Financial Daily from THE HINDU group of publications
Monday, Jun 12, 2006
Financial Daily from THE HINDU group of publications Monday, Jun 12, 2006 |
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Mentor
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Taxation Columns - At Your Service Applicability of revised rates
The service is rendered before April 15, 2006. In this connection, please advise on the following: a) Is our service provider supposed to bill us service tax at 10.20 per cent or 12.24 per cent? b) What service tax is to be charged to us if their bill date is before March 18, 2006, and service is rendered before this date? c) What service tax is to be charged to us if their bill date is after March 18 but service is rendered before this date? d) As the payments will be made by us after April 18 (date from which service tax has been increased to 12.24 per cent), can we pay only 10.20 per cent on the ground that service is rendered before the date from which the rates are increased? Anand M. Section 66 of the Finance Act, 1994 is the charging section, according to which, service tax is levied on the value of taxable services referred to in Section 65(105). Sub-section 105 defines taxable services to mean any service provided or to be provided. In terms of Section 67, value of taxable services, that is, gross amount charged for taxable service, shall include any amount charged for taxable service and any amount received towards the taxable service before, during or after the provision of such service. Thus, the taxable event is the providing or agreeing to provide taxable service and service tax levied on amounts collected before, during or after rendering of taxable service. In the instant query, service tax liability shall be different under different situations as follows: a) Where service is rendered before April 18 and payments effected before that date, the applicable service tax rate (including education cess) will be 10.20 per cent. Thus, the amounts billed/collected up to April 17 will be subject to service tax at 10.20 per cent. b) Where the service is rendered and also billed before March 18, service tax will be 10.20 per cent only (rate increased to 12.24 per cent w.e.f. April 18). c) In case the service was rendered before March 18, service tax shall be the one applicable at that point of time, that is, at 10.20 per cent (rate increased to 12.24 per cent w.e.f. April 18). d) One needs to pay service tax as applicable on the date of rendering the service or invoice and not on the date of payment. It would be perfectly fair to pay service tax at 10.20 per cent being the applicable tax rate and there is no need to pay service tax on the rates as applicable on the date of payment of invoice.
Send in your queries to MentorAtYourService@gmail.com
Sanjiv Agarwal
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