India Service Tax liability confirmed

Tue 20th Aug 2013

In a recent tax case, the tax point for Indian Service Tax was confirmed as the date of the service provided, as opposed to the date of the invoice.

The case arouse following a tax audit of a shipping company.  It was identified that as invoice had been raised at the Service Tax rate of 5%, which was the prevailing rate when the service of port goods storage was provided to the customer.  However, subsequently to the raising of the invoice and after the provision of the service, the Indian Service Tax rate had risen to 8%.  The service tax had risen in September 2004.

The Indian Tax authorities raised an assessment and penalty, asserting that Service Tax point is the date of the invoice, and therefore the 8% rate should have been applied.

Last month, the Indian Courts rejected this claim.  The invoice date or date of payment do not have a bearing on the tax liability.  The Indian Finance Act 2012 had clarified this point.