Regarding service tax collecting and remitting

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  1. Uma Ranganath

    Uma Ranganath New Member

    We are Registered society (NGO) under karnataka Societies Registration Act and under section 12A of the Income Tax Act 1961 -We have commercial complex which we had rented out to international company for office purpose in the year 2013 and
    for some reason they were not paying rent to us . Now they agreed to pay the rent. ours is cash basis of accounting and we have obtained service tax registration only on 31/03/2016 and we have not raised any invoice for the rent and also we have not shown in our books the rent receivable. My question is that now whether we should collect service tax @ of 15% or service tax which is applicable at that time. where as our tenant they say that service what they have provided in there books only that they can pay us . Now who has to bare the difference of 15% - 12.36% i.e 2.64% of service tax. please guide us how to go about.
     
    Last edited: Jul 27, 2016
  2. ZED

    ZED Well-Known Member

    Since in this case the method of accounting followed was cash basis and not mercantile basis and since (presuming that the case is of individual) , as per proviso to rule -6 of Service Tax Rules , you will not be required to pay ST on it.


    Extracts from Rule 6
    Provided also that in case of individuals and partnership firms whose aggregate value of taxable services provided from one or more premises is fifty lakh rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or agreed to be provided by him up to a total of rupees fifty lakhs in the current financial year, by the dates specified in this sub-rule with respect to the month or quarter, as the case may be, in which payment is received
     
  3. Uma Ranganath

    Uma Ranganath New Member


    We are Registered society (NGO) under karnataka Societies Registration Act and under section 12A of the Income Tax Act 1961
     
  4. ZED

    ZED Well-Known Member

    Ok, thanks for the additional info.

    I wish to know why the registration was taken so late?
    If service tax was payable in year 2013 also then ST registration should also have been taken. Further, you would be liable to pay interest also for deferment of payment of service tax.


    The effective rates of ST has changed thrice since 2013.
    We will have to apply the rate as it was prevailing at the time of point of taxation.
    Point of taxation, as per point of taxation rules would be

    Earlier of date of invoice or payment.
    But, where the invoice is not issued within 30 days from date of completion of service (renting) , the point of taxation shall be earlier of date of completion of service or payment.

    Since the payment was not made, the point of taxation shall be the date of rendering the service.
     
  5. Uma Ranganath

    Uma Ranganath New Member

    First of all ours is cash basis accounting . when our total turnover crosses 9 lacs we should apply for service tax registration and after turnover crosses 10 lacs it becomes compulsory for collecting and rendering service tax. here we are not received any rent nor raised any invoice where our turnover it not cross the limit.Now my question is whether service we have provided where as not received any income for that, I should considered date of service into my turnover or income when we receive actually . here whether we should follow cash basis or mercantile basis of accounting for service tax purposes.
     
  6. ZED

    ZED Well-Known Member

    Ma'am, I understand that the entity in this case is following cash basis and not mercantile basis. Let's once go through the following rule and see what we can deduce.

    RULE 3. Determination of point of taxation.[Point of Taxation Rules 2011]
    For the purposes of these rules, unless otherwise provided, 'point of taxation' shall be,-
    (a) the time when the invoice for the service provided or agreed to be provided is issued:

    Provided that where the invoice is not issued within the time period specified in rule 4A of the Service Tax Rules, 1994, the point of taxation shall be date of such completion of provision of the service.


    (b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment.



    In the above rule, no differentiation has been made in method of accounting.
    I wish to know your understanding of the provision.
     
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