Sometimes Government changes the Service tax rate

For example

Service tax rate till 31 May 2015 was 12.36% but from 1.6.2015 was changed to 14%

Point is whether old rate will be applicable or new rate

 

In this case as per Rule 4 of Point of Taxation Rules

Service Provided before rate change

Normally old rate is applicable
However, if both invoice and payment received after rate change,new rate applicable

 

Service Provided after rate change

Normally new rate is applicable
However,if both invoice and payment received before rate change, old rate applicable

Summary

SERVICE INVOICE  PAYMENT Rate applicable
BEFORE BEFORE BEFORE

-a-OLD-ea-

BEFORE BEFORE AFTER -a-OLD-ea-
BEFORE AFTER AFTER -a-NEW-ea-
BEFORE AFTER BEFORE -a-OLD-ea-
AFTER AFTER AFTER -a-NEW-ea-
AFTER AFTER BEFORE -a-NEW-ea-
AFTER BEFORE BEFORE -a-OLD-ea-
AFTER BEFORE AFTER -a-NEW-ea-

 

 

 

Similarly,it may happen Service tax was earlier exempted,later it became taxable or vice versa

In this case also,Rule 4 applicable

 

 

Meaning of Date of Payment

 Date of Payment means

Date Payment entered in books

Or

Date of Credit in bank account

Whichever is earlier

 

Exception-

But In case of new service becoming taxable or change in rate of tax,

Date of Payment means

Date of Credit in bank account only

If following condition is satisfied

  • Such rate change or new service becoming taxable is between date of credit and date of payment
  • the payment is made by way of an instrument which is credited to a bank account, (Example- Cheque)
  • the credit in the bank account is after four working days from the date when there is change in effective rate of tax or a service is taxed for the first time;

 

  1. Service Tax
  2. Point of Taxation Rules
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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