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Introduction:

After the Hon’ble President has given assent to the Finance Bill, 2015 on May 14, 2015, the Ministry of Finance, Department of Revenue vide Notification No. 14/2015-ST dated May 19, 2015 has notified increase in the rate of Service tax from 12.36% to flat 14% (Subsuming Education Cess and Secondary & Higher Secondary Education Cess) to be effective from June 1, 2015.

Swachh Bharat Cess:

Swachh Bharat Cess is not notified till date, it will be notified separately at a later date. Only an enabling provision is being incorporated in the Finance Bill, 2015 to empower the Central Government to impose a Swachh Bharat Cess on all or any of the taxable services at a rate of 2% on the value of such taxable services. The cess shall be levied from the date to be notified after the enactment of the Finance Bill 2015. Hence, an illustrative clarification to this effect is much warranted from the Board before the new rate of Service becoming effective from June 1, 2015.

Balance of Education Cess and Secondary & Higher Education Cess as on June 01, 2015: Still remains a question unanswered.

The question arises what will happen to the balance lying in ‘Education Cess’ and ‘Secondary and Higher Education Cess’ as on June 1, 2015.

Will it be allowed to be adjusted with Service tax liability as this is being denied in terms of Rule 3(7)(b) of the Cenvat Credit Rules, 2004 (“the Credit Rules”)!

Point of Taxation when there is Change in Effective Rate of Tax:

Point of taxation involving change in effective rate of tax is governed by Rule 4 of the POT Rules, which provides for determination of Point of taxation when there is change in effective rate of tax as mentioned in the table below:

Sl. No. In case a taxable service has been provided Invoice has been issued Payment received for the invoice Point of taxation shall be Applicable Rate
1 BEFORE the change in effective rate of tax AFTER the change in effective rate of tax AFTER the change in effective rate of tax Date of issuance of invoice or Date of receipt of payment, whichever is earlier New Rate
2 BEFORE the change in effective rate x of ta AFTER the change in effective rate of tax Date of issuance of invoice Old Rate
3 AFTER the change in effective rate of tax BEFORE the change in effective rate of tax Date of receipt of payment Old Rate
4 AFTER the change in effective rate of tax BEFORE the change in effective rate of tax AFTER the change in effective rate of tax Date of receipt of payment New Rate
5 BEFORE the change in effective rate of tax BEFORE the change in effective rate of tax Date of issuance of invoice or Date of receipt of payment, whichever is earlierOld Old Rate
6 AFTER the change in effective rate of tax BEFORE the change in effective rate of tax Date of issuance of invoice New Rate

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