Sunday, October 19, 2014

Service Tax - POT Rules in Layman Terms


RULE 2A Date of Payment
Rule - Date of payment shall be the earlier of the dates on which the payment is entered in the books of accounts or is credited to the bank account of the person liable to pay tax

Scenario – when change in e.r.t or new levy between date of book entry and credited to bank (not cash)

Eg:Payment was credited in the books of accounts on 10.3.2013 Payment was credited in the bank account on 1.2.2013

Scenario – when change in e.r.t or new levy between date of book entry and credited to bank (not cash)
Rule - Date of payment shall be the earlier of the dates on which the payment is entered in
the books of accounts or is credited to the bank account of the person liable to pay tax w.e.f. 1.4.2012


RULE 2C Continuous supply of Service
any service which is provided, or to be provided continuously or on recurrent basis, under a contract, for a period exceeding three months with the obligation for payment periodically or from time to time or where the Central Govt. by notification in the Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition.


Rule 3 Determination of Point of Taxation


  • Date of invoice or payment, whichever is earlier, if the invoice is issued within the prescribed period of 30 days from the date of completion of the provision of service (W.e.f. 1-4-201 2).
  • Date of completion of the provision of service or payment, whichever is earlier if the invoice is not issued within the prescribed period.

Rule 4 Determination of Point of Taxation in case of change in effective rate of Tax


Rule 5 Payment of Tax in case of New Service

No tax shall be payable (5a)
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 (5b)
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 taxed for the first time.

Rule 7 Determination of Point of Taxation in case of specified services or persons (Reverse Charge)

Shall be the date on which payment is made within 180 days from the date of invoice Provided that, where payment is not received within a period of 180 days of the date of Invoice, the POT shall be determined as if this rule does not exist (Rule 3)

Rule 8 Determination of Point of Taxation in other cases (copyrights, etc)


Rule 8 – In case of royalties or payments relating to copy rights, trade marks, designs, where the whole amount of consideration is not ascertainable, then POT as per the above.

Where the POT cannot be determined as per rule 8 then Rule 8 (A)
  • as the date of Invoice or date of Payment or both are not available Central Excise Officer may require the concerned person to produce such accounts, documents or other evidence as he may deem necessary shall by an order in writing, after giving an opportunity of being heard determine the POT to the best of his judgments.

Regards
CMA Loganathan Sekar
Author for Indirect Taxes
Email: Logucwa@gmail.com

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