This new Point of Taxation Rules, 2011 has taken care of problem faced in situations where service are provided on continuous basis ,issue of when to raise Invoice and when to claim refund of service tax paid on input service.
The detail notification is reproduced below for reference:
Notification No. 18/2011 – Service Tax New Delhi, the 1stMarch, 2011
G.S.R. (E).- In exercise of the powers conferred under clause (a) and clause (hhh) of subsection (2) of section 94 of the Finance Act, 1994, the Central Government hereby makes the
following rules for the purpose of collection of service tax and determination of rate of service tax,
namely,-
1. Short title and commencement.-(1) These rules shall be called the Point of Taxation Rules, 2011.
(2) They shall come into force on the 1st day of April, 2011.
2. Definitions.- In these rules, unless the context otherwise requires,-
(a) “Act” means the Finance Act, 1994 (32 of 1994);
(b) “associated enterprises” shall have the meaning assigned to it in section 92A of the Income
Tax Act, 1961 (43 of 1961);
(c) “continuous supply of service” means any service which is provided, or to be provided
continuously, under a contract, for a period exceeding three months, or where the Central
Government, by a notification in the Official Gazette, prescribes provision of a particular
service to be a continuous supply of service, whether or not subject to any condition;
(d) “invoice” means the invoice referred to in rule 4A of the Service Tax Rules, 1994 and shall
include any document as referred to in the said rule;
(e) “point of taxation” means the point in time when a service shall be deemed to have been
provided;
(f) “taxable service” means a service which is subjected to service tax, whether or not the same
is fully exempt by the Central Government under Section 93 of the Act;
3. Determination of point of taxation.- For the purposes of these rules, unless otherwise stated,
„point of taxation‟ shall be determined in the following manner, namely:-
(a) a provision of service shall be treated as having taken place at the time when service is
provided or to be provided; and
(b) if, before the time specified in clause (a), the person providing the service issues an invoice
or receives a payment, the service shall, to the extent covered by the invoice or the payment
made thereof, be deemed to have been provided at the time the invoice was issued or the
payment was received, as the case may be, whichever is earlier.
Explanation.- For the purposes of this rule, wherever any advance, by whatever name known,
is received by the service provider towards the provision of taxable service, the point of
taxation shall be the date of receipt of each such advance.
Explanation 2.- For the purposes of this rule, in respect of services taxable under section 66A
of the Act, the point of taxation under clause (b) shall be the date on which the invoice is
received, or the payment is made, as the case may be, whichever is earlier.28
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 of 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 of rate, 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 tax rate but the payment is
received after the change of rate, the point of taxation shall be the date of issuing of
invoice; or
(iii) where the payment is also received before the change of rate, but the invoice for the
same has been issued after the change of rate, the point of taxation shall be the date
of payment;
(b) in case a taxable service has been provided after the change of rate,-
(i) where the payment for the invoice is also made after the change in tax rate but the
invoice has been issued prior to the change of tax rate, 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 of tax rate, 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 of rate but the payment has
been received before the change of rate, the point of taxation shall be date of
issuing of invoice.
5. Payment of tax in cases of new services.- Where a service, not being a service covered by rule 6,
is taxed for the first time, then, –
(a) no tax shall be payable to the extent the invoice has been issued and the payment received
against such invoice before such service became taxable;
(b) no tax shall be payable if the payment has been received before the service becomes taxable
and invoice has been issued within the period referred to in rule 4A of the Service Tax Rules,
1994.
6. Determination of point of taxation in case of continuous supply of service.- (1) In case of
continuous supply of service, the whole or part of which is determined or payable periodically or from
time to time, shall be treated as separately provided at the date on which the payment is liable to be
made by the service receiver, if such date is specified in the contract.
(2) If, before the time specified in sub-rule (1), the person providing the service issues an invoice
or receives a payment, the service shall, to the extent covered by the invoice or the payment made 29
thereof, be deemed to have been provided at the time the invoice was issued or the payment was
received, as the case may be, whichever is earlier.
Explanation.- For the purposes of this rule, wherever any advance, by whatever name known,
is received by the service provider towards the provision of taxable service, the point of
taxation shall be the date of receipt of each such advance.
Explanation 2.- For the purposes of this rule, in respect of services taxable under section 66A
of the Act, the point of taxation under sub-rule (2) shall be the date on which the invoice is
received, or the payment is made, as the case may be, whichever is earlier.
7. Determination of point of taxation in case of associated enterprises.- The point of taxation in
respect of associated enterprises shall be the date on which the payment has been made, or invoice
under rule 4A of the Service Tax Rules, 1994 has been issued, or the date of debit or credit in books
of accounts of the person liable to pay service tax, whichever is earlier.
8. Determination of point of taxation in case of copyrights, etc. .- In respect of royalties and
payments pertaining to copyrights, trademarks, designs or patents, where the whole amount of the
consideration for the provision of service is not ascertainable at the time when service was performed,
and subsequently the use or the benefit of these services by a person other than the provider gives rise
to any payment of consideration, the service shall be treated as having been provided each time when
a payment in respect of such use or the benefit is received by the provider in respect thereof, or an
invoice is issued by the provider, whichever is earlier.
9. Savings.- Nothing contained in these rules shall be applicable in case of invoices issued prior to the
date from which these rules become effective.
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