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CA Sandesh Mundra

Consult Us For Construction

Point of Taxation - Continous Supply

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No Point of Taxation Rules for continuous supply

I am undertaking construction for a builder, wherein the contract awarded to me will be executed over a period of 18 months. I will receive payment as and when my bill is certified by the architect. My question is if I have to pay service tax as per the new rules on the basis of service provided then I will be in a loss as I might not get the actual payment since it all depends on the quantum of work certified by the architect? Kindly guide me as to how should I discharge my service tax liability?

 

As per the Point of Taxation Rules, a continuous supply of service has been defined to mean:

(i) Any service provided or

to be provided continuously by a service provider under a contract for a period more than 3 months or

(ii) Such services which the central government prescribes by a notification to be issued in the nature of continuous supply of services.

In case of continuous supply of service, the Point of Taxation is the
‘specified date’ or date of issue of invoice or date of receipt of payment which ever is earlier.

Specified date would be the date specified in the contract, as to when the payment is liable to be paid by the service receiver in case of continuous supply of service, the whole or part of which is determined or payable periodically or from time to time. If there is no specified date, then the Point of Taxation would be the earliest of the following dates:

(i) Date of issue of invoice or

(ii) Date of receipt of payment

As per notification no.28/2011-St dated April 1, 2011, the following services will fall under continuous supply namely:

1. Commercial or industrial construction service

2. Construction of complex

3. Telecommunication services

4. Works contract service.

Since you are providing services to a builder, you might be registered under either works contract service or construction of complex service and hence you shall be liable to pay service tax as per the rules mentioned above.

Source : Daily News & Analysis, India, dated 22/07/2011

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CA Sandesh Mundra, Consultant – Management Audit and Indirect Taxation - Chartered Accountant, Diploma in Information System Audit, Diploma in Insurance & Risk Management , Certificate from ICAI on International Financial Reporting Standards. Actively associated with clients in the industrial construction sector since last 9 years.He possesses special skills in structuring the indirect tax component of the works contracts and as management auditor, has visited several construction sites in various states like Orissa, Rajasthan, Gujarat, Maharasthra, Madhya Pradesh etc. During the course of said visits he has been to very large industrial complexes, refineries, power plants etc

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