Revese charge mechanism

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Philip John (Querist)
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04 April 2015 Dear Sirs,

Under OLD Reverse Charge Mechanism (25 % / 75 %), suppose a Service Provider’s total annual turnover is only Rs. 8 Lakhs (less than the threshold limit of Rs 10 L to fall within the Service Tax Net). Accordingly, he does not have to pay any Service Tax. In this case, is the Service RECIPIENT still required to pay 75 % of Service Tax applicable for the value of Services provided by the above Service Provider ? If so, can this Service Recipient avail CENVAT credit on the same ?

Is it necessary that the Service Provider should have a Service Tax Registration Number so that the Service Recipient can avail CENVAT credit ?

Further, we understand that from today (1st April 2015) onwards, for Manpower Supply, 100 % of service tax will have to be paid by the Service Recipient under 100 % Reverse Charge Mechanism.

Is there any DIFFERENCE in the above rule, if the Service PROVIDER is a Limited Company ?

Is there any difference, if the Service RECIIENT is a Body Corporate or NOT ?

Under the new scheme (Budget 2015 / 100 % Reverse Charge), the Service Provider is NOT required to pay any portion of the Service Tax, BUT is it necessary that HE (the service PROVIDER) should STILL have A Service Tax Registration ? If YES, what is the relevance ?

Further, if the annual turnover of the Service Provider is less than Rs. 10 L, does HE (PROVIDER) have to get Service Tax REGISTRATION ?

In this case, should the Service Recipient still have to pay 100 % Service Tax irrespective of whether the Service Provider’s Annual Turn Over is less than Rs.10 L or Not ?

In that case, if the Service Provider does not have a Service Tax Registration Number, can the Service Recipient still avail CENVAT Credit under the new rules ?

We are planning to invite Tender for outsourcing of Security ServiceS. Under the new scheme (Budget 2015 / 100 % REVERSE CHARGE), will it be proper to insist that the Service Providers should have Service Tax Registration, (ie. even though they need not pay Service Tax, and 100 % Service Tax has to be paid instead by us as Service Recipients) ?

Thanks & regards::
Philip John

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 April 2015 1. The service receiver can avail cenvat credit even if the service provider is not registered with service tax in view of lower turnover.
2. New provisions not applicable to limited company providing service.
Service provider need not have service tax registration.
3. Under the new rule irrespective turnover of service provider service recipient has to pay service tax.
4. Don't insist for service tax registration in the tender.

Philip John

Philip John (Querist)
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04 April 2015 Sir,

Thank you for the reply.

That means, even under the new rules, if the Service Provider is a Limited Company, they (PROVIDER) have to pay 100 % Service Tax, as in the past.

Philip John

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 April 2015 Yes you are right........

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