SERVICE TAX RATE HIKED TO 14% WEF JUNE 1, 2015:
1. The Government has notified that the enhanced service tax rate of 14% will come into effect from June 1, 2015. This development will require an intense understanding of the statutory provisions governing the point of taxation, especially with regard to the on-going contracts. With effect from 1-6-2015, the enhanced rate of 14% would be an all inclusive rate and there would be no need for payment of education cess over and above this rate of 14%.
2.2. For understanding the effective date for applying the enhanced rate, we would need to refer to Clause 4 of the Point of Taxation Rules, 2011 (‘PoTR’), which is reproduced below.
4. Determination of point of taxation in case of change of rate of tax.-
Notwithstanding anything contained in rule 3, the point of taxation in cases where there is a change in effective rate of tax in respect of a service, shall be determined in the following manner, namely:-
(a) in case a taxable service has been provided before the change of rate,-
(i) where the invoice for the same has been issued and the payment received after the change in effective rate of tax, the point of taxation shall be date of payment or issuing of invoice, whichever is earlier; or
(ii) where the invoice has also been issued prior to change in effective rate of tax but the payment is received after the change in effective rate of tax, the point of taxation shall be the date of issuing of invoice; or
(iii) where the payment is also received before the change in effective rate of tax], but the invoice for the same has been issued after the 3[change in effective rate of tax, the point of taxation shall be the date of payment;
(b) in case a taxable service has been provided after the change in effective rate of tax,-
(i) where the payment for the invoice is also made after the change in effective rate of tax but the invoice has been issued prior to the change in effective rate of tax, the point of taxation shall be the date of payment; or
(ii) where the invoice has been issued and the payment for the invoice received before the change in effective rate of tax, the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier; or
(iii) where the invoice has also been raised after the change in effective rate of tax, but the payment has been received before the change in effective rate of tax, the point of taxation shall be date of issuing of invoice.
