Service Tax - What is Completion of Service? CBEC Clarifies
SERVICE Tax Rules, 1994 requires that invoice should be issued within a period of 14 days from the completion of the taxable service. The invoice needs to indicate inter alia the value of service so completed. Thus, it is important to identify the service so completed. This would include not only the physical part of providing the service but also the completion of all other auxiliary activities that enable the service provider to be in a position to issue the invoice. Such auxiliary activities could include activities like measurement, quality testing etc. which may be essential pre-requisites for identification of completion of service.
Now what is completion of service?
CBEC clarifies:
The test for the determination whether a service has been completed would be the completion of all the related activities that place the service provider in a situation to be able to issue an invoice. However, such activities do not include flimsy or irrelevant grounds for delay in issuance of invoice .
What a beautiful clarification!
Now, what is completion of all the related activities?
And what are flimsy or irrelevant grounds that the Department will not accept?
What does this Circular really clarify?
By the way, why should any sane person delay the issue of invoice and collect his money for the service? Maybe to avoid paying Service Tax even before getting payment? And how is the department going to prove that service has been completed? Are they going to check each invoice to ascertain whether the invoice had been issued within 14 days of completing the service?
For every problem, there is a solution, which is simple, elegant, and wrong.
CBEC Circular No. 144/13/2011-ST Dated: July 18, 2011