Service tax - manpower supply and catering services

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Querist : Anonymous

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Querist : Anonymous (Querist)
18 November 2014 Dear Sir,

We are registered with Service Tax Deptt and our contractor who is providing security service and catering services wants that his service tax component should be paid to him on quarterly basis so that he can timely deposit the with the deptt.

Kindly advise as a principal employer his request can be accepted, as we are availing the service tax credit in the subsequent months.
Regards

19 November 2014 Before answering this query, you may please provide further details:

1. status of your business, company or firm or individual etc.
2. Whether you are following reverse charge or not on security services.
3. Catering service means whether it is related to employees service?

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Querist : Anonymous

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Querist : Anonymous (Querist)
19 November 2014 Dear Sir,
First of all, thanks for the clarification. As desired, the details are given below :-

1. We are registered as company
2. Reverse charge mechanism is being followed on both services i.e. security and catering services

24 July 2025 Thanks for the details! Here's how it works in your case as a principal employer under reverse charge mechanism (RCM):

Key Points:
Reverse Charge Mechanism (RCM) Applies:
Since you are the recipient of security and catering services, you are liable to pay service tax under RCM, not the contractor/service provider.

Service Tax Payment & Credit:

Your contractor can charge service tax on their invoices, but the payment and deposit of service tax is your responsibility under RCM.

You pay the service tax directly to the government.

You can then avail CENVAT credit of this tax in your subsequent returns.

Contractor’s Request to Collect Tax from You Quarterly:

The contractor wants their tax collected and deposited quarterly from you so that they can pay to the department timely.

This is NOT how the law works under RCM.

The contractor may charge you service tax on invoice for accounting purpose but the actual payment and filing responsibility is yours as the principal employer.

You cannot make the contractor responsible for paying service tax on your behalf under RCM.

Best Practice:

You pay the service tax on these services in your quarterly ST-3 return.

You can reimburse the contractor the service tax amount included in the invoice (if that is part of their billing) but ensure you account for it correctly and claim credit.

The contractor must separately show service tax on invoices, but the compliance burden remains with you.

Summary Table
Aspect Responsibility
Service Tax Payment Principal Employer (You) under RCM
Service Tax Deposit You pay directly to government quarterly
Contractor’s Role Raise invoice with service tax component, no payment of tax to department by them
Input Credit You can claim CENVAT credit on tax paid under RCM

Final Advice:
Explain to your contractor that service tax paid under RCM is to be deposited by you.

You can reimburse the tax amount included in their bills if agreed but tax compliance stays with you.

Maintain clear records for smooth credit claims.



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