Overview of Point of Taxation Rules for India

On March 31st, 2011, the Indian Government announced rules to introduce amendments to the new legal requirement of Point of Taxation for Services. These rules are applicable from April 1st, 2011 for services provided or received in India. These rules define principles of service taxation during various situations.

Point of taxation is the time when a service is provided, which imposes tax even if it is before the receipt of consideration for services. The relevant rule defines point of taxation as the earliest of:

• Actual provision of a service

• Creation of an invoice

• Receipt of consideration

This rule shifts the service tax from cash to an accrual base. This rule also states that if you receive an advance for providing services, you must pay the tax at the time of such receipt.

The Point of Taxation is deemed on conditions in this regard.