Legal Update: Service Tax: Clarification Re Invoice Within 14 Days of ‘Completion of Service

Subject: – Clarification on “Completion of service”- regarding.

Representations requesting clarification on “completion of service” as
provided under the Point of Taxation Rules, 2011 and Service Tax
Rules, 1994 have been received from certain sections of service
providers that in many situations it is not possible to issue invoices
within 14 days of the completion of the service since the exact date
of completion of service is difficult to identify. Instances have been
given where after the task of providing the service may be physically
accomplished, but certain other formalities are required to be
completed from the client’s end before an invoice can be issued.

2. These representations have been examined. The Service Tax Rules,
1994 require that invoice should be issued within a period of 14 days
from the completion of the taxable service. The invoice needs to
indicate interalia 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. 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. However such activities do not include flimsy or
irrelevant grounds for delay in issuance of invoice.

The above interpretation also applies to determination of the date of
completion of provision of service in case of “continuous supply of
service”.