When Service Tax Rate Changes

The levy and collection of service tax depends on the provision of the service, creation of the invoice, or the receipt of consideration. These three events can take place at different points of time, therefore the applicable rate of service tax between these events can change. For changing applicable rates of service tax, Rule 4 defines these principles:

• When you provide a taxable service before the tax rate changes, the taxable event is determined as follows:

  • When the invoice is issued and the payment is received after the change in rate, the point of taxation is the date of payment or issue of the invoice, whichever is earlier.

  • When the invoice is issued before the change in tax rate, but the payment is received after the change, the point of taxation is the date of issue of the invoice.

  • When the payment is received before the change in tax rate, but the invoice is issued after the change, the point of taxation is the date of the payment.

• When you provide a taxable service after the change in tax rate, the taxable event is determined as follows:

  • When the payment is received after the change in tax rate, but the invoice is issued before the change, the point of taxation is the date of the payment.

  • When the invoice is issued and the payment is received before the change in tax rate, the point of taxation is the date of issue of the invoice or the date of receipt of payment, whichever is earlier.

  • When the invoice is raised after the change in tax rate, but the payment is received before the change, the point of taxation is the date of issue of the invoice.