srividya (asst mgr fin & a/cs) (114 Points)
06 December 2012while deducting service tax under reverse charge mechanism, should the amount of service tax be calculated on the value of the bill or a backward calculation from the bill value is to be done to arrive at the service tax amount. Kinly clarify
Dipjyoti Majumdar
(CA in service & CS. dipmaj@ rediffmail.com )
(3468 Points)
Replied 06 December 2012
Look, the concept of service tax payable by recipient under RCM is not akin to TDS in income tax.
If 1,000 is the service value of provider of service, you as a recipient pay 50% or 75% or as the case may be on 12.36% of 1000.
If that is, say, Rs 100 you cannot deduct 100 and pay balance 900 to provider.
You pay 1000 to provider and 100 to Govt.
Please correct if I am wrong.
Regards,
Priyanka Maheshwari
(Assistant Manager)
(76 Points)
Replied 08 December 2012
Mr. mazumdar is correct. Would like to add upon that, it also depends upon the kind of contract you are having with the provider. Suppose, you had entered into an all inclusive contract prior to 01.07.2012 , in that case, even your portion of RCM would be incuded in the contract value. In this case, you will have to back calculate. However, for contracts post 01.07.2012 it is unlikely that your portion of service tax would be included in the contract value.In this case, you will have to pay your poprtion on the gross value of the bill.
Ankit Agarwalla
(CA)
(281 Points)
Replied 17 January 2013
Just want to add - In RCM Concept, where both service receiver and provider are liable to service tax, the receiver can have independent valuation for purpose of payment of service tax and it need not be equal to that calculated by the provider.
So, you can pay tax on a reasonably calcuated amount by you as long as you document your calcuation adequately.
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