Treatment of service tax paid at old rate

We received services from an architect firm prior to 31 March 2012 for designing our new office. Service Tax was charged at the rate of 10.3% on the invoice issued to us, which is still pending for payment. The architect firm has raised a supplementary invoice to recover additional service tax at 2.06% on the ground that the rate of tax has increased from 10.3% to 12.36%. Please clarify whether we are required to make such additional payment and whether Cenvat credit of the same shall be available to us.

Architect firms (proprietorship or partnership) were governed by Rule 7 of the Point of Taxation Rules, 2011 till 31 March 2012, where Service tax payment had to be discharged on receipt basis. However, this provision has been rescinded from 1 April 2012 and the point of taxation of such services would be as per Rule 4 of the Point of Taxation Rules, 2011.

In this regard, the Central Board of Excise and Customs (CBEC) had clarified that for invoices issued on or before 31 March 2012, the point of taxation shall continue to be the date of payment. The CBEC issued another clarification that in case of the specified services (which include architect’s services) where invoice has been raised prior to 1 April 2012 (when the rate of tax was 10.3%) but payment is received post 1st April 2012 (when the rate

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