Point of Taxation Rules (POT Rules), 2011.

POT Rules, 2011, came  into force on the 1st day of April, 2011.

A.  Important  Definitions

(a)   Associated enterprises:

 As assigned section 92A of the Income Tax Act, 1961

(b)   Continuous supply of service means any service

a.     which is provided or to be provided continuously, under a contract, for a period exceeding three months,

b.     where the Central Government, by a notification in the Official Gazette, prescribes provision of a particular service to be a continuous supply of service, whether or not subject to any condition

Notified services:

a.     Telecommunication services 65(105)(zzzx),

b.    Commercial or industrial construction 65(105)(zzq),

c.     Construction of residential complex 65(105)(zzzh),

d.    Internet  telecommunication services 65(105)(zzzu),

e.     Work contract services65(105)(zzzza),

(c)   Invoice means

a.     The invoice referred to in rule 4A of the Service Tax Rules, 1994

b.    Andl include any document as referred to in the said rule;

(d)   Point of taxation means

the point in time when a service shall be deemed to have been provided;

(e)   Taxable service means

a.     a service which is subjected to service tax,

b.    whether or not the same is fully exempt by the Central Government under Section 93 of the Act;

B.  Determination of point of taxation (POT).

Unless otherwise provided, ‘point of taxation’ shall be,-

1.     The time when the invoice for the service provided or to be provided is issued:

2.     If  invoice is not issued within fourteen days of the completion: POT - date of such completion

3.     If payment received before 14 days (even if advance): POT - date of such receipt

 ( 14 days is the period referred to in rule 4A of the Service Tax Rules, 1994.)

C.  Determination of POT in case of change in effective rate of  tax

(a)     When taxable service has been provided before the change in effective rate of tax,-

Invoice issued                          Payment received                                 POT

1. After change                         After change                             Whichever is earlier

2. Before change                       After change                             Date of Invoice

3 .After change                         Before change                          Date of payment

(b)  When taxable service has been provided after the change in effective rate of  tax,-

Invoice issued                          Payment received                                 POT

1. Before change                       Before change                          Whichever is earlier

2. Before change                       After change                             Date of payment

3. After change                         Before change                          Date of invoice

Change in effective rate of tax shall include

a.     Any notifications

b.    Change in Abatements

c.     Change in rate.

.

D.   Payment of tax in cases of new services

Where a service, not being a service covered by rule 6,is taxed for the first time, then, –

(a)      Not taxable : If invoice issued and  payment received against such invoice before such service became taxable;

(b)     Not taxable: If the payment received before the service becomes taxable and invoice has been issued within the period referred to in rule 4A of the Service Tax Rules, 1994.(14 days)

E.  Determination of POT in case of continuous supply of service

 (a)   When the invoice for the service provided or to be provided is issued (but should be within 14 Days on date of completion of service)

     
(b)  When receives   payment before the time specified in clause (a), date of receipt.( includes advance)

F.   Determination of point of taxation in case of associated enterprises.

 Notwithstanding anything contained in these rules, the point of taxation in respect of,-

(a)       the services covered by sub-rule (1) of rule 3 of Export of Services Rules, 2005: when payment is received or made

If payment is not received within the period specified by the Reserve Bank of India, the point of taxation shall be determined, as if this rule does not exist.

(b)       the persons required to pay tax as recipients under the rules made in this regard in respect of services notified under sub-section (2) of section 68 of the Finance Act, 1994: when payment is received or made

If  the payment is not made within a period of six months of the date of invoice, the point of taxation shall be determined as if this rule does not exist.

(c)       individuals or proprietary firms or partnership firms providing taxable services referred to in sub-clauses (p), (q), (s), (t), (u), (za),

(zzzzm) of clause (105) of section 65 of the Finance Act, 1994: when payment is received or made

In the case of  “associated enterprises”, where the person providing the service is located outside India, the POT shall be the date of credit in the books of account of the person receiving the service or date of making the payment whichever is earlier.

G. Determination of POT in case of copyrights, etc.

 In respect of royalties and payments pertaining to copyrights, trademarks, designs or patents,

1.     where the whole amount of the consideration for the provision of service is not ascertainable at the time when service was performed, and subsequently the use or the benefit of these services by a person other than the provider gives rise to any payment of consideration. The service shall be treated as having been provided:

a. Each time when a payment in respect of such use

b. Or the benefit is received by the provider in respect thereof,

c. Or an invoice is issued by the provider,

                 whichever is earlier