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Knowledge Exchange | The Knowledge Exchange | Service Tax

EFFECT OF CHANGE OF RATE IN SERVICE TAX:

 

What is therate of service tax applicable now?

 

[D.O.F.No.334/5/2015-TRU]

 

3194_0.jpgSection66B of the Finance Act, 1994, prescribes the service tax rate. It has

been amendedby Section 108 of the Finance Act, 2015:

 

Therate of Service Tax is being increased from 12% to 14% (including cesses). Theincrease in Service Tax rate will come into effect from 1st June, 2015

What is the effect of Education Cess& Secondary and Higher education Cess?

 

Education Cess and Secondary and Higher EducationCess, respectively, on taxable services, shall cease to have effect from 1stJune, 2015

 

What is Swachh Bharat Cess and is itapplicable now?

 

An enabling provision has been incorporated in theFinance Act, 2015 vide section 117 (Chapter VI) to impose a Swachh Bharat Cesson all or any of the taxable services at a rate of 2% or lower on the value ofsuch taxable services. This cess shall be levied on such services at such ratefrom such date as may be notified by the Central Government. Thedate from which this amendment would come into effect will be notified in duecourse.

 

 

What is the rate applicable for mewhen my service is provided or invoice is raised or payment is made before 1stJune 2015?

 

Point of taxation involving change in effective rate of tax is governedby Rule 4 of the POT Rules

 

 

Invoice has been issued

Payment received for the invoice

POINT OF TAXATION

Applicable Rate

 

 

 

Service provided before the date of change of tax rate

After change in effective rate

 

After the change in effective rate

Date of payment or of invoice, whichever is earlier.

 

New Rate

Before the change in effective rate

After the change in effective rate

Date of issue of invoice

Old Rate

After change in effective rate

Before the change in effective rate

Date of payment received

Old Rate

 

 

Services provided after the date of change of tax rate

Before the change in effective rate

After the change in effective rate

Date of payment received

New Rate

Before the change in effective rate

Before the change in effective rate

Date of payment of issue of invoice; whichever is earlier.

Old Rate

After change in effective rate

Before the change in effective rate

Date of issuing invoice

New rate

 

 

What happened if the Service isprovided before 1st June and the invoice is not raised within 30days as per Rule 3?

 

*Note: It is essential to notethat in case the invoice is not issued within the stipulated period of 30 days (or45 days in case of Banking Companies) from the date of completion of service.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 isapplicable only in cases covered by Rule 3.