Changes in Point of Taxation Rules, 2011

The Point of Taxation Rules, 2011 were framed by the principal Notification No. 18/2011 – Service Tax, dated 1st March, 2011 vide number G.S.R. 175 (E), dated 1st March, 2011 and amended by Notification No. 37/2012-Service Tax, dated 20th June, 2012 vide number G.S.R.479 (E), dated 20th June, 2012.

Now, by this Notification No. 13/2014, certain amendments have been made to the earlier notifications as summarised below:

1. Determination of point of taxation in case of specified services or persons: Rule 7:
The point of taxation for the services specified in section 68(2) that is services falling under the ambit of reverse or partial charge mechanism shall be the month in which the payment is made to the vendor, subject to a condition that such payment is made within six months from the date of invoice. If the payment is not made within six months, the point of taxation shall be determined as if this rule does not exist.

However, the point of taxation shall be date immediately following three months if the payment is not made within three months from the date of invoice. Hence, effectively the time period has been reduced from six months to three months.

2. Rule 10: POT for instances where invoice for reverse or partial charge has been issued before 01-10- 2014 and payment is pending as on said date:
The new rule provides that notwithstanding anything contained vide first proviso to Rule 7, if the invoice in respect of a service for which POT is determinable vide Rule 7 has been issued before 01-10-2014 but payment has not been made as on the said day, the POT shall be:
i. If payment is made within a period of six months from the date of invoice – POT Is the date of invoice; ii. If payment is not made within a period of six months from the date of invoice – POT shall be determined as if this rule does not exist.