Applicability of new rate of Service tax from June 1^st – an illustration

The rate of service tax has been increased to 14% with effect from 1^st June, 2015. The table below gives a bird’s eye view of the applicability of new rate when the service in different scenarios.

For example, you might have  provided the service before the new rate coming into force, but you have issued the invoice in June  and you got the payment against that invoice in June, then even though you have provided the service while the old rate was applicable, you will be forced to pay tax at new rate, irrespective of whether you could recover the increased service tax from your client or not.

The table given below gives a full picture of point of taxation as per The Point of Taxation Rules, 2011, in case of rate change:

Service provided	Invoice Issued	Payment received	Rate of Tax
Before June 1st	In June or after	In June or after	14%
Before June 1st	Before June 1st	In June or after	12.36%
Before June 1st	In June or after	Before June 1st	12.36%
In June or after	Before June 1st	In June or after	14%
In June or after	Before June 1st	Before June 1st	12.36%
In June or after	In June or after	Before June 1st	14%