Oracle E-business Suite Release 12 and 11i: India Point of Taxation Rules April 2011 Deferred till July 1, 2011
(Doc ID 1309964.1)
Last updated on AUGUST 06, 2020
Applies to:Oracle Financials for India - Version 22.214.171.124 and later
Information in this document applies to any platform.
The objective of this note is to alert customers that Government of India has decided to defer the implementation of Point of Taxation Rules for 3 months; the revised dead line for implementing Point of Taxation Rules is July 1, 2011.
Through Notification No.25/2011 – Service Tax dated 31 March 2011, It is clarified that till July 1, 2011, tax payers can continue either with the old system of accounting (where service tax liability is accounted only on receipt of payment) or switch to the proposed system where liability is accounted once the receivable transaction is completed.
Customers who would like to continue with the existing accounting method till the revised dead line for implementing Point of taxation Rules (July 2011) are advised not to apply the patch on their production instance till July 1, 2011.
Once the patch is applied in the production instance, the service tax liability will get accounted once the AR transaction is completed.
Through Notification No.25/2011 – Service Tax dated 31 March 2011 the implementation of point of Taxation is deferred till July1,2011. The notification also mandates changes in the procedure for recovering the Service Tax. As per the Notification, service tax can be recovered on receipt of the tax invoice for service from the service provider and need not wait till the bill is paid. However, the notification brings in conditions that the service tax so availed need to be reversed if the payment is not made within the stipulated time. The notification also describes certain circumstances where cenvat credit need to be reversed or service tax need to be paid (eg. cases where a credit note or refund is received from service provider pointing to a transaction where cenvat credit was availed on service tax).
We are in the process of building required solutions to address the above requirements and plan to bundle the new set of solutions along with Phase II patch. Delivery of Phase II patch will be delayed. ETA for this patch will be advised soon.
Since implementation of point of taxation is deferred for 3 months, customers are advised to defer applying the Phase I patch to their production instance. The phase I patch will change the procedure of accounting the service tax liability from the current cash basis system to accrual based system.
Appended below is the content of initial Note 1308548.1 announcing the availability of patch to support the revised accounting requirement under Point of Taxation Rules. Request those customers who would like to continue with the old accounting system till July 2011 are requested to discard this note and refrain from applying this patch in their production instance till July 1, 2011.
Point of Taxation Rules 2011:
In the India Federal Budget for 2011-12, it was proposed to make changes to the existing service tax regulations. Consequently Central Board of Excise and Customs issued a Notification # 18 /2011- Service Tax the point of taxation has been changed from cash basis to accrual basis. The revised provisions of the law are applicable from April 1, 2011. As per the revised regulations, the service tax liability must be accounted either on invoicing or on rendering of service or on receipt of payment whichever is earlier.
There are no changes regarding the taxable event for recovery of Service Tax. As per the Cenvat Credit Rules the recovery of service tax paid will be available only on payment of the service bill.
In order to enable compliance on the above legislative update, Oracle Financials for India will be modifying some of the components of the existing service tax solutions. The solution would be released in a phased manner. In Phase I, we will release a patch which will change the accounting requirements in Order to Cash Cycle. In Phase II, we will be releasing solutions to update the Service Tax repository, to manage the restrictions on Service tax recovery (which is specific to Banking and Insurance Sector) and the impact on service tax reporting.
Patch containing solutions covered under Phase I solutions are ready for download from My Oracle Support. Solution for Phase II would be ready by Second week of April 2011. Customers will require solution components bundled In Phase II only for making the Service Tax liability settlements which is due in the 1st week of May 2011.
We have released the patch for supporting the revised requirements for accounting the service tax liability. Once this patch is applied the accounting in case of AR, liability accounting will be generated at the time of completion of Invoice. Repository will be updated at the end of month when the service tax processing concurrent is generated (Addressed in phase II).
The revised accounting entry for service tax liability will be:
Debtors A/c Dr
Revenue A/c Cr
Service Tax Liability A/c Cr
Service Tax Educ Cess Liability A/c Cr
Service Tax SH Educ Cess Liability A/c Cr
Following patches are released via Development under control release, please raise an SR or Post your queries on communities so that we can assist you:
R12.0 : 11843527:R12.JAI.A
R12.1.1 : 11913561:R12.JAI.B
R12.1.3 : 11843527:R12.JAI.B
11i Branchline patch : 11896307
11i Mainline patch : 11829333
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