The Rule 7 of the point of Taxation Rules, 2011, according to which the individuals or proprietary firms or partnership firms providing taxable services namely, services by a consulting engineer, architect, interior decorator, chartered accountant, cost accountant, company secretary, scientist/technocrat, and a lawyer/advocate, are allowed to pay service tax on realization basis, i.e. they are required to pay service tax on such taxable value which they are able to realize from their clients. But, the recent budget amendment in vide Notification no. 4/2012-ST dated 17-3-2012, has brought in to cap such services upto the taxable value of Rs. 50 lakhs. The provisions have been amended both in the Point of Taxation Rules 2011 and the Service Tax Rules 1994 such that from 1st April 2012 the payment of tax shall be allowed to be deferred till the receipt of payment upto a value of Rs 50 lakhs of taxable services. Moreover, the facility was granted to all individuals and partnership firms, irrespective of the description of service, whose turnover of taxable services is fifty lakh rupees or less in the previous financial year.
Once again, there was confusion among the above learned professionals. What will happen if they have raised the invoices before 31-3-2012, say for a value of Rs. 70 lakhs, but have realized only Rs. 40 lakhs. Will they be eligible for the luxury of paying service tax still on realization basis. Strictly speaking, there was no clarity on this aspect, and the effective date of such levy was fast creeping in and consultants like us and my brothers in the fraternity were busy finding out solutions to the esteemed lot of the society. Finally, with two days to go, CBEC has clarified this issue, and have come up with a Circular no. 154/5/2012-ST dated 28-3-2012, wherein it is now clarified for the above mentioned eight categories, that,
“in respect of the specified eight services, where invoices are issued on or before 31st March 2012 and where the payment has not been received before 1st April 2012, the point of taxation shall continue to be governed by the erstwhile Rule 7 as it stood as on 31-3-2012, and the point of taxation shall be the date of receipt of payment only.”
This comes as a timely help, to many of such professionals, and saved them from lot of legal entanglements. It is well said old quote, “a stich in time saves nine”.