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Contents

POINT OF TAXATION RULES, 2011. 1

Point of taxation in case of Coal Mining Business: 1

Service Tax in relation to Copyrights of Songs: 1

Services of Renting of campsites: 2

 

POINT OF TAXATION RULES, 2011

Point of taxation in case of Coal Mining Business:

Kirti Ltd is the owner of a coal-mine in Bihar. It obtained a patent from the concerned competent authorities in relation of foregoing coal-mine in February, 2011. Further, the company has entered into an agreement with ABC Ltd in April, 2011 for allowing the latter party to extract coals for the next three years. The consideration payable by ABC Ltd. for using the coal-mine has been fixed @ Rs.1,000 per ton. The quantum of coal extracted by ABC Ltd. and other relevant details re given in the following table:

Year

Relevant Output In Tonnes

Consideration for using the coal-mine @Rs.1000/- per tonne

Date of Issuance of Invoice

Date of Receipt of Payment

2011-12

2000

20,00,000

05.07.2012

26.08.2012

2012-13

3000

30,00,000

13.04.2013

03.04.2013

2013-14

4000

40,00,000

11.04.2014

20.07.2014

 

 

 


Solution:

It is pertinent to clarify here that in the present question Kirti Ltd. is the service provider and ABC Ltd. is the service recipient. Since whole amount of the consideration for the provision of patent is not ascertainable at the time when service was performed and subsequently the use of these services by a person other than the provider gives right to any payment of consideration, both the conditions specified in Rule 8 of POT Rules, 2011 get satisfied. The Point of Taxation of Kirti Ltd. for the various Financial Years has been exhibited in the following table:

 

Earlier of the two:

1. Date of Issuance of Invoice OR

2. Date of Payment

 

The Point of Taxation is to be determined in the above manner each time on the occurrence of earlier of the above two events.

 

Point Of Taxation

Remarks

05.07.2012

Date of Issuance of Invoice[05.07.2012] falls before Date of Payment[ 26.08.2012]

03.04.2013

Date of Payment [03.04.2013]precedes Date of Issuance of Invoice[13.04.2013]

11.04.2014

Date of Issuance of Invoice[11.04.2014]falls before Date of Payment[20.07.2014]

 

 

Service Tax in relation to Copyrights of Songs:

HMV Ltd. is having the copyright of classic songs of Late Kishore Kumar recorded in a Compact Disk [CD]. The company gave the aforementioned copyright to Super Cassettes Industries Ltd. [hereinafter abbreviated as 'SCI Ltd.'] on 20.04.2011. The consideration payable by SCI Ltd. to HMV Ltd. for acquiring the foregoing copyright has been fixed @Rs.10/- per CD sold by it [SCI Ltd.]. The No. of CDs Sold by SCI Ltd. during different financial years as well as other relevant details is given in the following table:

Year

No. of CDs sold

Consideration for using the coal-mine @Rs.10/- per CD sold

Date of Issuance of Invoice by HMV Ltd.

Date of Receipt of Payment from SCI Ltd.

2011-12

4,00,000

40,00,000

29.07.2012

16.08.2012

2012-13

6,00,000

60.00,000

03.06.2013

23.05.2013

2013-14

7,00,000

70,00,000

16.06.2014

16.06.2014

 

 

 

 

Determine the point of taxation for the same.

Solution:

The Point of Taxation for differential financial years will be determined in the following manner:

Point Of Taxation

Remarks

29.07.2012

Date of Issuance of Invoice[29.07.2012] falls before Date of Payment [16.08.2012]

23.05.2013

Date of Payment [23.05.2013] precedes Date of Issuance of Invoice [03.06.2013]

16.06.2014

Date of Issuance of Invoice [16.06.2014] as well as Date of Receipt of Payment [16.06.2014] is same.

 

 

Services of Renting of campsites:

Mr. Hiren was providing the services of renting of campsites to schools, colleges and corporates during the months of April, May, June and July. It was availing the benefit of abatement of 50% on the said services. However, from 1st July, 2012, the rate of abatement was changed to 40%. Up to 31/06/2012 it had raised various bills totaling to Rs. 10,00,000/-. The Payments for which were received on 31.06.2012 Rs. 7,00,000/- , 15.07.2012 Rs. 3,00,000/- . It raised one invoice of Rs. 5,00,000/- on 13.07.2012 for which the payment was received on 25.06.2012. For the month of June, it raised Bills amounting to Rs. 2,50,000/- on 02.08.2012 and made the payment on 16.08.2012. Also, for the services provided in the month of July, 2012 it raised bills of Rs. 6,50,000/- on 16.08.2012 and received the payments on 25.08.2012. Calculate the Service Tax Liability.

Solution:

In the given case, the rate of abatement has changed from 50% to 40% on 01.07.2012. This amounts to change in the effective rate of taxation. Hence, Rule 4 of the Point of Taxation Rules, 2012 gets attracted. Therefore, the point of taxation for each of the case is given below:

Month of completion of Service

Amount

Point of Taxation

Applicable Abatement Rate

Reason

Up to the month of June, 2012

Rs. 7,00,000/-

31.06.2012

50%

POT = Date of Invoice (31.06.2012) or Date of Payment (31.06.2012) which ever is earlier

 

Rs. 3,00,000/-

15.07.2012

50%

POT = Date of Invoice (31.06.2012), Since the service was completed and the invoice was issued before the change in effective rate of tax, notwithstanding the fact that the payment was made after the change in the rate.

 

Rs. 5,00,000/-

25.06.2012

50%

POT = Date of Payment (25.06.2012), Since the service was completed and the payment was made before the change in effective rate of tax, notwithstanding the fact that the invoice was issued after the change in the rate.

 

Rs. 2,50,000/-

02.08.2012*

40%

POT = Date of Invoice (31.06.2012) or Date of Payment (31.06.2012) which ever is earlier

For the month of July, 2012

Rs. 6,50,000/-

16.08.2012

40%

POT = Date of Invoice (31.06.2012) or Date of Payment (31.06.2012) which ever is earlier

 

* Note: It is essential to note that in the given case the invoice (issued on 02.08.2012) is not issued within the stipulated period of 30 days from the date of completion of service (i.e. 31.06.2012). Even then, we have not taken the POT as the date of completion of service, since the condition of invoice to be issued within a period of 30 days is applicable only in cases covered by Rule 3.