POT Rules - Associated Enterprises - Credit or Debit? · TIOL-DDT 1829

POT Rules - Associated Enterprises - Credit or Debit?

By Vijay Kumar

AN alert Netizen sent us this:

While reading the service tax notifications on amendments to POTR, 2012, we observed that in Rule 7, there is an amendment in case of reverse charge transactions with associated enterprises, which is as under:

Old Proviso	New proviso	Comment
Provided also that in case of “associated enterprises”, where the person providing the service is located outside India, the point of taxation shall be the date of credit* in the books of account* of the person receiving the service or date of making the payment whichever is earlier.	Provided further that in case of “associated enterprises”, where the person providing the service is located outside India, the point of taxation shall be the date of debit* in the books of account* of the person receiving the service or date of making the payment whichever is earlier.?	1. Why is 'credit' changed to ‘ debit '? 2. While the intention appears to be that the date of credit is the correct one, as the service receiver credits the account of the service provider, there seems to be no logic why this one word was changed. 3. Is it that the Government wants to see the debit in the expense account and not the credit entry in the service receiver's account? 4. If this entry continues like this, either new or old, only one provision will be correct in which case service tax on reverse charge basis is not applicable in the other situation. 5. When the double entry system is already in vogue for ages, is it necessary to specify whether it is debit or credit? Would it not be better if they merely mention that the relevant date is the date of making relevant entries in books of account?

Old Proviso

New proviso

Comment

Provided also that in case of “associated enterprises”, where the person providing the service is located outside India, the point of taxation shall be the date of credit in the books of account of the person receiving the service or date of making the payment whichever is earlier.

Provided further that in case of “associated enterprises”, where the person providing the service is located outside India, the point of taxation shall be the date of debit in the books of account of the person receiving the service or date of making the payment whichever is earlier.?

1. Why is 'credit' changed to ‘ debit '?

2. While the intention appears to be that the date of credit is the correct one, as the service receiver credits the account of the service provider, there seems to be no logic why this one word was changed.

3. Is it that the Government wants to see the debit in the expense account and not the credit entry in the service receiver's account?

4. If this entry continues like this, either new or old, only one provision will be correct in which case service tax on reverse charge basis is not applicable in the other situation.

5. When the double entry system is already in vogue for ages, is it necessary to specify whether it is debit or credit? Would it not be better if they merely mention that the relevant date is the date of making relevant entries in books of account?