Service Tax - What is Taxable Event? Providing or Payment?
THE Delhi High Court had to deal with this question in a number of cases recently. Between providing service and receipt of payment, if the rate of Service Tax is enhanced, at what rate is Service Tax payable? The rate on the date of providing the service or the date of receipt of payment?
The High Court observed, “ In the absence of any Rules, we will have to examine as to what is the taxable event. The taxable event as per the Finance Act, 1994 is the providing of the taxable service. In the present case, we find that not only were the services admittedly provided prior of 14.05.2003 but also the bills have been raised prior to 14.05.2003. The only thing that happened after 14.05.2003 was that the payments were received after that date. That, in our view would not change the date on which the taxable event had taken place. Since the taxable event in the present case took place prior to 14.05.2003, the rate of tax applicable prior to that date would be the one that would apply. In the present case, the rate of 5% would be applicable and not the rate of 8%.”
Please remember this is for the period April to September 2003.