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Point of Taxation

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Point of Taxation. Point of taxation means the point in time when a service shall be deemed to have been provided. Point of Taxation Rules, 2011 determine the point of taxation.

As per these rules, point of taxation is –

  • the time when the invoice for the service provided or agreed to be provided is issued;
  • if invoice is not issued within prescribed time period (30 days except for specified financial sector where it is 45 days) of completion of provision of service, then the date of completion of service;
  • the date of receipt of payment where payment is received before issuance of invoice or completion of service

Therefore, liability to pay service tax will arise on issuance of invoice or date of completion of service if invoice is not issued within prescribed period of completion or on receipt of payment, whichever is earlier.

Determination of point of taxation-General rule [Rule 3]

For the purposes of these rules, unless otherwise provided, point of taxation‘ shall be-

(a) the time when the invoice for the service provided/ agreed to be provided is issued.

However, in case the invoice is not issued within the time period specified in rule 4A of the Service Tax Rules, 1994 (30 or 45 days, as the case may be) of the completion of the provision of the service, the point of taxation shall be date of such completion.

(b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment.

For the purposes of clauses (a) and (b), –

(i) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service;

(ii) wherever the provider of taxable service receives a payment up to ` 1,000 in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of clause (a) [Proviso to rule 3].

Must Read – Swachh Bharat Cess – Levy, Collection

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