Circular
No. 162/13 /2012 –ST
F.
No. 354/111/2012-TRU
Government
of India
Ministry
of Finance
Department
of Revenue
Central
Board of Excise and Customs
(Tax
Research Unit)
*******
Room
No 146, North Block, New Delhi-1,
Dated the 6th July 2012.
To
Chief Commissioner of
Customs and Central Excise (All)
Chief Commissioner of
Central Excise & Service Tax (All)
Director General of
Service Tax
Director General of
Central Excise Intelligence
Director General of
Audit
Commissioner of
Customs and Central Excise (All)
Commissioner of
Central Excise and Service Tax (All)
Commissioner of
Service Tax (All)
Madam/Sir,
Subject: Clarification
on Point of Taxation Rules - regarding.
Consequent to the changes introduced
at the time of Budget 2012 in the Point of Taxation Rules, 2011, together with
revision of the service tax rate from 10% to 12% and the subsequent changes
that have been made effective from 01.07.2012, the following clarifications
have been desired:
(a)
Point
of taxation and the rate applicable in respect of continuous supply of services
at the time of change in rates effective from 01.04.2012;
(b)
Applicability
of the revised rule 2A of the Service
Tax (Determination of Value) Rules, 2006 to ongoing works contracts for determination
of value when the value was being determined under the erstwhile Works Contract
(Composition Scheme for Payment of Service Tax) Rules, 2007; and
(c)
Applicability
of partial reverse charge provisions in respect of specified services.
2.1 The issues have been examined. The continuous supply of services was
governed by rule 6 until 31.03.2012. The
rule started with the wordings “notwithstanding anything contained in rules 3,
4 …” Therefore, the point of taxation in respect of services provided in terms
of the said rule on or before 31.03.2012 would remain unaffected by rule 4.
2.2 To clarify the matter further, if the
invoice had been issued or payment received in respect of such services on or
before 31.03.2012, the point of taxation would stand determined under rule 6
accordingly and shall not alter due to the subsequent changes in the Point of
Taxation Rules, 2011 that became effective only from 1.4.2012.
3.1 However the position has undergone a
change at the time of transition towards the Negative List and the introduction
of other accompanying changes in Service Tax (Determination of Value) Rules,
2006 and partial reverse charge. At the
said time rule 6 stood omitted and the point of taxation was required to be
determined ordinarily in such cases under the main rule i.e. rule 3. This
rule is, however, overridden by rule 4 when there is a change in effective rate
of tax. The “change in effective rate of tax” has been defined in clause (ba) of rule 2 to include a change in the portion of value
on which tax is payable.
3.2 To illustrate, the following would be
changes in effective rate of tax:-
(i)
the change in the portion of total
value liable to tax in respect of works contract other than original works (from
@ 4.8% earlier to @ 12% on 60% of the total amount charged, or effectively @ 7.2%
now).
(ii) exemption
granted to certain works contracts w.e.f. 1st July 2012 which were
earlier taxable.
(iii) taxability of
certain works contracts which were hitherto exempted.
(iv) change in the
manner of payment of tax from composition scheme under the Works Contract
(Composition Scheme for Payment of Service Tax) Rules, 2007 to payment on
actual value under clause (i) of rule 2A of the
Service Tax (Determination of Value) Rules, 2006.
3.3 However, the following will not be a change
in effective rate of tax:-
(i)
works contracts earlier paying
service tax @ 4.8% under Works Contract (Composition Scheme for Payment of
Service Tax) Rules, 2007 and now required to pay service tax @12% on 40% of the
total amount charged, keeping the effective rate again at 4.8% (as only the
manner of expression has been altered).
(ii) works contracts which were outside the
scope of taxation (and not merely exempted) but have become now taxable e.g. construction
of residential complex comprising of 2
to 12 residential units, construction of
buildings meant for use by NGOs etc. (Rule 5 of the Point of Taxation Rules,
2011 shall apply to such services.)
3.4 Thus the point of taxation for services
provided in respect of taxable works contracts in progress on 01.07.2012 would
need to be determined under rule 4 of the Point of Taxation Rules unless there
is no change in effective rate of tax.
4. It is further clarified that the
provisions of partial reverse charge would also be applicable in respect of
such services where point of taxation is on or after 01.07.2012 under the
applicable rule in respect of the service provider.
5. This Circular may be communicated to the
field formations and service tax assessees, through Public Notice/ Trade
Notice. Hindi version to follow.
Yours
faithfully,
(Dr.
Shobhit Jain)
O.S.D.
(TRU)
Fax:
23093037