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What is the date from which new service tax rate of 10% has become effective?
In UOI v. Ganesh Das Bhojraj 116 ELT 431 = AIR 2000 SC 1102 = 2000 AIR SCW 764 (SC 3 member bench), it has been held that notification comes into operation from date of publication in Official Gazette. The gazette is official record evidencing public affairs. Court is required to presume its contents as genuine u/ss 35 & 38 of Evidence Act, unless contrary is proved. Thus, notification comes into effect on the day it is published in Official Gazette same view in State of UP v. Twin City Jewellers Association (2006) 147 STC 354 (SC).
Since notification No. 8/2009-ST was issued on 24-2-2009, the reduced rate will be effective from 24-2-2009.

Though announcement of reduction in service tax rate was made in the morning Finance Minister in Parliament, the notification was actually available on website only in the evening after about 7 PM. Will it make any difference?
In law, this makes no difference, as time of publication is never given in Official Gazette. The notification is effective for whole day irrespective of time at which it was issued.
Generally, service tax rates become effective only after budget is passed and assent of President is obtained. Sometimes, a notification has to be issued after passing of Act. How this time the new rate became effective immediately? The aforesaid provision applies only if tax is imposed on new service or service tax rate is increased. Exemption or reduction in service tax can be granted by Central Government under section 93 of Finance Act. This can be done imply by issuing a notification in official gazette. No further formalities are required.

We provided service on 23-2-2009 but invoice was issued on 24-2-2009. Can we charge service tax @ 10%?
Answer is No.
As a general rule, liability of tax is fastened when taxable event occurs, unless different provision is made law. Thus, date of which service is rendered will determine the rate of service tax and not date of invoice or date of receipt of payment.
Section 66 (which is a charging section), reads, There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve percent of value of taxable services referred to in sub-clauses (a), (b), - - - (zzzzc) and (zzzzd) of clause (105) of section 65 and collected in such manner as may be prescribed. Opening sentence of section 65(105) of Finance Act, 1994 reads as follows, taxable service means any service provided or to be provided. Thus, service provided or to be provided is a taxable event.
In Reliance Industries Ltd. v. CCE (2008) 15 STT 29 (CESTAT), it was held that rate of service tax will be as on date on which service is rendered and not on basis of date of billing or date of receipt of payment. Thus, rate of service tax as prevailing on date of provision of service will be determining factor. If you see form of half yearly return ST-3, it contains all columns i.e. 5%, 8%, 10% and 12%. This is because if some payment was received in current period in respect of service provided during earlier period, the rate at which tax was collected will be lower and hence service tax will be payable at that lower rate only.

In case of central excise, date of invoice is relevant for determining rate of excise duty, even if goods were manufactured earlier. Why this principle is not applicable to service tax?

In central excise, the rate relevant is the date on which final product is cleared from factory. In service tax, there is no such concept of clearance. Hence, analogy of service tax will not apply.
A service provider has provided service prior to 24-2-2009, but payment was received after 24-2-2009. What is the rate at which service tax is payable? As stated above, date of payment is not taxable event.
In CCE v. Matsushita TV (2006) 3 STT 374 (CESTAT), it was held that providing of service is the taxable event. Date of receipt of payment is not the relevant factor quoted with approval and followed in Lumax Samlip v. CST (2007) 8 STT 82 (CESTAT) Thus, if service is provided prior to 24-2-2009, service tax will be payable @ 12%, even if payment is made/received later.
As per second proviso to rule 6(1) of Service Tax Rules, service tax is not payable if payment was received after service tax was imposed, even if payment for such service is received after service tax is imposed same view in Amba Polytubes v. CCE (2007) (CESTAT).
This is correct, as taxable event had occurred before the service was brought into tax net. This principle will equally apply to change in rate of service tax.

We were not aware that rate of service tax has been reduced. We made an invoice on 24-2-2009 @ 12.36%. Can the customer avail full Cenvat credit or credit will be restricted to 10.3% only?
In CCE v. CEGAT 2006 (202) ELT 753 (Mad HC DB), it was held that the words used in rule 3(1) of Cenvat Credit Rules are excise duty and service tax paid and not payable. Thus, once duty is paid, Cenvat credit is available, whether duty was payable or not - same view in CCE v. Ranbaxy Labs Ltd. 2006 (203) ELT 213 (PH HC DB).
If supplier has paid excise duty on wire drawn (though it was not legally payable during relevant time), the buyer is eligible to avail Cenvat credit if supplier had not obtained refund of duty paid by them on drawn wire BCL Springs v. CCE 2005 (185) ELT 56 (CESTAT).
In Spic (HCD) Ltd. v. CCE 2006 (201) ELT 386 (CESTAT), duty was paid by job worker and the manufacturer availed its credit. The credit was proposed to be denied on the ground that job worker was not required to pay duty. It was held that the credit is eligible. If goods were received on payment of duty, Commissioner having jurisdiction over manufacturers unit cannot revise or restrict credit relying on Kerala State Electronic Corporation v. CCE 1996 (84) ELT 44 (CEGAT) and Owens Bilt v. CCE 1998(101) ELT 642 (CEGAT) similar view in CCE v. Hogans India (2007) 212 ELT 37 (CESTAT SMB) followed in CCE v. DIL Ltd. (2008) 14 STT 210 (CESTAT SMB).
Similarly, in Owens Bilt Ltd. v. CCE 1998(101) ELT 642 (CEGAT), it was held that once duty is paid at the manufacturer' s end, the jurisdictional Assistant / Deputy Commissioner at user's end has no jurisdiction to decide whether duty was payable or not followed in Goa Industrial Products v. CCE 2005 (181) ELT 222 (CESTAT).
Credit even if duty paid at higher rate - Even if duty was paid at higher rate, buyer is eligible to avail Cenvat credit of entire duty paid Nahar Industrial Enterprises v. CCE (2007) 210 ELT 38 (CESTAT SMB). Thus, if customer is in position to avail Cenvat credit, it may be advisable not to claim any refund or adjustment.

Due to ignorance, we paid service tax @ 12.36% instead of 10.3% though service was provided after 24-2-2009. Can we on our own adjust the excess payment of service tax made above 10.3% ?
There are various issues involved. Firstly, as per section 73A of Finance Act, 1994, if any amount is collected as representing as service tax, it shall be deposited with Central Government. Secondly, as per rule 6(4B) of Service Tax Rules, adjustment upto Rs one lakh is permissible on own only if excess amount paid is on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification. Strictly legally, applicability of exemption notification is involved in this case.
Thirdly, as per rule 6(3), if excess tax is paid, in respect of service which is not provided either wholly or partially for any reason, the excess service tax paid can be adjusted against service tax payable for subsequent period, if the value of services and tax thereon is refunded to the person from whom it was received. Such adjustment is permissible only when refund is on account of services not provided. Hence, by strict interpretation, even this rule cannot apply.
Finally, it has to be ensured that the customer/client has not availed Cenvat credit on basis of your invoice. In view of above, my suggestions are as follows. If customer is in position to avail Cenvat credit and is willing to make full payment to you, it may be advisable to forget about refund/adjustment (You may just inform department, if you want to be extra cautious).
Strictly legally, self adjustment is not permissible, but if you are slightly risk taking type, you may do so after informing department that you are making self adjustment on the basis of principles of rules 6(4B) and rule 6(3). You should issue credit note to customer. You should get certificate from customer that the customer is paying to you service tax only @ 10.3% and that he is availing Cenvat credit of only 10.3% (or is not availing Cenvat credit at all, as applicable).
If you do not want to make self adjustment, you may file refund claim. You should issue proper credit note to customer. You should get certificate from customer that the customer is paying you service tax only @ 10.3% and that he is availing Cenvat credit of only 10.3% (or is not availing Cenvat credit at all, as applicable). The amount claimed as refund should be shown in balance sheet clearly as amount receivable on account of service tax refund. Suitable certificate should be obtained from CA. Then, you should be mentally prepared that the refund claim will be rejected at first level on some flimsy ground and then you will have to try your luck at appellate level!
Let us hope that some administrative instructions are issued considering genuine difficulties of assessees. We are raising invoice on monthly basis to customer. How to raise invoice for February, 2009? You should split the invoice between period 1-2-2009 to 23-2-2009 and 24-2-2009 onwards and charge service tax accordingly. It is really not required to prepare separate invoice but may be advisable to prepare separate invoices to avoid harassment, as department is simply waiting for such opportunities.

Such bifurcation is very cumbersome. Can be calculated weighted average? For example, out of 28 days in February, the rate was 12% for 23 days and 10% for 5 days. The weighted average would be 11.643% [11.992% including education and SAH cess]. Is it permissible?
Solution is practical but unfortunately, there is no provision in law allowing such a procedure. What about construction services provided on long term basis where assessee is not availing any abatement scheme? It is advisable to prepare invoice for services rendered upto 23-2-2009, on basis of certificate of Chartered Engineer/Architect and pay service tax @ 12.36% on that amount.

My clients paying service tax under composition scheme @ 4% on works contract, @ 0.6%/1.2% on air travel agent service [rule 6(7)] and 0.25% on foreign exchange services [rule 6(7B)]. Is their any reduction in those rates? These rates are specified under rules. Hence, there will be no change in those rates unless the relevant rules are amended. Assessee is paying service tax under abatement scheme under Notification No. 1/2006-ST dated 1-6-2006 (on 33%/50%/60% amount as applicable). Is there any change in those abatement rates? Really, no change in those abatement rates are required. The value should be calculated on the basis of percentage as specified in the notification and then service tax should be calculated @ 10.30% in respect of services provided on or after 24-2-2009.

We had received advance and had made invoice charging service tax @ 12%. Now, we are providing service after 24-2-2009 and invoice for balance amount. What will be rate of service tax?
There is no doubt that in respect of amount charged after 24-2-2009, service tax rate will be 10.30%. In respect of advance received, in my view, though service tax is payable when advance is received and service to be provided is also a taxable event, really, provision of service is the real taxable event. There cannot be two taxable events on basis of same transaction. Hence, in my view, on entire transaction, service tax should be @ 10.30%. However, since issue is arguable, it is advisable to inform department suitably. If customer is in position to avail Cenvat credit, it is better to forget about any adjustment.

How long the reduced rate will continue?
The exemption notification does not prescribe any last date and Government can increase the rate anytime by amending or withdrawing the notification. However, in my view, the rate of 10% may continue till elections are over and new Government comes in power, i.e. at least till June 2009.

 
     
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