20 October 2007
Pls tell me on which amount Service tax will be charged in the following situation:- A company has taken employees on contract.The contractor is charging Service tax in his bill on the following amount:- Total wages of employees Rs.X Service Charge @5%on RS X Rs.Y Service Tax @ 12.36% on (RS.X+Y) Is it right to charge service tax on (X+Y) or it should be charged on amount of Service charge only(ie RS.Y)
20 October 2007
I PRESUME YOUR CONTRACT IS THAT YOU PAY YOUR CONTRACTED EMPLOYEES' SALARIES TO THE CONTRACTOR. IN THAT CASE,THE CHARGEABILITY UNDER SERVICE TAX ACT IS ON THE TAXABLE SERVICES OF THE SERVICE PROVIDER. SO PL. LET US BE SURE AS TO WHAT CONSTITUTES THE CONTRACTOR'S TAXABLE SERVICES. SINCE YOU ARE PAYING THE COST OF EMPLOYEES SALARY TO CONTRACTOR, ALONGWITH HIS SERVICE CHARGES , THE TAXABLE SERVICE WOULD CONSITUTE THE TOTAL OF WAGES COST PLUS HIS SERVICE CHARGE. ACCORDING TO DR. SANJIV AGARWAL'S ASSESSEE'S GUIDE TO SERVICE TAX (2006 EDITION),THE VALUE OF TAXABLE SERVICE IN RESPECT OF A MANPOWER RECRUITMENT OR SUPPLY AGENCY SERVICES--IS THE "GROSS AMOUNT CHARGED BY THE SUPPLY AGENT FROM THE CLIENT IN RELATION TO ....SUPPLY OF MANPOWER IN ANY MANNER" R.V.RAO
20 October 2007
The contractor is charging Service tax in his bill on the following amount:- Total wages of employees Rs.X Service Charge @5%on RS X Rs.Y Service Tax @ 12.36% on (RS.X+Y) Is it right to charge service tax on (X+Y) or it should be charged on amount of Service charge only(ie RS.Y)
Answer:The Service Tax on Y only (Wages of employees is Exempted) as per serviceTax Guide, if bill is Separte ,like wages of employee Rs.xxxx and other charges Rs. yyy in this case only
2. and another option is 67% Exempted and 33% percetage will be charge on whole amount if bill is Mix Billing
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