Reverse charge mechanism

sourav jain (INTERNAL AUDITOR) (128 Points)
Replied 01 October 2012

Reason is very simple they wanted to increase their revenue

In reverse charge mechanism corporate assesse have to pay service tax on input service even where service provider was exempted.

previously no one was liable to pay service tax when service provider is claiming exemption

another reason is that they can control service tax evasion to some extent as two parties are liable to pay service tax for a particular service in some cases and if one pays and other dont than it can be tracable instantly

bt first reason is the main reason behind the scheme.

1 Like

Madhukar N Hiregange (Chartered Accountant) (39034 Points)
Replied 01 October 2012

Reasons:

1. Reverse charge is validly being collected from 2006 on mainly GTA + Import of services- wherever there is any diffiuclty in collection due to nature of service provider [ unorganised/ uneducated] this method is used.

2. Like TDS which now covers the majority of DT slowly this method is preferred as corproates/ large corporations are generally law abiding.- Easier to collect.

3. Joint charge logic does not exist. Maybe revenue augmentation appears tobe the only reason.

1 Like

rohit (Article) (61 Points)
Replied 03 October 2012

Thanks for your replies people..Furthermore do we have choice in selecting any of the options of claiming the payment made by corporate service receiver as EXPENSE or INPUT CREDIT?

sourav jain (INTERNAL AUDITOR) (128 Points)
Replied 04 October 2012

If you are not able to utilize your service tax paid as recipient of service than you can cliam refund for the same

so it will not be wise to claim it as an expenditure

Mehul Joshi (Advocate) (34 Points)
Replied 05 October 2012

In menpower recruitment and supply services, service provider collects tax in its bill from service receiver (here service receiver is ltd company) and pay to government by challan is it possbile after 1st july 2012

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 October 2012

Originally posted by : sourav jain
	If you are not able to utilize your service tax paid as recipient of service than you can cliam refund for the same so it will not be wise to claim it as an expenditure

sir,

can you enlight us the provision and procedure to get refund of such service tax ( except in case of export)?

as till now we have not got any provision or rule for refund of service tax , except export.

1 Like

HS Negi (Senior Executive- F&A) (590 Points)
Replied 06 October 2012

Dear Mr. Saurov Jain

I am not agree with the reason first you have provided. You have told that for increasing the revenue govt had introduced the reverse charge mechanism.

The main reason, behind is that Govt had secured the revenue especially in the case of manpower, legal,GTA etc etc. The burdan had been partly divided, or fully uploaded on reciver so that they could determine the correct taxable value. As per past experience, there are number of case (especially in the case of indiviual, propritership, partnership firm etc), where assessee found in the evasion of tax. so govt had increased its area of reverse charge. Earlier only 5 five servies are in the category of reverse charge, now there are 10 services.

Regards

HS Negi

HS Negi (Senior Executive- F&A) (590 Points)
Replied 06 October 2012

Dear Mr. Saurov Jain

I am not agree with the reason first you have provided. You have told that for increasing the revenue govt had introduced the reverse charge mechanism.

The main reason, behind is that Govt had secured the revenue especially in the case of manpower, legal,GTA etc etc. The burdan had been partly divided, or fully uploaded on reciver so that they could determine the correct taxable value. As per past experience, there are number of case (especially in the case of indiviual, propritership, partnership firm etc), where assessee found in the evasion of tax. so govt had increased its area of reverse charge. Earlier only 5 five servies are in the category of reverse charge, now there are 10 services.

Regards

HS Negi

sourav jain (INTERNAL AUDITOR) (128 Points)
Replied 06 October 2012

Originally posted by : U S Sharma

sir,

can you enlight us the provision and procedure to get refund of such service tax ( except in case of export)?

as till now we have not got any provision or rule for refund of service tax , except export.

sir

i think i was out of my mind when i was answeing d query

thanks for correcting me

i must remove my post or else it will confuse others.

sourav jain (INTERNAL AUDITOR) (128 Points)
Replied 06 October 2012

Originally posted by : HS Negi
	Dear Mr. Saurov Jain I am not agree with the reason first you have provided. You have told that for increasing the revenue govt had introduced the reverse charge mechanism. The main reason, behind is that Govt had secured the revenue especially in the case of manpower, legal,GTA etc etc. The burdan had been partly divided, or fully uploaded on reciver so that they could determine the correct taxable value. As per past experience, there are number of case (especially in the case of indiviual, propritership, partnership firm etc), where assessee found in the evasion of tax. so govt had increased its area of reverse charge. Earlier only 5 five servies are in the category of reverse charge, now there are 10 services. Regards HS Negi

sir i wont disagree with your logic but just consider the cases where lakhs of assesse works as contractor & manpower supplier who is claiming SSP exemption, from them nothing is coming in name of service tax to government bt due to joint charge mechanism service recipent being body corporate have to pay his portion of service tax on these services. you dont consider it to be increase in revenue to goverment..