Point of taxation Rules, 2011 introduced the change in payment method of service tax. Excepting certain specified cases, now service tax would be paid on accrual basis. Before it was payable on receipt of payment.
Point of Taxation- Point of taxation is the time of issuing of invoice for the provision of service or agreement of provision. It could be the date of completion of service or provision of service if invoice is not issued within prescribed time period which is of 30 days (45 days for financial sector). Also if payment is received before completion of service or issuance of invoice, then the date of receipt is considered to be the point of taxation. Hence tax would be applied on the agreements to provide services only on issuance of invoice or on receipt of payment or on date of completion of service.
Also this rule answered the question of actual date of payment which is earlier of date of entry in books of accounts or date of credit to bank.
The Point of taxation rules came into force from April 1, 2011.
|Notification No:||Service Tax Notification No 18/2011 (ST)|
|Issuing Authority:||Service Tax|
|Subject:||Central Government hereby makes the following rules for the purpose of collection of service tax and determination of rate of service tax, namely,-|