Is he liable to pay service tax

Queries 867 views 5 replies

Swopna

Audit Assistant

44 Points Joined March 2013

Hi, good morning & happy Holi to all experts, the question is a labor contractor has fail to collect service tax form those builders to whom he use to supply labour for new plumbing works, due to old work order where service tax clause was not mentioned, hence the builder denying to pay service tax to the said contractor and now the contractor turnover crossed the limit of audit.

We have advised him to collect and pay the service tax 100% on provided service, but he is not ready to pay service tax and he is standing with his own question, that, why he should pay the tax when he has not collected tax from any service received to whom he supplied labour for the above mentioned work, which is not appropriate according to us.

I’m seeking your valuable inputs.

Thanks in advance for your valuable answer and suggestions

Regards

Swopna

Replies (5)

Asif Khan

Taxation executive

410 Points Joined December 2008

@ Swopna

If the labour contarctor is registered in Service Tax than I would assume he has crossed the limit of Rs 10 lakhs in previous year than he will habe to pay service tax on grosss amount recieved from builders by reverse calculation i.e (gross amt recievedX12.36/112.36) and if he has not crossed the limit than he would be liable to pay service tax on services provided after crosssing 10 lakhs limit.

Swopna

Audit Assistant

44 Points Joined March 2013

Originally posted by : Asif Khan

Thank you very much sir for your quick reply, sir as I have stated in my query that the contractor has crossed the audit limit it means he has crossed one crore and he is registered in service tax as an proprietor entity.

The problem is, the builder is not ready to pay any service tax, due to earlier work order passed without considering service clause, hence.

I know contractor is liable to pay but my question is can the contractor approach to the builder for paying of service tax; because it was duty of the both to reevaluate the earlier work order after Govt. enforced the finance bill to leave service tax @ 100% on labuor supply service.

This is what that I’m confuse….

Please reply ………….

Regards

Swopna

Prabhat Kumar

Advocate & Consultant

1912 Points Joined July 2009

your client appears to be fall in reverse charge system in which recepient of the service is liable to pay certain portion of service tax.If he falls under Works Contract Service or supply of manpower services he is to pay only part of Service tax e.g in case of manpower supply he will liable to pay only 25% of the Service tax payable.But he will have to pay Service Tax of his portion of Service Tax,if the same is reimbersed it is allright or otherwise it will have to bear by your client.

Swopna

Audit Assistant

44 Points Joined March 2013

Thank you very much sir,

Whether the contractor is liable to pay 100% service tax on only labour supply service or he can take the advantage of composition scheme and pay 12.36% on 40% of on it.

As far my knowledge/understanding only labour supply doesn't amounting as work contract service so labour supply would be treat as 100% taxable service for payment of service tax.

Please correct me if I’m wrong

Regards

Swopna

Abhinay Kesanapalli

Articles asst.

84 Points Joined August 2011

for supply of manpower, both service provider and receiver has to pay service tax.Service Provider is required to pay @ 25%(ie.,3.09%) and Service Receiver has to Pay remaining 75%.

So, from that Your client has to Pay 3.09% as Service Tax.

The said amount received has to taken as inclusive of service tax(Amount received*3.09/103.09).

Your are no need to think about that 75% whether service reeiver paid or not.