What will happen if the effective rate of service tax changes before or after rendering of a service [rule 4]

When there is a change in effective rate of service tax in respect of a service, the point of taxation shall be determined in the following manner:


Case 1: Where a taxable service has been provided before the change in effective rate of tax

  Situation
 Point of Taxation 
 Rate of service Tax 
  1
Invoice issued after change in rate 
Payment received after change in rate 
Date of payment or the date on which the invoice has been issued, whichever is earlier 
  New rate
  2 
Invoice issued prior to change in rate
Payment received after change in rate  
Date on which the invoice has been issued
  Old rate
  3.
Payment received before change in rate 
Invoice issued after change in rate 
Date when the payment has been received 
  Old rate

 Case 2: Where a taxable service is provided after the change in effective rate of tax


 Situation
  Point of Taxation 
  Rate of service Tax
  1
Payment received after change in rate 
Invoice issued prior to change in rate 
Date of payment, even though the payment is subsequent to date of invoice
 New rate
  2  
Invoice issued before change in rate
Payment received before change in rate
Date when invoice was issued or the payment was received, whichever is earlier 
 Old rate
  3.
Invoice issued after change in rate
Payment received before change in rate
Date on which the invoice is issued even though the payment is received before the date of invoice
 New rate 

 Note: If any two of the following three events take place before the change in the effective rate of tax, the old rate of service tax shall apply:

  1. Date of taxable service provided
  2. Date of invoice
  3. Date of payment 

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