Points of taxation rules, 2011


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Points of taxation rules, 2011

  1. 1.
  2. 2. Point of Taxation Rules2011 – (Service Tax)<br />Analysis of <br />(For internal circulation only)<br />
  3. 3. Contents<br /><ul><li>Introduction
  4. 4. Point of taxation Rules
  5. 5. Normal Case
  6. 6. Change in effective rate
  7. 7. New Service
  8. 8. Continuous Supply
  9. 9. Specified Services
  10. 10. Intellectual Property Services
  11. 11. Transitional Provisions
  12. 12. CenvatCredit Rules
  13. 13. Service Tax Rules</li></li></ul><li>INTRODUCTION<br />
  14. 14. Introduction<br /><ul><li>NotifiedVides Notification No. 18/2011 dated 1-3-2011 & Notification 25/2011 dated. 31-3-2011
  15. 15. Move from Cash basis of taxation to an Accrual based system
  16. 16. Point of taxation is defined as the “Point in time when a service shall be ‘deemed to have been provided’[Rule 2(e)].
  17. 17. The point of taxation (POT) determines Rate of service tax and Due date of payment of service tax.
  18. 18. Under new rules, liability to pay shall be determined on the date when services are deemed to be provided</li></li></ul><li>DETERMINATION OF POINT OF TAXATION<br />
  19. 19. Determination of Point of Taxation [Rule 3]<br />Point of Taxation<br />Normal Situation<br />Special Cases<br /><ul><li>Date of Issue of Invoice</li></ul>or<br /><ul><li>Date of receipt of Payment</li></ul>Whichever is earlier<br />In case invoice has not been issued within 14 days of the completion of provision of service, the point of taxation shall be the date of such completion.<br />Change in Rate of Tax<br />Export of service<br />New Service<br />Continuous Services<br />Specified Services<br />Associated Enterprises<br />Intellectual Property<br />Reverse Charge<br />Transitional provisions<br />
  20. 20. Point of Taxation [Rule 3] – Normal Case<br />Scenarios:<br />For the purposes of this rule, wherever any advance, by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance<br />
  21. 21. Change in Effective Rate [Rule 4]<br /><ul><li>While the rule does not define “change in effective rate” it means that any event which has the effect of reducing or enhancing the amount of tax liability
  22. 22. Change in effective rate of tax may arise out of the following:
  23. 23. Any amendment, insertion or deletion of a clause in the Act
  24. 24. Any amendment, insertion or deletion of a clause in any Rules governing provisions of ST
  25. 25. Issue or withdrawal of a Notification or amendment in any clause thereof
  26. 26. Issue or withdrawal of a Circular or amendment in any clause thereof
  27. 27. Change in effective Rate of Tax includes:
  28. 28. Change in portion of Value on which Tax is payable in terms of Notification issued under the provisions of Finance Act, 1994 or Rules made there under.
  29. 29. Change in rate of abatement or rates under composition scheme.</li></li></ul><li>Change in Effective Rate [Rule 4]<br />Scenarios:<br />
  30. 30. Introduction of New Service [Rule 5]<br />Scenarios:<br />
  31. 31. Continuous Supply of Services [Rule 6]<br /><ul><li>Telecommunication Services
  32. 32. Commercial or Industrial Construction
  33. 33. Construction of Residential Complex
  34. 34. Internet Telecommunication
  35. 35. Works Contract </li></ul>Continuous Services<br /><ul><li>Any other service if provided under a contract for a period exceeding three months.</li></ul>The point of taxation in the case of continuous supply of services shall be as follows:<br /><ul><li>Date of issue of invoice or receipt of payment, whichever is earlier, if the invoice is issued within the prescribed period of 14 days from the date of completion of the provision of service.
  36. 36. Date of completion of the provision of service or receipt of payment, if the invoice not issued within the prescribed period as above.</li></li></ul><li>Continuous Supply of Services [Rule 6]<br />Illustration:<br />
  37. 37. Specified Services [Rule 7]<br />
  38. 38. Intellectual Property Services[Rule 8]<br /><ul><li>Intellectual property service means a service where consideration is not ascertainable at the time of service being rendered.
  39. 39. Examples include Copy rights, trade marks, design and patents etc.
  40. 40. Point of Taxation is deemed to be when earlier of the following events occur:
  41. 41. Payment is received by the provider, or
  42. 42. Invoice is issued by the provider, whichever is earlier</li></li></ul><li>Transitional Provisions [9]<br /><ul><li>Keeping in mind the transitional phase, the aforementioned rules not to apply to
  43. 43. Provision of services completed, or
  44. 44. Invoices issued Prior to 1.4.2011
  45. 45. Service Providers have the option of continuing on Cash basis till 30/06/2011</li></li></ul><li>CENVAT CREDIT RULES<br />
  46. 46. Cenvat Credit Rule Changes<br /><ul><li>Credit is also now available on Accrual basis
  47. 47. Credit available on receipt of invoice provided
  48. 48. In case of Non-payment within 3 months of date of invoice Credit availed needs to be reversed
  49. 49. Such reversed credit can be re-availed on payment of value of service and service tax
  50. 50. For reverse charge , Credit available on payment of Value of service and service tax within 6 months of invoice.
  51. 51. For invoices issued prior to 1/4/2011 , Credit is available on payment.
  52. 52. Supplementary invoice by service provider can be used as document for availing credit
  53. 53. For Proportionate credit or payment of 5%, the value of exempted service will be difference between the sale price and the cost of goods sold or 10% of the cost of goods sold, whichever is more</li></li></ul><li>SERVICE TAX RULES<br />
  54. 54. Service Tax Rules <br /><ul><li>Invoice to be issued:
  55. 55. Within 14 days of “completion of service”
  56. 56. For continuous supply – within 14 days of completion of each specified event
  57. 57. In case of invoice renegotiated due to deficiency of service or change in terms of contract Service provider can refund the amount to Service receiver with service tax or issue a Credit Note to service receiver except Bad debts/ Discounts/ Reduction in Charges.
  58. 58. Then assessee can himself adjust the excess service tax paid by him against his service tax liability for the subsequent period.</li></li></ul><li>OUR TEAM <br />Our team of Chartered accountants, Company Secretaries, MBA’s and Lawyers is determined to help you leverage your business to help it grow and to attain the lofty heights of success. We provide a suite of services in the realms of Taxation, Assurance and Advisory to manage, measure and improve your bottom-line, respectively<br />
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