Reverse charge menthod

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 July 2012 Hi, I have not completely understood the concept of reverse charge method - is it like:

eg in case of supply of man power, if bill is 1000

service provider will have to pay on 25% of 1000 @ 12.36% = 31

&

Service receive has to pay on 75% of 1000 @ 12.36 = 93.

& Service provider cannot collect the amount that he has paid ie 31 as he was collecting the entire 12.36 % on total amount earlier..?

Pl confirm..Thanks.

Amol S Joglekar

Amol S Joglekar (Expert)
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02 July 2012 The service tax is collected by the service provider and paid to the exchequer. The reverse charge is when the same is not collected by service provider, service receiver has to deduct the same from the payment to be given to service provider and pay it to exchequer.

Querist : Anonymous

Querist : Anonymous (Querist)

02 July 2012 Can you pl explain with an example - if we take the above example does that mean - service receiver charges @ 25% on 1000

Bill - 1000
ST - 31 (25% on 1000 - st@ 12.36%)
Total - 1031

& Service receiver while paying to the service provider - pays only

Bill - 1031
Less: ST - 96 (75% on 1000 - st@ 12.36%)

Payable by Service receiver to service provider - 935 (1031-96)
To Govt - 96

Querist : Anonymous

Querist : Anonymous (Querist)

03 July 2012 Should the service tax paid by service receiver deducted / recovered while making the payment to service provider