How to Invoice Service Tax Before & After 1st June, 2015?

In the Budget 2015, it was declared the new applicable rate of Service Tax would be 14%. The new rate will replace the old rate of 12.36%, however, the effective date for the application of new Service Tax was not disclosed at that time. Eventually, on May 19 2015, the Ministry of Finance declared that the new rate of Service Tax will be effective from June 1 2015.

With this new implementation there may arise a lot of confusions for the tax payers. Here is a simplified presentation of how tax payers should determine their applicable rate service tax.

First of all, one should have a clear idea about service tax. The term Service Tax is a form of taxation which has been laid on services which are availed from the third parties. The rate of service tax after June 1 2015 will be 14% and will include Education Cess and Secondary Higher Education Cess. Services such as advertisements, services from lawyers, services from accountants, etc., are chargeable under service tax.

There are two cases which are required to be taken care of:

Condition – 1: Invoices which are being raised after June 1 for services which were availed before June 1
Condition –2: Invoices which were raised after June 1 for services which will be availed after June 1

Invoices which are being raised after June 1 for services which were availed before June 1

The following interpretation is being made with reference to Rule 4a of the ‘Point of Taxatoin Rules’ which presents four distinct conditions. They are:

Case A: Where service was offered before June 1 and invoice was raised before June 1 along with the payment being made before June 1- 12.36% will be the rate of Service Tax.

Case B: Where service was offered before June 1 and invoice was raised before June 1, but the payment being made after June 1- 12.36% will be the rate of Service Tax.

Case C: Where service was offered before June 1 and invoice was raised after June 1, but the payment being made before June 1- 12.36% will be the rate of Service Tax.

Case D: Where service was offered before June 1 and invoice was raised after June 1, along with the payment being made after June 1- the rate of service tax will be decided on the basis of invoice’s date or payment’s date (earlier of the two).

Invoices which were raised after June 1 for services which will be availed after June 1

The following interpretation is being made with reference to Rule 4b of the ‘Point of Taxatoin Rules’ which presents four distinct conditions. They are:

Case A: Where service is availed after June 1, but invoice is raised earlier than June 1 along with payment made earlier than June 1- 12.36% will be the rate of Service Tax

Case B: Where service is availed after June 1, but invoice is raised earlier than June 1 and payment is made after June 1- 14% will be the rate of Service Tax

Case C: Where service is availed after June 1 and invoice is raised after June 1, but payment is made before June 1- 14% will be the rate of Service Tax

Case D: Where service is availed after June 1, invoice is raised after June 1 and payment is made after June 1- 14% will be the rate of Service Tax.

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1 Comment

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  1. AFTER THIS NEW RATE OF SERVICE TAX OF 14%
    SERVICE TAX RETURN WILL BE MONTHLY,QUARTERLY,
    AND WHAT IS DATE OF RETURN FILING
    PLEASE REPLY ON MY MAIL ID
    sknyadav@yahoo.co.in

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