Service Tax

This query is : Resolved

Renjith.R.s.

Renjith.R.s. (Querist)
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30 March 2011 On of our vendor providing services to us which is taxable under service tax rules. but in his invoice he is not showing service tax, whether we have to make payment to vendor without service tax.

please advice impact of same to
1) Vendor
2) Service Receiver

Ram Avtar Singh

Ram Avtar Singh (Expert)
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30 March 2011 Yes You can pay. because Your vender under service tax Exemption threshold limit. i.e. 10 lakhs.

Renjith.R.s.

Renjith.R.s. (Querist)
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30 March 2011 If he is not under exemption limit whether we can pay?

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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24 July 2025 This is an important compliance question related to **service tax invoicing and liability** — here's a clear breakdown of the situation and its implications:

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### 🧾 Situation:

* You are receiving **taxable services** from a **vendor**.
* The **vendor is not charging service tax** in the invoice.
* You want to know:

* Can you **still make the payment** without service tax?
* What is the **impact** on both:

1. The **vendor (service provider)**
2. The **service recipient (you)**

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### ✅ Answer:

#### 🔹 **If the Vendor is within the Small Service Provider (SSP) exemption limit** (up to ₹10 lakhs):

* **Yes**, you can **pay without service tax**.
* The **vendor is not required to charge or collect service tax** if:

* Their total taxable service receipts are **≤ ₹10 lakhs** in the **previous financial year**, and
* They have **opted for the exemption** under **Notification No. 6/2005-ST**.
* Vendor should mention on the invoice that **they are availing SSP exemption**.

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#### 🔹 **If the Vendor is NOT eligible for exemption (turnover > ₹10 lakhs):**

* The vendor **must charge and collect service tax**.
* If they are **not charging it**, it is a **compliance violation**.

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### 💥 Impact Analysis:

#### 1) **Impact on Vendor (Service Provider):**

* If **liable for service tax** but **fails to collect and deposit**, then:

* **Entire liability** rests with the **vendor**.
* They will be liable for:

* **Tax dues**
* **Interest** under Section 75
* **Penalties** under Section 76, 77, and 78 of the Finance Act, 1994
* Department can **demand tax + penalty** from the vendor later.

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#### 2) **Impact on Service Receiver (You):**

* As a recipient, your primary concern is **CENVAT Credit** (if applicable):

* If the vendor does **not charge service tax**, you **cannot claim CENVAT credit**.
* If you're under **reverse charge mechanism (RCM)** (for certain services like legal, GTA, etc.), you may still be liable to pay service tax yourself.
* Otherwise, **no direct liability** on you if:

* It’s not a reverse charge service
* And you can prove you relied on the vendor’s invoice in good faith

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### 📌 What You Should Do:

* **Ask the vendor**:

* Are they **under the ₹10 lakh exemption limit**?
* Have they **opted** for the exemption?
* **Document this** (email or letter).
* If not under exemption, **insist that they raise a tax-compliant invoice** with proper service tax.
* If you are eligible for **CENVAT credit**, you must have a **tax invoice** showing the service tax charged.

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### 🔚 Final Advice:

* ✅ If vendor is under ₹10 lakh: You may pay without service tax.
* ❌ If vendor is **not under exemption** and still not charging tax: Don’t accept such invoice — ask them to revise it and charge applicable tax.

Would you like a **sample declaration** from vendor regarding SSP exemption?

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