Service tax

This query is : Resolved

Nitin G Haldikar (Querist)
Follow

29 August 2012 We are manufacturing unit as we are receiveing services like Manpower & Security services as well as we are paying GTA on carrige out.

We are takeing above services from private limited company as well as propriety firm .

As per new amedments what are the step we have to take .

Nitin Haldikar

Soumyaranjan Biswal

Soumyaranjan Biswal (Expert)
Follow

30 August 2012 Dear Nitin,

1) For the following three services - reverse charge mechanism is not applicable if service received from Body corporate

- Manpower supply including security service
- Renting or Hiring of any Motor vehicle
- Works contract

For other cases refer Notification number - 30/2012

Nitin G Haldikar

Nitin G Haldikar (Querist)
Follow

30 August 2012 If we received this services from Propriety firm then what is proceture.& how we can treated in books specialy if propriety gave the bill on 25% how we pay 75% & when how we can treated.

Nitin Haldikar

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)
Follow

24 July 2025 Your question relates to the Reverse Charge Mechanism (RCM) under the Service Tax law as amended on 1st July 2012, especially concerning services like manpower supply, security services, and GTA, received from proprietorship firms and private limited companies.

Let’s break it down by service type, service provider type, and the accounting/treatment.

✅ Applicable Law Reference:
Notification No. 30/2012-ST dated 20.06.2012, effective from 01 July 2012 (amended from time to time)

🧾 Summary of Reverse Charge Liability (as of Aug 2012):
Service Type Service Provider Type RCM Applicable? Who Pays ST?
Manpower Supply / Security Proprietor / Partnership ✔️ Yes 50% by provider, 50% by receiver
Private Limited Company ❌ No (100% by provider) Only provider pays
Goods Transport Agency (GTA) Any GTA (with consignment note) ✔️ Yes 100% by recipient (you)

🔄 Case 1: Manpower or Security Services from Proprietor Firm
✔️ Reverse charge applies
You (manufacturing company) must pay 50% of service tax

🧾 Billing Example:
Invoice Value (manpower services): ₹1,00,000

Service Tax Rate (as on 2012): 12.36%

Total ST = ₹12,360

Provider pays = ₹6,180 (50%)

You pay = ₹6,180 (50%) under RCM

🧮 Accounting Treatment in Books:
At the time of bill booking:

css
Copy
Edit
Manpower Expenses A/c............Dr ₹1,00,000
To Party A/c (Proprietor firm)........ ₹1,00,000
For service tax paid by you under RCM:

css
Copy
Edit
Service Tax Expenses A/c..........Dr ₹6,180
To Service Tax Payable A/c........... ₹6,180
When you pay the tax:

css
Copy
Edit
Service Tax Payable A/c............Dr ₹6,180
To Bank A/c................................. ₹6,180
(You may take CENVAT credit of ₹6,180 if eligible under CCR, 2004)

🔄 Case 2: Same Services from a Private Limited Company
❌ Reverse charge does not apply

Entire 12.36% service tax will be charged and paid by the service provider

You just pay the invoice including service tax.

✅ What You Need to Do:
Take proper invoices with service tax charged

No need to pay separately under RCM

Can claim CENVAT credit if eligible

🔄 Case 3: Goods Transport Agency (GTA)
✔️ Reverse charge applies fully
You must pay 100% of service tax as recipient, irrespective of whether GTA is a proprietor or company.

🧾 Billing & Abatement:
Under Notification No. 26/2012-ST, GTA is allowed 75% abatement if it doesn’t claim CENVAT.

So:
Freight charged: ₹10,000

Taxable value = 25% of ₹10,000 = ₹2,500

Service Tax @12.36% on ₹2,500 = ₹309

➡️ You pay ₹309 to the govt under reverse charge.

🧮 Book Entry for GTA RCM:
css
Copy
Edit
Freight Inward A/c....................Dr ₹10,000
To GTA Party A/c........................ ₹10,000

Service Tax Expenses A/c.........Dr ₹309
To Service Tax Payable A/c............ ₹309

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now