Services becoming taxable w.e.f. 01.07.2012- advisable to pay and to receive evidence of payment before 30.06.2012 to avoid extra liability, contingency and disputes.

[C.A. DEV KUMAR KOTHARI]

Many services will become taxable w.e.f.01.07.2012:

On new regime of taxable services based on negative list and deemed service etc. coming into force or becoming effective w.e.f. 01.07.2012 many services shall become taxable which are not taxable under existing service tax provisions.

Documentation and payment after 30.06.12 may cause disputes:

When service is not taxable till 30.06.12 but becomes taxable w.e.f. 01.07.12, it is advisable to comple documentation and payment before 30.06.12. In case of need advance payment can be made as agreed, or on estimate basis. If documentation for service rendered  like raising of invoice, issue of credit note, or  passing of invoice by service receiver, issue of cheque by service receiver, and receipt of  cheque by service provider  etc. is on or after 01.07.12, some disputes may arise as to taxability of service charges in view of new service tax regime.

Therefore, to avoid disputes as to  taxability under new regime and disputes about rendering of service, invoicing, receiving payment etc. it is advisable to raise bills and receive payment before 30.06.12 and also to receive bills and   make payment before 30.06.12.

When ST liability will be on receipt basis:

Particularly when tax liability will be on receipt or payment basis, it is more important to ensure that payment is made and received before 30.06.12. If payment is made/ received on or after 01.07.12, then the services which are not taxable up to 30.06.12 will also become taxable ,when tax liability is fixed based on receipt of payment by service provider.    

Appraisal required:

It is desirable for service providers and service receivers both to make an appraisal to identify services which are presently not taxable but will become taxable w.e.f. 01.07.2012. In respect of such services documentation, and payment can be completed before 30.06.12.

Better course of action:

In respect of services which are not taxable till  30.06.12 and will become taxable w.e.f. 01.07.12 ,it is advisable to raise bills for month of June 2012 or quarter or other service period ending on 30.06.12 well in advance and also to ensure that payment is made by service receiver well before 30.06.12. Deposit of cheque before 30.06.12 will avoid any doubt or confusion.