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 | ||
