Reverse charge mechanism

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Querist : Anonymous

Querist : Anonymous (Querist)

25 May 2013 Under reverse charge mechanism if suppose a service provider for works contract charges Service Tax on 30% of the value,Is it necessary that the service receiver has to pay only 50% of that or can he pay 50% on 40% of the value of service? Ie;can the service receiver's valuation be different?

CA Vikas Acharya

CA Vikas Acharya (Expert)

25 May 2013 1st of all the service category will be decided and then only the payment will be done.
though both can use differnt rules, say if service provider may take abatement and service receiver may not. - as clarified by cbec.

but in your situation its about taking different abatements, which is only possible when one of you is paying wrong tax. SO better to check applicability of tax rate/abatement and then pay 50 50% accordingly on that rate.

Querist : Anonymous

Querist : Anonymous (Querist)

25 May 2013 Dear Sir,
In this case the service provider does Landscaping service which would fall under original works if I am right. And he charges Service Taxon 30% of the value. We are a construction company who receives the above service and our auditor has suggested us to pay taxon 40% of the value. Does this mean the service provider has charged the wrong service tax?

CA Vikas Acharya

CA Vikas Acharya (Expert)

25 May 2013 he charging tax on 30% value on what basis. there's no rule of tax on 30%.
it will be on 40%, and if the provider is individual, partnership firm, aop, llp.
then you will pay 50% tax and he will pay 50% tax - (of that 40%)

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