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August 2012

Clarification on point of taxation rules — Circular No. 162/13/2012-ST, dated 6-7-2012.

By Tarun Ghia, Brijesh Cholera, Pratik Mehta, Chartered Accountants
Reading Time 2 mins
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This Circular has been issued to clarify issues relating to point of taxation in (i) continuous supply of service — dealing with the transition by way of changes in the Rules w.e.f. 1st April 2012; (ii) works contracts — the transition by way of changes in tax treatment w.e.f. 1st July 2012; and (iii) introduction of partial reverse charge in certain services w.e.f. 1st July 2012. Accordingly,

(i) In the case of continuous supply, where the invoice had been issued or payment received before or on 31st March 2012, the point of taxation is governed by Rule 6 of the Point of Taxation Rules, 2011 as it stood at that point of time.

(ii) In the case of works contracts, which have been subjected to certain changes in service tax treatment effective from 1st July, if there has been a change in the effective rate of tax, the point of taxation will be determined under Rule 4, and if not, it will be determined under Rule 3. Introduction of service tax for a service that was not exempted by Notification, but was outside the scope of taxable service, does not constitute a change in the effective rate of taxation, and will be dealt with under Rule 3. (iii) For services where partial reverse charge has been introduced from 1st July, it will apply only when the point of taxation is on or after 1st July.

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