Determination of point of taxation-General rule [Rule 3] :

For the purposes of these rules, unless otherwise provided, ‘point of taxation‘ shall be –

(a) the time when the invoice for the service provided/ agreed to be provided is issued.

However, in case the invoice is not issued within the time period specified in rule 4A of the Service Tax Rules, 1994 (30 or 45 days, as the case may be) of the completion of the provision of the service, the point of taxation shall be date of such completion.

(b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment.

For the purposes of clauses (a) and (b), –

(i) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service;

(ii) wherever the provider of taxable service receives a payment up to Rs 1,000 in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of clause (a) [Proviso to rule 3].

Point of taxation in case of advance received by service provider For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance.

ANALYSIS
As per rule 3 of the said rules, point of taxation would be determined as follows:-

S.No.	In case	Point of taxation would be
1.	the invoice is issued within the prescribed period of 30 days* from the date of completion of provision of service	(a) Date of invoice or (b) Date of payment whichever is earlier
2.	the invoice is not issued within the prescribed period of 30 days* from the date of completion of provision of service	(a) Date of completion of service or (b) Date of payment whichever is earlier

The principle of point of taxation can be better understood with the help of the following tabular summary followed by an illustration:-

Case	In case where	Point of Taxation
I	Invoice is issued within 30 days* from the completion of service and payment is received after invoice	Date of invoice
II	Invoice is issued within 30 days* from the completion of service, but payment is received before invoice	Date on which payment is received.
III	Invoice is not issued within 30 days* from the completion of service and payment is received after completion of service	Date of completion of service
IV	Invoice is not issued within 30 days* from the completion of service. However, part payment is received before the completion of service and remaining payment is received after the completion of service.	For the payment received before the date of completion of service	Point of taxation is the date on which payment is received.
		after the date of completion of service	the date of completion of service.

*45 days in case of in case of banking and other financial institutions including NBFCs.

Illustration
In case of provision of the taxable services other than banking and other financial institution including NBFCs, point of taxation would be determined as under:-

Case	Date of completion of service	Date of invoice	Date on which payment received	Point of Taxation
I	August 5, 20XX	August 28, 20XX	September 10, 20XX	August 28, 20XX
II	August 5, 20XX	September 01, 20XX	August 20, 20XX	August 20, 20XX
III	August 5, 20XX	September 8, 20XX	August 25, 20XX	August 5, 20XX
IV	August 5, 20XX	September 8, 20XX	Amount received partly on August 3, 20XX and remaining on August 20, 20XX	August 3, 20XX and August 5, 20XX for respective amount

Determination of date of completion of service

(i) Date of completion of service in cases other than continuous supply of services : CBEC vide Circular No. 144/13/2011- ST dated 18.07.2011 has clarified that 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. The Service Tax Rules, 1994 require that invoice should be issued within a period of 30 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. However, it has been clarified that such activities do not include flimsy or irrelevant grounds for delay in issuance of invoice.

(ii) Date of completion of service in case of continuous supply of services: The Board has elucidated that the above interpretation also applies to determination of the date of completion of provision of service in case of “continuous supply of service”.

Further, in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service.

Point of taxation in case where payment upto Rs 1,000 received in excess of the invoiced amount: Wherever the provider of taxable service receives a payment up to Rs 1,000 in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined on the basis of invoice or completion of service, as the case may be, rather than payment.

Purpose of the aforesaid provision:-As a measure of added facilitation, an option has been provided to determine the point of taxation in respect of small advances up to Rs 1000, in excess of the amount indicated in the invoice, on the basis of invoice or completion of service rather than payment. Such provision is expected to address the accounting problems faced by service providers in telecommunications, credit card businesses who regularly receive minor excess payments from their customers.