Why JS(TRU) letter is mum on amendment to Rule 6? - Calls for an 'explanation'!!!!
WITH effect from 1.4.2011, Rule 6 of the Service Tax Rules has been amended. This is a significant amendment and is going to change the present system of assessees paying service tax (monthly or quarterly) on receipt of the amount for the services rendered. Till now no service tax is payable even if service is rendered or invoice issued. The payment of service tax is only on the receipt of the amount from the client. All this is going to be history from 1.4.2011. The new rule after the amendment reads:
(1) The service tax shall be paid to the credit of the Central Government,-
(i) by the 6th day of the month, if the duty is deposited electronically through internet banking; and
(ii) by the 5th day of the month, in any other case,
immediately following the calendar month in which the service is deemed to be provided as per the rules framed in this regard.
All tax payers will have a tough time in understanding this new rule and in computing the service tax liability for the month of April 2011 and onwards. Not only assessees, many officers are also having tough time in understanding this new concept. Surprisingly, no mention has been made in the JS(TRU)'s letter explaining the budget changes. Perhaps they thought it is too complicated to explain and better leave it to the field.
And what about the services rendered and bills issued in the month of March for which payments are going to be received in April 2011? Can they pay service tax on receipt of the money? How to deal with such cases? Can they give a suitable explanation before the deadline of 5 th May 2011?