Reverse charge

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

13 June 2013 if the invoice is charged with 100% service tax liability in his invoice but the said case is of reverse charge (let say 75% in Labour supply of or 25% in GTA), then what is the liability of the company:

a. Pay 100% Service tax to the party.

b. Pay 75% or 25% of service tax to govt and remain only to the party.

Please suggest and also state how could i say something like to the management while doing audit.

Rupesh Jain

Rupesh Jain (Expert)
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13 June 2013 you have to pay 75% on labour charges and 25% on GTA .

no chance to escape

Querist : Anonymous

Querist : Anonymous (Querist)

13 June 2013 Then what about the accounting treatment of the said party who has raised bill at full value of service tax? And if the said party take the plea that it has already paid service tax to the government then?

Ganeshbabu K

Ganeshbabu K (Expert)
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13 June 2013 1)Under reverse charge - Billing by service provider should be as follows:-

(i)Service provider should charge only his part of service tax

(ii)Service receiver to pay service tax of his part by GAR-7 challan

(iii)Service receiver liable for only his part and not entire amount, even if service provider does not charge his portion of service tax.

2)Tax should be paid under service tax registration number of service receiver and included in his return as he is liable to pay service tax.

3)Service tax is payable by service receiver when actual payment is made to service provider and not on receipt of Invoice from service provider. However, if payment is not made to service provider within 6 months, service tax is anyway payable. Interest is also payable.

Thanks & regards
Ganeshbabu k

Ganeshbabu K

Ganeshbabu K (Expert)
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13 June 2013 4)Recommendation to management as below:-
Legal liability is of service receiver. That liability does not disappear even assuming that the service provider has paid the service tax. The department can insist on payment of service tax from you [In respect of past, may be you can get away by claiming that it is only procedural mistake and no revenue loss. However, for future, please do not do it.

As a proof get a certificate from service provider that service tax collected from you is deposited duly to the credit of government

Thanks & regards
Ganeshbabu k

Querist : Anonymous

Querist : Anonymous (Querist)

13 June 2013 Dear Ganeshbabu,

You have only said on the condition that service tax raised in the invoice contain liability of the service provider but not stated the condition where service tax is fully charged(100%) in the invoice.

Regards,
Abhisek khandelwal

Ganeshbabu K

Ganeshbabu K (Expert)
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13 June 2013 Above given recommendation was where service receiver receives bill claiming 100% of service tax where as reverse charge he supposed to claim less than that..

I hope i have given...details adequately..

1)if paid with 100% to service provider get certificate from party that they have paid to governmnet..

However there is a possibility of issues from government...as said above reply

2) from now onwards ask service provider to claim only applicable percentage of servicetax in his bill if he cannot provide bill in such way dont settle bill or pay servicetax for which he is entitled to

Thanks & regards
Ganeshbabu k

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