Reverse charge

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Shweta (Querist)
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06 February 2012 Hi

I have received an invoice on Dec11 from a foreign client on which im required to pay service tax under reverse charge. The foreign exchange rate in dec11 was Rs 50. Now in feb 11, i am making payment to party by deducting tds . In Feb11 the foreign exchane rare is Case-1:Rs 48
Case-2 :Rs 52
So now how will i book my service tax. Am i required to book service taxboth on accrual basis ans payment basis? and what amount of service tax should i pay to government(ie on what forex rate)?. What will bw the treatment of the difference.

Shyam Lal Naik

Shyam Lal Naik (Expert)
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12 February 2012 In case of service tax on reverse charge mechanism, Service tax is payable on payment basis. And hence, the exchange rate applicable on the date of remittance is applicable in my view.

Booking of Service tax on accural or payment basis is an accounting policy. In any case, the difference, has to be adjusted with the Service Tax Liability only.

Shweta

Shweta (Querist)
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13 February 2012 Thanks Shyam for your reply. Can you please confifrm me that in reverse charge mechanism-payment means payment of Service tax to govt or payment of import remittance (after taking effect of sec 195) to foreign client?

Shyam Lal Naik

Shyam Lal Naik (Expert)
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13 February 2012 Payment of Import Remittance. You may refer to the Rule 7 of the Point of Taxation Rules, 2011.

Shweta

Shweta (Querist)
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13 February 2012 thank you so much for the information.It has helped me a lot

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