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Service tax liability on rcm

Pushpak Lal (Student CA Final ) (286 Points)

09 June 2016

Suppose i receive manpower services. But the contractor has told me that instead of me charging ST on RCM, he will charge it in the bill itself. We have a good rapport with the client. The rate of ST changed from 14% to 14.5% . He has charged only 14% in the bill. Who can the department catch for 0.5% ?

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CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 09 June 2016

As per the decision of Hon'ble Supreme court in Rashtriya Ispat Nigam Ltd.V Dewan Chand Ram Saran, the parties may among themselves can contract to shift the service tax liability, as service tax is an indirect tax liability which may be passed on. The said service indicated by you comes under Reverse charge mechanism i.e Service Recipient (you,in this case) is liable to pay service tax fully, but this liability can be shifted as you have done so your action is tenable in law.
Now coming to short levy of service tax, since burden of service tax is passed on to Service provider he is liable to collect proper amount of service tax. You should ask the client to raise separate invoice for the difference amount and deposit it to the treasury of govt. OR if the client refuses to do so, then it will be you who have to bear this burden (since as per the law you are the person who is liable to pay service tax originally).

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karan jit singh (Consultant) (1299 Points)
Replied 10 June 2016

Originally posted by : Pushpak Lal
	Suppose i receive manpower services. But the contractor has told me that instead of me charging ST on RCM, he will charge it in the bill itself. We have a good rapport with the client. The rate of ST changed from 14% to 14.5% . He has charged only 14% in the bill. Who can the department catch for 0.5% ?

Righly mentioned the case law by harshal. As ultimately its Service receiver liability to pay service tax to govt dept, if he fails to do so the government will recover those dues with adequate penalty.
SO DEPOSIT ST BY YOURSELF @ 15%

Regards

Karanjit Singh

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