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Reverse charge

keshetti.sunil (article student) (43 Points)

16 January 2013

Dear all ....please clear my cloud on the Topic REVERSE CHARGE.

AS per the rule 2(1d) and notification 30-2012 service receiver is liable to pay the service tax to the govt.

My doubt is ....

What if the service provider included the 100% service tax amount in the INVOICE and the client paid the Total invoice amount.

Whether he is liable to pay the service tax amount to the govt. again or no need of payment by him to the govt as there is no tax evasion by him..??????????

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8 Replies

(Guest)

service receiver has to pay to the govt and he may raise credit note to the service provider...

1 Like

Saurabh Maheshwari (B.com,ACA) (5923 Points)
Replied 16 January 2013

Sir, service provider can charge only that much Tax which he is liable to pay to Govt. ....if chartges anything extra then he has to deposit that extra to the credit of Central Govt.(As per Rule 73A of FA,1944).

But that extra tax charged by service provider does not absolve/free Service receiver from his responsibility to pay ST under reverse charge mecahnism and he is liable to pay ST as usual he should pay.

1 Like

Nirav Worah (CHARTERED ACCOUNTANT) (396 Points)
Replied 16 January 2013

Even if the service provider has paid entire service tax it cannot absolve the service receiver from payment of service tax. He has to discharge its service tax liability. Department may demand service tax from the service receiver. It is advisable to make correction in the bills or ask the service provider to not charge service tax from future.

1 Like

Madhukar N Hiregange (Chartered Accountant) (38934 Points)
Replied 16 January 2013

The requirement of payment by the SR is obligation of the SR. The fact that SP has charged 0n 100% would require- a) revise the bill and SR pays only what is billed in accordance with law b) pays the whole amount and avdises that the same shall be deducted in furutre and avails the full credit. The need to pay the ST on his part is still tobe done.

1 Like

Dhanesh Agarwal ( ) (70 Points)
Replied 16 January 2013

Always remember that in Service tax

liability to pay service tax is always on SR, However in Reverse Charge Liability to deposit is put on SR.

therefor if, SP has charged 100% Service tax in bill yet, SR is liable to deposit his/ her part of service tax.

Further, if SR has paid whole amonunt to SP then, either SR can issue debit note on SP.

or if SR does not issue Succh note, then SP has to Deposit such excess amount of Service Tax collected from SR in Govt a/c

i.e. in both case SP will not get the benefit of such excess service tax charged.

keshetti.sunil (article student) (43 Points)
Replied 16 January 2013

Dear all,

Thank u all for your valuable info and time.

I searched about this in the act but my efforts were fruitless.May i know is there any clarification on this in the provisions/notifications/circulars given by the dept..

Moreover,can dept insist the service receiver to pay tax twice ( i.e., first paid to service provider and again as per reverse charge basis)....???

SIddarth Asrani (Article) (21 Points)
Replied 16 January 2013

Reverse charge is a shift in the service tax liability from service provider to service recipient. Ordinarily, a statutory obligation cannot be passed on to others by mutual agreement. However, the Delhi CESTAT in Lilason Breveries Ltd. v. CCE [2010] 24 STT 279 has held that where it can be established that service tax was paid by the transporters themselves, demand of tax again on the same service is not sustainable. On the basis of this judgment a view may be taken that in case the service providers have charged service tax on full amount of gross value of services provided and recover the same by invoicing the service receiver, service recipient is not be required to pay service tax again on the same value.