Service tax is currently applicable under the current indirect tax regime upon the provision of taxable services. The point of taxation helps in ascertaining when the service tax is actually payable to the central government by the recipient or the supplier. As per the point of taxation mechanism, on forwarding charge, the impacts of liability of payment of service tax is as follows –

The Earliest of the Dates is Considered when –

• The invoice has been issued within 30 days from the date of rendering / completing the service;
• The date of completion of the service is considered in case the invoice has not been issued within 30 days from the date on which the service was completed;
• Either the date on which the record was entered into the books of accounts or the date on which the payment was credited to the bank is considered in the case of the date of the recipient of the payment.

As an illustration, let us Consider the following dates –

• If the service was completed on November 15, 2016, the invoice was issued on November 20, 2016, and the date of receipt of the payment is December 10, 2016, then the point of taxation is November 20, 2016. This is because the invoice has been issued well within the 30-day span of completion of the service and the date of receipt of payment is later than the date of issuance of the invoice.
• If the service was completed on January 1, 2016, the invoice was issued on January 5, 2016, and the date of receipt of the payment is December 25, 2015, then the point of taxation is December 25, 2015. This is because the invoice has been issued well within the 30-day span of completion of the service and the date of receipt of payment is earlier than the date of issuance of the invoice.
• If the service was completed on December 1, 2016, the invoice was issued on January 5, 2017, and the date of receipt of the payment is January 10, 2017, then the point of taxation is December 1, 2016. This is because the invoice has not been issued within the 30-day span of completion of the service, so the date of payment will not be considered the point of taxation. Instead, the date of completion of the service is considered as the point of taxation.

GST Regime –

Under the GST regime, the determination of the point of taxation is similar to the current indirect tax regime. Even though services are intangible compared to goods, the provisions of determining the time of supply of goods and services are similar to ensure easier to understand and implement principles. Under the GST regime thus, on a forward charge basis, the time of supply of services may be understood as follows –

It is pertinent to note that the tax liability is paid by way of CGST, SGST, and IGST, whichever may be attracted based on an intrastate or interstate supply of services.

The Earliest of the Dates is Considered when –

• The supplier has issued the invoice – the date of the invoice is considered;
• The invoice must be issued within 30 days from the date on which the services were supplied (In the case of a banking company the date of the invoice is 45 days from the date on which the services were supplied) for considering the due date to issue the invoice;
• Either the date on which the record was entered into the books of accounts or the date on which the payment was credited to the bank is considered in the case of the date of the recipient of the payment.

As an illustration, let us Consider the Following Dates –

• If the date of issue of the invoice was November 20, 2016, the payment was received on December 10, 2016, then the time of supply shall be November 20, 2016, as the date of the invoice is earlier than the date on which the payment was received.
• If the date of issue of the invoice was January 5, 2017, the payment was received on December 25, 2016, then the time of supply shall be December 25, 2016, as the date of receiving the payment is earlier than the date of the invoice.
• If the date of issue of the invoice was January 5, 2017, the entry was recorded in the books of accounts as of December 20, 206 and the date on which the payment was made to the bank was December 25, 2016, then the time of supply shall be December 20, 2016, as the date of the receiving the payment is earlier of the two – date on which the entry was made in the accounts books and the date of crediting the payment to the bank (in this case the date on which the payment was entered into the accounts books).
• If the date of issue of the invoice was January 5, 2017, the entry was recorded in the books of accounts as of December 15, 206 and the date on which the payment was made to the bank was December 10, 2016, then the time of supply shall be December 10, 2016, as the date of the receiving the payment is earlier of the two – date on which the entry was made in the accounts books and the date of crediting the payment to the bank (in this case the date on which the payment was credited to the bank).

In a Situation where the Invoice is not Available –

• If the date of completion of the service is December 1, 2016, the date of receiving the payment is January 5, 2017, then the time of supply shall be December 30, 2016, as the item of supply will be considered from the last day of the invoice so issued and the payment so received. 30 days from the date of supply of the services is given as the cutoff date for the issue of the invoice.

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