Treatment of service tax paid at old rate

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SummaryWe received services from an architect firm prior to 31 March 2012 for designing our new office.

Queries on taxation and service tax liabilities, addressed by Vivek Sharma & Manav Saneja of Ernst & Young

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 However, this provision has been rescinded from 1 April 2012 and the point of taxation of such services would be as per Rule 4 of the Point of Taxation Rules, 2011.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 of tax is 12.36%), service tax would be charged at 12.36%. The circular also clarifies that supplementary invoices may be issued to reflect the correct rate of service tax, and Cenvat credit can be claimed on such supplementary invoices subject to the conditions prescribed in the Cenvat Credit Rules 2004. It is on the basis of such circular that your vendor has raised the supplementary invoice. Further, you can claim credit of such differential service tax paid based on the supplementary invoice.

FOC supplies

We’re engaged in real estate development in Haryana. We often engage subcontractor’s to do certain services such as electrical and plumbing services. In most of these works contract, material is supplied by us to the subcontractor on Free of Cost basis. We would like to know whether under the negative list regime, wherein composition scheme has been replaced by a unified scheme, the value of goods procured by

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