Point of Taxation in Service Tax

One major change made in service tax effective from 01-04-2011 is the introduction of Point of Taxation Rules, 2011 to (a) introduce the provisions relating to payment of service tax on accrual basis instead of receipt basis and (b) to specify date relevant for determining rate of service tax.

So far the provision was that service tax was payable on receipt basis i.e. on receipt of payment of the invoice or bill from the customer or receipt of advance, whichever is earlier. Now w.e.f.  01-04-2011, service tax will be payable on billing basis and not on ‘receipt of payment’ basis i.e. on accrual basis and not cash basis (option has been granted to assessee to continue payment on receipt basis upto 30-06-2011, if they so desire).

Scenario Relevant Rule First event Subsequent event Point of Taxation
Normal Situation (not covered under rule 4 to 9) 3(a) Issue of invoice Completion of service or receipt of payment Time of invoice
3(a) Completion of service Issue invoice within 14 days Time of Invoice
Proviso to 3(a) Completion of service Invoice not issued within 14 days Date of completion of service
3(b) and explanation to rule 3 Receipt of payment or advance Invoice or completion of service Time of receipt of payment
Taxable Service provided before change in effective rate of service tax 4(a)(i) Invoice issued and payment received after the change in effective rate N.A. Date of receipt of payment or date of issuance of invoice, whichever is earlier
4(a)(ii) Invoice issued prior to change in effective rate Payment received after change in effective rate of tax Date of issue of invoice
4(a)(iii) Payment received before change in effective rate of tax Invoice issued after change in effective rate of tax Date of receipt of payment
Taxable Service provided after change in effective rate of service tax 4(b)(i) Invoice issued prior to change in effective rate Payment received after change in effective rate of tax Date of receipt of payment
4(b)(ii) Invoice issued and payment received prior to change in effective rate Taxable Service provided Date of receipt of payment or date of issuance of invoice, whichever is earlier  
4(b)(iii) Payment received before change in effective rate of tax Invoice issued after change in effective rate Date of issuing of Invoice  
New service brought under tax net 5(a) Invoice issued and payment received before service became taxable N.A. No Service tax payable  
5(b) Payment received before service became taxable Issue invoice within 14 days of provision of service No Service tax is payable  
3(a) Service provided before tax became effective Invoice within 14 days and payment received after tax became effective No service tax is payable  
Continuous supply of service (applicable separately to each event as specified in contract) 6(a) Issue of Invoice Completion of service or receipt of advance payment Time of Invoice  
6(a) Completion of service Invoice issued within 14 days Time of Invoice  
Proviso to 6(a) Completion of service Invoice not issued within 14 days Date of completion of service  
6(b) and explanation 2 to rule 6 Receipt of payment or advance Invoice or completion of service Time of receipt of payment  
Export of Service 7(a) Completion of service Payment received within the period specified by RBI Date of receipt of payment  
7 (a) and first proviso to rule 7 Completion of service Payment not received within the period specified by the RBI As per rule 3,4,5,6 or 8 (as applicable) Interest will be payable.  
Service where tax payable by recipient of service under reverse charge 7(b) Receipt of Service Payment made to service provider in advance or within six months of date of invoice or service provider Date of payment  
7 (b) and second proviso to rule 7 Receipt of Service Payment not made to service provider in advance or within six months of date of invoice or service provider As per rule 3,4,5,6 or 8 (as applicable) Interest will be payable.  
Professional and firms providing specified taxable service 7 (c) Invoice, completion of service or receipt of payment in any sequence   Date of receipt of payment  
Service Provided from associate enterprises when service provider outside India Third proviso to rule 7 Date of credit in books of account of person receiving service Date of making payment Date of credit in books of account of person receiving service  
Third proviso to rule 7 Date of making payment Date of credit in books of account of person receiving service Date of making payment  
Intellectual property service, where consideration not ascertainable at the time of service 8 Receipt of payment or benefit is received by service provider Invoice issued by the service provider Receipt of payment or benefit is received by service provider  
8 Invoice issued by the service provider Receipt of payment or benefit is received by service provider Invoice issued by the service provider  
Service completed on or before 30-06-2011 9 Issue of Invoice Receipt of payment Issue of invoice or date of receipt of payment  

 

 

I have forgot to deposit the form ITR-V

As per circular of the CBDT you can file verification form ITR-V (pdf) within 30 days of uploading the electronic data then date of uploading the data will be treated as date of filing of income tax return.  But if you are not able to file ITR-V within 30 days then you have to reupload the return and new ITR-V has to be filed. Suppose you have uploaded the data electronically on 31st July and you file the ITR-V on 30th Aug then date of filing of income tax return will be 31st July but if you are not able to submit ITR V on or before 30th August retun will be treat as “never filed”. All assessee has to sumit their ITR-V at central location at :

Income Tax Department ,

CPC, Post Bag No – 1,

Electronic City Post Office,

Bangalore – 560100, Karnataka

Real Estate Developer liable to Service Tax on Residential Construction

Authority for Advance Rulings vide a ruling pronounced on 7th April 2008 has ruled that a Real Estate Developer who is booking, constructing and selling residential units on land owned by him is liable to service tax.

  • Though the rulings of the Authority are binding only on the applicant and the service tax department; but since the issue has been settled in favour of service tax department; all the Builders and Real Estate Developers who are not paying service tax on construction of residential flats and units are going to be slapped the demands of service tax. Majority of the Builders are neither charging nor paying any service tax on construction and sale of residential flats. The costs of residential flats and units are also going to witness a hike due to service tax liability. This may lead to a further slowdown in Real Estate market.
  • The applicant is a developer of residential housing projects in Gujarat. As per the proposed activities No.1 & 2, the residential units will be constructed either on its own or through a contractor and the residential units so constructed will be sold to third parties. The applicant will book the residential unit after taking a booking amount and the total cost of the residential house will be specified to the buyers at the time of booking.
  • The proposed activities no. 3 & 4 consist of sale of plots of land inside the complex to the prospective buyers who will also enter into works contract with the applicant for the construction of residential units. Under the proposed activity no.4 the applicant will for the purpose of executing the contract with the buyer enter into works contract with Contractors.