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Service Tax Rate change effective from 1.6.2015

Vide Notification No. 14/2015, the new service tax rate of 14% will be applicable from 1st June 2015 .

How will this affect companies billing their clients during the month of May?

There are three parameters here which have to be taken into account:

1. Service provided

2. Payment received

3. Invoice raised.

Simple way to tackle this is -

If any of the two parameters above fall before 1.6.2015, then apply old rate in bill. If any of the two parameters above fall after 1.6.2015, then apply new rate in bill.

For example::

1. Service Provision is complete till 31.05.2015 and Invoice is raised till 31.05.2015 but Payment is received on or after 01.06.2015- Service Tax rate of 12.36% is applicable.

2. Service Provision is complete till 31.05.2015, Invoice is raised on or after 01.06.2015 but Payment is received till 31.05.2015 - Service Tax rate of 12.36% is applicable.

3. Service Provision is complete till 31.05.2015 and Invoice is raised on or after 01.06.2015 and Payment is also received after 01.06.2015- Service Tax rate of 14% is applicable.

4. Invoice is raised till 31.05.2015 in advance and some part of total consideration has been paid till 31.05.2015 but Service Provision is being done on or after 01.06.2015 -12.36% for such part payment, 14% for balance to be received.

5. Entire consideration has been received till 31.05.2015 but no invoice has been raised till 31.05.2015 and no service has been provided - Service Tax rate of 14% is applicable.

6. Even if entire service has been provided on or after 01.06.2015 but both payment as well as invoicing has been done till 31.05.2015 - Service Tax rate of 12.36% is applicable.


Hope this will clear up any doubts.

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