on all outstandings where both invoice and payments are pending or payments made but invoices not issued within 14. 06.2016 will suffer Krishi kalyan Cess, though services might have been rendered before 01.06.2016. 8) The aforesaid interpretation is examined below. 8.1) It is settled law that rate of service tax cannot change based on date of payment. Please see COMMR. OF SERVICE TAX Versus CONSULTING ENGINEERING SERVICES (I) P. LTD- 201 .....

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of its powers under aforementioned sub-section (2), Government has inserted the two explanations in rule 5 of the Point of Taxation Rules. But the moot question is whether Government can exercise its powers in such a manner that rules framed / amended under notifications issued by taking recourse to sub-section (2) of section 67A are not in conformity with sub-section (1) of section 67A?. The answer has to be no . The words in force or as applicable at the time when the taxable service has been .....

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evy of a new adjunct like Krishi kalyan Cess through Point of Taxation Rules, Government is levying tax on services rendered and completed long before the date of introduction of Krishi kalyan Cess. Executive cannot assume such taxing powers through subordinate legislation. In ADANI POWER LIMITED Versus UNION OF INDIA-2015 (330) E.L.T. 883 (Guj.) = 2015 (11) TMI 1466 - GUJARAT HIGH COURT (upheld by Supreme Court in Union of India v. Adani Power Limited - 2016 (331) E.L.T. A129 (S.C.)] = 2016 (2) .....

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