Service tax input

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This query is : Resolved

ACS,CMA Basant chaudhury (Querist)

15 April 2016 CAN WE CLAIM INPUT ON SERVICE TAX BILL RAISED BY CONTRACTOR FALLING UNDER REVERSE CHARGE WHERE 70% IS TAXABLE. HE RAISED BILL BY CHARGING 7.25% OF SERVICE TAX. PLS HELP ME WHETHER WE ARE LIABLE TO PAY BALANCE 7.25% OR CAN WE TAKE CREDIT OF THAT

Suresh Ramaswamy

Suresh Ramaswamy (Expert)

15 April 2016 Works Contract Service is taxable under Partial Reverse Charge Mechanism. Under this the Service Provider is liable for 50% of the Service Tax liability and the Service Receiver for the rest 50%. Again irrespective of the basis adopted by the Service Provider, the Service Recipient can follow his own method.

The tax under RCM has to be paid only in CASH through e-challan. So you cannot take CENVAT Input Credit for the 7.25% tax paid to the contractor. You will have to pay further tax under RCM @ 5.08% i.e on 35% of the invoice @14.5%.

The Service Tax paid alone is entitled to be treated as input and not Swachh Bharat Cess which is not an eligible Input for CENVAT Credit. Therefore 7% of the tax paid to the contractor and 4.90% of the RCM paid by you can be used as input for payment of any other output service tax.

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