Government by issuing the notification has cleared about the effective date for applicability of new service tax rate. This notification ended all confusion and now in all invoices service tax shall be charged at the correct rate.    I remember, many times I had to communicate to the vendors to charge correct rate of service tax. Since the announcement of new rate, this confusion was there and from starting of this Financial Year, it has certainly increased. In our previous article, From 1st June, expenses will increase as service tax shall be charged at 14%, we have highlighted the notification issued by the government about the applicability of service tax @14% from 1^st June, 2015. Though there is clarity about the applicability date but now what next?? We caught you!!! You are in dilemma to charge ST @ 12.36 or 14% on which invoices. Now, the confusion is about which rate to apply. As the new rate is not applicable from first day of this financial year so, now, skepticism is all about charging of old or new rate to invoices already raised or to be raised. This issue seems like climbing a mountain. But, in simple and easy way we can tackle this situation. Situation 1. Service completed before 1^st June, 2015 Either payment made or invoice raised against the said service before 1^st June then charge the Old Rate. Where payment and invoice is on or after 1^st June then New Rate shall be applicable. Situation 2. Service completed after 1^st June, 2015 Either payment made or invoice raised against the said service after 1^st June then charge the New Rate. Where payment and invoice is before 1^st June then Old Rate shall be applicable. To understand this better, let us look on the instances below:

1. Service completed till 31.05.2015 and Invoice raised till 31.05.2015 but Payment received on or after 01.06.2015 – 12.36%
2. Service complete till 31.05.2015, Invoice raised on or after 01.06.2015 but Payment is received till 31.05.2015 – 12.36%
3. Service completed till 31.05.2015 and Invoice raised on or after 01.06.2015 and Payment also received after 01.06.2015 – 14%
4. Invoice raised till 31.05.2015 in advance and some part of total consideration has been paid till 31.05.2015 but Service Provision is being done on or after 01.06.2015 -12.36% for such part payment, 14% for balance to be received.
5. Entire consideration received till 31.05.2015 but no invoice raised and no service provided till 31.05.2015  – 14%

6. Even if entire service has been provided on or after 01.06.2015 but both payment as well as invoicing has been done till 31.05.2015 then 12.36% With above explanation, we hope you must be clear about the applicability of new and old service tax rate.   For any assistance, contact us at: http://taxmantra.com/services/business-maintenance/ __________________________________________________________________________________________