The Service Tax (Rate of Digital Services Tax) (Amendment) Order 2024 [P.U (A) 67/2024] amends the service tax rate for digital services provided by foreign service providers from 6% to 8%, effective 1 March 2024.
This is an increase from the previous 6% rate established in the Service Tax (Rate of Digital Services Tax) Order 2019 [P.U. (A) 271/2019], also included here.
The change aligns the tax rate for imported digital services with the standard rate for domestic service tax.
Key points about the savings provision:
- For digital services provided before 1 March 2024 but with provision spanning after that date:
- Service tax charged at the new 8% rate only on the portion attributable to the period after 1 March 2024
- For digital services provided on or after 1 March 2024:
- Any payments received before 1 March 2024 remain subject to the previous 6% service tax rate.
This savings clause:
- Avoids imposing the higher 8% rate retrospectively on services already contracted or paid for before the Order comes into force.
- Ensures incremental effects of the rate increase rather than unfairly changing mid-stream tax costs for services already being supplied
- Provides certainty and transitional relief for taxpayers regarding services straddling the implementation date of 1 March 2024
- Overall, the savings provision eases the transition to the higher 8% rate and avoids disruption, uncertainty or unfairness in business arrangements spanning the effective date.
References:
Service Tax (Rate of Digital Services Tax) (Amendment) Order 2024
Service Tax (Rate of Digital Services Tax) Order 2019
