Point of Taxation in case of import of service from Associated Enterprise.

In case of import of service from associated enterprise (associated enterprise located outside India) , the reverse charge mechanism is applicable and the receiver of the service is liable to pay the service tax. The point of taxation in this shall be the date of credit in the books of account or the date of making the payment, whichever is earlier as per second proviso to Rule 7 of Point of taxation rules 2011. The service tax is payable even if the provision is created for expenses without crediting to the accounts of the associated enterprise.

This rule is not applicable if the payment is not made to the associated enterprise within 6 months from the date of Invoice and the point of taxation will be determined as if the rule 7 does not exist.

The taxpayer can take the cenvat credit of the service tax paid on such book entry based on the payment challan even if the amount for the service rendered is not paid to the associated enterprise.