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Liability to deposit service tax

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Rahul Jain

Accountant

131 Points Posted on 05 October 2013

A partnership firm is engaged in Construction business. It has appointed a Contractor(which also is a partnership firm) on Work Contract to build the basic structure of building.

Now the Service tax charged by Contractor should be deposited by itself or should it be deposited by Service recipient which in this case is a Partnership Firm?

Under reverse charge notification it is written that service tax to be deposited by service recipient only if it is a Body corporate?

So what if Service Recipient is a Partnership Firm and Service Provider is also a partnership firm?

Replies (4)

Prashant Kini

Article Assistant

190 Points Posted on 05 October 2013

Reverse charge mechanism doesn't apply to the above stated case and provider of service is liable to discharge service tax liability

Manoj Agarwal

Service Tax Consultant Rourkela Service

2755 Points Posted on 07 October 2013

Say, A is the principal contractor who has given sub-contract to B for Work Contract. Both are partnership firms. Reverse Charge is not applicable.

B will charge service tax @ 12.36% on service portion of work contract (40%/60%/70% of gross amount charged). A shall be eligible to take Cenvat Credit of Service Tax charged by B. And A shall charge service tax @ 12.36% on service portion from its customers, subject to other conditions.