The Finance Ministry has come to the rescue of industry and professionals by considerably simplifying its norms on ‘point of taxation' for service tax collection purposes.
The point of taxation will now be primarily linked to date of invoice/collection, according to the latest changes made by the Central Board of Excise and Customs (CBEC).
The simplification has come a month after the original norms were issued and would help allay the concerns expressed by industry.
Point of taxation refers to the time when a taxable service should be brought to service tax.
Prior to the latest changes, the point of taxation was also linked to the date of provision of services/date when services were to be provided. This has now been dropped.
The point of taxation was hitherto decided as the earlier date of invoice, date of collection or date of provision of services/date when services were to be provided.
Meanwhile, it has now been clearly spelt out that the point of taxation for services exports will be the date of payment.
Also, professionals such as chartered accountants, company secretaries, architects and interior decorators need to pay service tax only when they receive payment for their services and not on accrual basis.
This will come as a big relief for small practitioners and professionals as they generally get payments for their services after a gap of 4-6 months.