Service atx default by the service providers
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
07 September 2013
Dear All,
One of my service providers are not charging the service tax on the bills and services provided to us. Amounting would be approx 20 to 25 lacs.
Having said above as a service receiver should i have any liability on the above default for under service tax act.
What is my course of action now as a auditor. Bill has already processed and paid??
One of my service providers are not charging the service tax on the bills and services provided to us. Amounting would be approx 20 to 25 lacs.
Having said above as a service receiver should i have any liability on the above default for under service tax act.
What is my course of action now as a auditor. Bill has already processed and paid??
07 September 2013
If the service tax is not to be paid by the receiver under reverse charge then your company is not liable to deptt & it will be only default of service provider
Querist : Anonymous
Querist :
Anonymous
(Querist)
07 September 2013
We are exempted for Reverse charges mechanism under the category of Business entity registered as educational institutions.
Please share if any available material where, as a Service receiver I am no where liable under act if Service Provider is not charged the service tax.
Regards
Please share if any available material where, as a Service receiver I am no where liable under act if Service Provider is not charged the service tax.
Regards
23 July 2025
You're right to seek clarity — here's a direct answer based on **Service Tax Law (pre-GST era)**:
---
### ✅ **Your Liability as a Service Receiver (under Pre-GST Service Tax Regime):**
If **reverse charge** does **not apply**, and:
- You (the service receiver) are not liable to pay service tax under **Notification No. 30/2012-ST**, and
- The service provider is **not exempt** and is **not charging service tax** on their invoice,
➡ **Then the liability to pay service tax lies solely with the service provider** — not with you.
---
### 📚 **Legal Reference:**
The **Finance Act, 1994** (which governed service tax before GST) imposed liability on:
- **Service provider**, by default under Section **68(1)**, unless
- Specific services or categories of persons were notified under **Section 68(2)** (reverse charge), via **Notification No. 30/2012-ST**.
You mentioned you're an **educational institution** and **exempt from reverse charge**, so:
> 🔸 **You are not liable** under Section 68(2), and
> 🔸 The **service provider alone is responsible** for any default in charging or remitting service tax.
---
### 📌 As an Auditor — What You Should Do:
1. **Document the default**: Record that service tax was not charged.
2. **Obtain a declaration** (if possible) from the service provider about their tax treatment or exemption claim.
3. **Disclose in audit report** (if material): You can note that:
> “Invoices amounting to ₹X were received without service tax. The service provider is liable for the same. The company is not liable as per Section 68 of the Finance Act, 1994 and relevant notifications.”
4. **Future recommendation**: Advise management to:
- Vet service providers for tax compliance,
- Include clauses in vendor agreements regarding service tax responsibility.
---
### ⚠️ Important Caveat:
If **any part** of the service is covered under **reverse charge**, **joint charge**, or **partial reverse charge**, then **you may have had a liability** — but since you've clarified that you are exempt under the education category, you're covered.
---
Let me know if you want a draft disclaimer or audit note text.
---
### ✅ **Your Liability as a Service Receiver (under Pre-GST Service Tax Regime):**
If **reverse charge** does **not apply**, and:
- You (the service receiver) are not liable to pay service tax under **Notification No. 30/2012-ST**, and
- The service provider is **not exempt** and is **not charging service tax** on their invoice,
➡ **Then the liability to pay service tax lies solely with the service provider** — not with you.
---
### 📚 **Legal Reference:**
The **Finance Act, 1994** (which governed service tax before GST) imposed liability on:
- **Service provider**, by default under Section **68(1)**, unless
- Specific services or categories of persons were notified under **Section 68(2)** (reverse charge), via **Notification No. 30/2012-ST**.
You mentioned you're an **educational institution** and **exempt from reverse charge**, so:
> 🔸 **You are not liable** under Section 68(2), and
> 🔸 The **service provider alone is responsible** for any default in charging or remitting service tax.
---
### 📌 As an Auditor — What You Should Do:
1. **Document the default**: Record that service tax was not charged.
2. **Obtain a declaration** (if possible) from the service provider about their tax treatment or exemption claim.
3. **Disclose in audit report** (if material): You can note that:
> “Invoices amounting to ₹X were received without service tax. The service provider is liable for the same. The company is not liable as per Section 68 of the Finance Act, 1994 and relevant notifications.”
4. **Future recommendation**: Advise management to:
- Vet service providers for tax compliance,
- Include clauses in vendor agreements regarding service tax responsibility.
---
### ⚠️ Important Caveat:
If **any part** of the service is covered under **reverse charge**, **joint charge**, or **partial reverse charge**, then **you may have had a liability** — but since you've clarified that you are exempt under the education category, you're covered.
---
Let me know if you want a draft disclaimer or audit note text.
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