Reverse charge mechanism-still confusing......

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Manoj Saini (Querist)

28 March 2013 Reverse Charge applicable or not in Following cases:-
1. ABC Company Limited is Construction Company. Same company has provides construction of Road service for government awarder. In same case company issued sub contract to EFG Construction (Individual Firm) for road construction work. Subcontractor service covers or not covers under Joint/Reverse Charge Mechanism? If not cover then any specific notification.

2. In case of Service receiver is service provider and he has claim SSI Exemption. He receives a service which fall under Joint Charge Mechanism, then SR is liable to pay his liability? If yes then he can Set off Such Tax (Paid under Joint charge) in future from his ascertain tax liabilities?

3. XYZ Builder Pvt. Ltd. Construct a building having seven flats, No advance amount taken before the construction of same flats. There is no service tax applicable as a service provider on XYZ Builder Private Limited. But the construction activity has done by a work contractor LMK Construction Individual firm. Now in same case reverse charge applicable or not for works contract service?

Ashish Vaish

Ashish Vaish (Expert)

28 March 2013 Dear Sir,
1. Construction of Roads is exempt from levy of ST, therefore no question of Reverse Charge arises on the company.

2. SSP exemption is not available(to Service receiver) for services which are liable to ST on reverse charge. In your query, Service receiver has to pay ST even though he himself would be claiming SSP Exemption. He can avail the Cenvat of said ST only if his services become taxable, that means for availing cenvat, input services shall be used for providing taxable services.

3. Yes, reverse charge would be applicable. Company will bear 50% of ST liability of WC service.

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