Do I need to collect additional service tax for gift cards, packages, and memberships sold before the service tax rate change?

For clients who purchased gift cards, packages, or membership before the service tax rate was increased, they can continue to use them to redeem services at old tax rate. For instance, if the client purchases a gift card worth ₹ 500 prior to tax rate change and uses it to redeem against the service of ₹ 500 price post the tax rate increase, no additional tax needs to be paid. If this card is used to redeem a higher priced service, say for ₹ 1000, the client needs to pay 15% tax on the balance amount that the client owes, which in this case is ₹ 70.

Do I need to update the price if I sell gift cards, packages, and memberships inclusive of taxes after the service tax change? 

For gift cards, packages, and memberships configured to be inclusive of tax, the system deducts the tax at the time of sale. Because of increased service tax rate, your net revenue is reduced by an additional 0.5% on the base price of the service.

Will the tax change be applicable on an invoice created prior to the change?

If an invoice was created before the tax change and the service was done before the tax change, the old tax rate apply to the invoice. The old tax rate should be used, and no action is required from you at the time of closing the invoice.

Would the tax change be applicable on a partially paid invoice?

Since the invoice is created prior to tax rate change and since prevailing tax rate is applied at the time of creating the invoice, old tax rates are still applicable, even if the invoice is partially paid for.

If I create a transaction today, for a service that was performed the day before the tax rate change, which tax rate will be used?

For all open invoices, the system shows an alert with a link that updates the tax on the POS window. You can choose to update the tax or retain the old tax value. If you create an appointment for a previous date after the tax changes are made in the system, the system automatically applies the new tax value, irrespective of the date.

Should the increased service tax be applied to retail purchases or sales?

Service tax is applicable only to services. This does not apply to product sales or purchases.

Did this answer your question?