Reverse charge mechanism

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Querist : Anonymous (Querist)


14 June 2012

Under new reverse charge mechanism pertaining to man power supply agency,25% of service tax is to be paid by the service provider and 75% by the service recipient. whether the service recipient is required to reimburse the rest 25% to the service provider or not?


Saurabh Saxena (Expert)


26 June 2012

Service provider will issue invoice only to the extent of 25% of service tax. Suppose the bill is of Rs.100 then he just add Rs.2.5 making the gross bill of Rs.102.5.

Service recipient will pay 102.50 to proivder and then, service provider will deposit 2.5 to GOI and simultaneously service recipient will deposit 7.5 to GOI.

Since billing is only to extent of 25%, hence its a simple case of payment inclusive of taxes. It cannot be termed as Reimbursement



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