Change in Point of Taxation Rule- Service Tax

At present Rule 7 of the Point of Taxation Rules 2011 has overriding effect over all rules.

However in the budget 2014-15 an amendment has been effected which will be effective from 1^st day of October 2014. Under service tax Return is filed on half yearly basis i.e. 1^st April to 30^th Sep and 1^st Oct to march that’s why change has been effected from 1st Oct to avoid any difficulty in implementation of the provision.

After change , Rule 7 will not override the Rule 5 which deals with point of taxation in relation to service tax on new services.

 Presently first proviso to Rule 7 provides that where the payment is not made within a period of 6 months of the date of invoice, the point of taxation shall be determined as if this rule does not exist.

But after amendment, the proviso would be 'where the payment is not made within a period of 3 months of the date of invoice, the point of taxation shall be the date immediately following the said period of 3 months.'

It means that if payment of invoice is not made within three months from the date of invoice, POT in such case would be :-

Date of invoice+3 months

Suppose invoice date is 01 oct 2014 then POT would be 02 Jan 2015 ( i.e  1.10.2014 + three months)

For invoices issued before 1-10-2014, a new Rule 10 inserted which will overrides first proviso to rule 7 and provides that if the invoice in respect of a service, for which point of taxation is determinable under rule 7 has been issued before 1-10-2014 but payment has not been made as on the said day, the point of taxation shall be determined as follows —

 (a) if payment is made within a period of 6 months from the date of invoice, POT would be  date on which payment is made;

 (b) if payment is not made within a period of 6 months from the date of invoice, POT shall be determined as if rule 7 and this rule do not exist. It means that POT would be determined based on other rules