Demand of Service tax from electrical contractor who supply labour /erection work to DHBVN

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An electrical contractor has received a demand for service tax from DHBVN, despite DHBVN deducting 15%/14.5% for service tax from payments. The contractor primarily supplies labour for erection, testing, and commissioning, with some work orders including material supply. The core issue is whether this constitutes a manpower supply contract for which Reverse Charge Mechanism (RCM) applies, or if the contractor is liable for service tax on work exceeding 10 lakhs. Advice is sought urgently regarding remedies and relevant case law.

CA Lucky Mehta

CA Lucky Mehta (Querist)
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25 May 2023 One on my client got the Demand of Service tax on the basis of 26AS. Client is providing labour to DHBVN and the heading of work contract is erection / testing /etc.
Also DHBVN is deducting 15% /14.5% in the name of Service tax from the payment.

is there any remedy/case law??

Please reply on urgent basis

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 May 2023 Service tax payable under RCM that's why DHBVN is deducting 15% /14.5% in the name of Service tax from the payment.

As laid down in the notification no. 30/2012.
As the service receiver is now become liable to pay full service tax, no need to demand service tax from the service provider.

Jivanbhai Makwana v. CCE [2010] 24 STT 85 (Ahd. - CESTAT):

CA Lucky Mehta

CA Lucky Mehta (Querist)
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25 May 2023 In my case the client is doing work with DHBVN. In some work order there is supply of material as well as supply of labour . But in mostly work orders ( say upto 90% of total work ) there is only work order for electrion /testing/commissioning ( no material is provide) .
whether is this falling RCM (Manpower supply)???
DHBNV is deducting 15/14.5% in name of service tax.

Please reply or give your Mob No ( i will call you)

CA Lucky Mehta

CA Lucky Mehta (Querist)
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25 May 2023 please reply its urgent

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 May 2023 Did you get payment based on number of man power supplied.
Also check with DHBVN whether the deducted service tax 15%/14.5% is paid to government under RCM.

CA Lucky Mehta

CA Lucky Mehta (Querist)
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25 May 2023 There is no relation between number of man power. DHBVN provide us the material and we have to complete the work as per the time limit of work (No of days) and we receive payment on the basis of % of completion of work.
on the 2nd hand,, DHBVN deduct 14.5/15% in the name of service tax in each bill. We , as a contractor, did not know whether is is deposited under RCM or Not.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 May 2023 In such case it's not a man power supply contract for which RCM not applicable.
You have to pay service tax on work done in excess of 10 lacs.
Enquire why service tax deducted from your bill. Check the deducted service tax paid on your behalf.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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