POT of KKC, Service Tax

[Sanjay Aggarwal]

Dear Sir,

Please advise me, whether Point of Taxation of KKC will be goveren by Rule 4 or Rule 5 of Point of Taxation Rule 2011 ?

Posts / Replies

[MARIAPPAN GOVINDARAJAN]

Rule of 5 of POT

[Rajagopalan Ranganathan]

Sir,

Rule 5 of Point of Taxation Rules, 2011 states that -

Where a service 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 fourteen days of the date when the service is taxed for the first time.

Explanation 1.- This rule shall apply mutatis mutandis in case of new levy on services.

Explanation 2.- New levy or tax shall be payable on all the cases other than specified above.

Therefore in the case of new levy of KKC rule 5 of Point of Taxation Rules, 2011 is applicable.

[PAWAN KUMAR]

Dear Sir,

As per my understanding, the Point of taxation would be as under :

1.The Krishi Kalyan Cess shall be applicable on all services as similar to Swachh Bharat Cess on the services provided or agreed to be provided on or after 01.06.2016, the invoice for which is also issued after that date and payment is also received after that date.

2.Further Krishi Kalyan Cess shall not be applicable where payment has been made and invoice is issued prior to 01.06.2016.

3.The Krishi Kalyan Cess shall not be applicable where payment has been received prior to 01.06.2016, the invoice for which is issued within 14 days i.e. up to 15.06.2016.

4.The Krishi Kalyan Cess will be applicable where payment has been received prior to 01.06.2016 the invoice of which has not issued within 14 days.

5.Further in case of reverse charge which is based on date of payment. In case of service received prior to 01.06.2016 but the payment for such service is made after 01.06.2016, Krishi Kalyan Cess will be leviable.

[Ganeshan Kalyani]

Sir, Krishi Kalyan Cess is a new levy and therefore Rule 5 of Point of Taxation Rules, 2011 is applicable. The scenarios of applicability in transition period is explained by Sri Pawan ji. Thanks.

[KASTURI SETHI]

The essence of the replies of all experts is same. Sh.Pawan Kumar has nicely explained and that too in simple language which makes very clear. All aspects have been beautifully explained by Sh.Pawan Kumar Ji.

[piyush agarwal]

I would like to draw everyone attention that in case of POT Rule-7 for Reverse charge, Mr. Pawan ji have explained in Point 5:

5.Further in case of reverse charge which is based on date of payment. In case of service received prior to 01.06.2016 but the payment for such service is made after 01.06.2016, Krishi Kalyan Cess will be leviable.

I would like to state in this reference that as per notification 21/2012 dated 30.03.2016

In the Point of Taxation Rules, 2011, in rule 7, after second proviso, the following proviso shall be inserted, namely,–

“Provided also that where there is change in the liability or extent of liability of a person required to pay tax as recipient of service notified under sub-section (2) of section 68 of the Act, in case service has been provided and the invoice issued before the date of such change, but payment has not been made as on such date, the point of taxation shall be the date of issuance of invoice.”.

In this case i would like to state that if service is provided before 01/06/2016 and invoice also raised before 01/06/2016 BUT only payment is made after 01/06/2016 then POT shall be date of invoice and in that case KKC will not be applicable.

[piyush agarwal]

Sorry notification number is 21/2016 dated 30.03.2016

[KASTURI SETHI]

Interpretation अपनी अपनी . With due regards to Sh.Piyush Aggarwal Ji, I differ with him on the issue. Notification No.21/16-ST dated 30.3.16 is not applicable here. This talks of 'change' regarding shifting of liability or change in the percentage under RCM. For new levy, Rule 5 of POTR is here.

Hence I go with Sh.M.Govindarajan, Sh.Ranganathan, Sh.Pawan kumar & Sh.Ganeshan Kalyani Sirs.

[Ganeshan Kalyani]

Sir, yes sir rule 5 of POTR is applicable and not rule 7. Thanks.

[piyush agarwal]

I also agree that Rule 5 should be applicable for KKC but Rule 7 - POT is applicable for SERVICE RECEIVER. Hence only for service receiver we shall determine POT on the basis of Rule 7. And in my view Rule 7 overrides Rule 3,4, 8 and NOT Rule 5.

Rule 7 states that:

a)Its overrides rule 3,4 and 8

b)POT for service receiver is Date of payment to service provider

c) If payment is not made within 3 months from date of invoice then POT shall be the date immediately following the said period of 3 months.

d) In case of “associated enterprises”, where the person providing the service is located outside India, POT shall be the date of debit in the books of account of the person receiving the service or date of making the payment whichever is earlier.

e) In change of liability for service receiver, in case service has been provided and the invoice issued before the date of such change, but payment has not been made as on such date, the point of taxation for service receiver shall be the date of issuance of invoice.”.

Hence in my view: there is change of liability for service receiver point of view:

If invoice issued before 01/06/2016,service also provided before 01/06/2016 and ONLY payment is made after 01/06/2016 then it this case POT for service receiver shall be Date of invoice and hence no KKC would be levied.

[piyush agarwal]

I take my views back.

Sh. K. Sethi sir and all other sirs Sh.M.Govindarajan, Sh.Ranganathan, Sh.Pawan kumar & Sh.Ganeshan Kalyani view are correct.

Rule 5 overrides Rule 7 and POT for service receiver will be Date of payment. Pawan sir was correct.

[KASTURI SETHI]

Sh.Piyush Agarwal Ji,

Keeping in view of our past exchange of views on various contentious issues through email as well as on this forum of TMI, I have really high opinion of you. With your divergent view on this issue, I was taken aback and I remained somewhat tense deliberating with myself to the extent how and where I was in the wrong.How I could not grasp the real message in the POTRs. Anyhow, now I feel relaxed. Your final view has also cleared the air in the minds of the visitors of this site/forum through out India. It is a well known fact that this site is being read over by thousands of assessees.(They may not react.)

[piyush agarwal]

Thank you Sethi Sir. Its always be good to participate in the forum and discussion as its always enhance the knowledge.

[KASTURI SETHI]

Sh.Piyush Agarwal Ji,

Of course. But you have disappeared from this forum. I have been deprived of your knowledge and valuable thoughts for a long period in this forum. . In this forum, not only visitors learn but we also learn. This is the best use of this forum.

[Ganeshan Kalyani]

Yes the name itself is enough to explain it - "Discussion Forum" which means the views are showcased here in this platform. Learning is a continuous process. In Indirect Tax it is needless to say the this subject is a dynamic. Each day one or the other Notification or Circular etc. Is issued by the department. So before sharing views all have to go through those changes. Thus each one of us learn from each other. Thanks.

[JITENDRA AGARWAL]

Dear Sir,
We are working as a contractor and take a contract of Civil Work of ₹ 50,00,000/- in April-2015. In April-2015 we received all payments from my Client against Advance Invoice with Amount of ₹ 50,00,000/- + Service Tax 12.36% , and provide Invoice of Advance payment to him in April-2015. Now we are Create Running Invoice for Completion of Work to our Client with 100 % adjustment of Advance amount. Please suggest us SBC and KKC will Charged/Applicable on our running Invoice in Sep-2016
Regards
Jitendra Agarwal

[praveen kumar]

Dear Sir, I am a article assisstant from Manohar Chowdhry & Associates. I read POT Rule 5 explanations. In my understanding, it is clashing with Rule 4. Is New Levy of KKC not a change in effective rate of tax?

Please clarify?