Determination of Rate of Service Tax after increase in rate of service tax w.e.f. 01.06.2015

The applicable rate of service tax in various scenarios as determined by Rule 4 and 5 of the Point of Taxation Rule, 2011 and Section 67A of the Finance Act, 1994.

For convenience of reference we have tabulated below the rate of applicable service tax under various scenarios:

Sl. No.	Activity Completion Date	Invoice Date	Payment Date	Point of Taxation	Brief SKKA comment
1.	Before Effective Date	After Effective Date	After Effective Date	Invoice date or Payment date whichever is earlier.	As per Rule 4 of POTR, Where the invoice has been issued and the payment received after the change in effective rate of tax, the point of taxation shall be date of payment or issuing of invoice, whichever is earlier As a result, here the point of taxation will be invoice date or payment date whichever is earlier and taxable rate will be the new rate i.e. 14% although the service has been provided before the date of change in effective rate. This runs into contradiction with section 67A of the Finance Act, 1994 as per which The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided.
2.	Before Effective Date	Before Effective Date	After Effective Date	Date of issue of Invoice.	As per Rule 4 of POTR, Where the invoice has also been issued prior to change in effective rate of tax but the payment is received after the change in effective rate of tax the point of taxation shall be the date of issuing of invoice. Here the taxable rate will be the rate that was prevailing at the time of issue of invoice i.e. 12.36%.
3.	Before Effective Date	After Effective Date	Before Effective Date	Date of Payment.	As per Rule 4 of POTR, Where the payment is also received before the change in effective rate of tax but the invoice for the same has been issued after the change in effective rate of tax the point of taxation shall be the date of payment. Here the taxable rate will be the rate prevailing at the date of payment i.e. 12.36%.
4.	After Effective Date	Before Effective Date	After Effective Date	Date of Payment.	According to POTR Rule 4, Where the payment for the invoice is also made after the change in effective rate of tax but the invoice has been issued prior to the change in effective rate of tax the point of taxation shall be the date of payment. Here the taxable rate will be the rate prevailing at the date of payment i.e. 14% although the invoice had been issued prior to the change in effective rate of tax.
5.	After Effective Date	Before Effective Date	Before Effective Date	Invoice date or Payment date whichever is earlier.	Where the invoice has been issued and the payment for the invoice received before the change in effective rate of tax the point of taxation shall be the date of receipt of payment or date of issuance of invoice, whichever is earlier. Point of taxation will be invoice date or payment date whichever is earlier so taxable rate will be the rate prevailing then i.e. 12.36%.
6.	After Effective Date	After Effective Date	Before Effective Date	Date of issue of Invoice.	Where the invoice has also been raised after the change in effective rate of tax but the payment has been received before the change in effective rate of tax the point of taxation shall be date of issuing of invoice. Here the taxable rate will be the rate that will be prevailing at the time of issue of invoice i.e. 14%.

Also, for new services which become taxable w.e.f. 01.06.2015, the point of taxation would be determined as follows:

Sl No.	Activity Completion Date	Invoice Date	Payment Date	Taxability	Brief SKKA comment
1.	Before Effective Date	Before Effective Date	Before Effective Date	Non- Taxable.	According to Rule 5 of POTR, where a service is taxed for the first time 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. Here as invoice day and payment both are before the effective date no tax will be levied.
2.	After Effective Date	Within fourteen days of the effective date	Before Effective Date	Non- Taxable.	According to Rule 5 of POTR, where a service is taxed for the first time no tax shall be payable if the payment has been received before the service becomes taxable and invoice has been issued within fourteen days of the date when the service is taxed for the first time. Here as payment is received before and invoice is issued within 14 days of the effective date no tax shall be levied.