Point of Taxation - Service Tax, Indirect Tax Laws Video Lecture | Indirect Tax Laws - B Com

point of Taxation rules under surface
tax part 2 in part 1 we discussed rule
number 3 and rule number 4 in great
detail in this video we will discuss
subsequent rules what happens when
service becomes taxable for first time
let's say you have started your business
and after a few months that turn over
crosses 10 lakhs then the question
arises whether one should pay service
tax on the amount which is more than 10
lakhs or on the whole amount take
another scenario you are providing
service on which no service tax is
payable however as per amendments in
service tax law you need to charge
service tax then what you should do
whether you should pay service tax on
the old billing or new billing the
answer to such question lies in rule 5
of point of Taxation rules here is rule
5 where a service is text for the first
time then comma 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
no tax shall be payable if the payment
has been received before the service
becomes taxable and invoice has been
issued within 14 days of the date when
the service is text for the first time
what is the point of Taxation for
government authorities service receivers
who have to pay tax based on reverse
charge mechanism in such cases one
should refer all seven of point of
Taxation rules rule seven point of
Taxation rules
notwithstanding anything contained in
rules three comma four or eight the
point of Taxation in respect of the
persons required to pay tax as
recipients of service under the rules
made in this regard in respect of
services notified under subsection of
section 68 of the Act shall be the date
on which payment is made provided that
where the payment is not made within a
period of three months of the date of
invoice the point of Taxation shall be
the date immediately following the set
period of three months provided also
that where there is change in the
liability or extent of liability of a
person required to pay taxes recipient
of service notified under subsection of
section 68 of the Act in case service
has been provided and the invoice issued
before the date of such change but
payment has not been made as on such
date the point of Taxation shall be the
date of issuance of invoice provided
also that in case of services provided
by the government or local authority to
any business entity the point of
Taxation shall be the earlier of the
dates on which - any payment part or
fall in respect of such service becomes
due as specified in the invoice bill
challenge or any other document issued
by the government or local authority
demanding such payment or
payment for such services is made point
of Taxation for copyrights royalty
trademarks patents and similar items at
times it become difficult to ascertain
when to charge service tax when service
is in the nature of royalty trademark
design or patents then in such instances
you need to refer rule eight a point of
Taxation where the whole amount of the
consideration for the provision of
service is not ascertainable at the time
when service was performed and
subsequently the use or the benefit of
these services by a person other than
the provider gives rise to any payment
of consideration the service shall be
treated as having been provided each
time when a payment in respect of such
use or the benefit is received by the
provider in respect thereof or an
invoice is issued by the provider
whichever is earlier what is the point
of taxation if the point of taxation is
not determinable as per the above rules
in such cases one need to refer rule 8 a
of point of taxation rules which says
where the point of taxation cannot be
determined as per these rules as the
date of invoice or the date of payment
or both are not available the central
excise officer may require the concerned
person to produce such accounts
documents or other evidence as he may
deem necessary and after taking into
account such material and the effective
rate of tax prevalent at different
points of time shall by an order in
writing after giving an opportunity of
being heard determine the point of
Taxation to the best of his judgment
what is the status of invoices issued
prior to 1st of October 2014 in view of
the rule 7 of point of taxation rules if
the invoice has been issued before
October 2014 but payment has not been
made then one has to refer rule 10 of
point of taxation rules which says
the point of Taxation shall comma if
payment is made within a period of six
months of the date of invoice be the
date on which payment is made if payment
is not made within a period of six
months of the date of invoice be
determined as if rule seven and this
rule do not exist for example company
ABCD Private Limited has received a
service on 30th sep 2014 but it made
payment on 21st Mar 2015
then point of taxation under reverse
charge mechanism will be 21st Mar 2015
however if ABCD Private Limited does not
make payment to service provider then
point of Taxation will be determined in
accordance with other rules
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